Price Waterhouse (Reg) v Beneficial Finance Corporation Ltd, SA Asset Management Corporation, and the State of South Australia No. SCGRG 94/1289 Judgment No. 5964 Number of Pages 50 Procedure
[1996] SASC 5964
•23 December 1996
COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA COX, PERRY AND LANDER JJ
CWDS
Procedure - discovery and interrogatories - discovery and inspection of documents - discovery of documents - discovery - very large damages claim for professional negligence against company auditors - application by plaintiff for discovery of documents relating to defendants' professional negligence insurance cover with a view to having insurers joined as defendants in the action - interpretation of Supreme Court Rules 58.01, 58.04 and 3.04(g) - merits of application - whether Full Court bound to follow its previous decision in State Bank v Smoothdale - principles of stare decisis discussed. Supreme Court Act 1935ss27 and 32; Supreme Court Rules r3.04(g), 8.01, 58.01, 58.04, 59.02 and 59.03, referred to. J.N. Taylor Holdings Ltd (In Liquidation) v Bond (1993) 59 SASR 432, distinguished. State Bank of South Australia v Smoothdale (No 2) Limited (1993) 171 LSJS 466, 174 LSJS 378; Mulley v Manifold (1959) 103 CLR 341; Compagnie Financier v The Peruvian Guano Company (1882) QBD 55; In re Hinchcliffe (deceased) (1895) 1 CR 117, considered.
HRNG ADELAIDE, 9 September 1996 (hearing), 23 December 1996 (decision) #DATE 23:12:1996 #ADD 28:1:1997
Counsel for appellant: Mr J Spigelman QC with Mr A J Besanko QC
Solicitors for appellant: Kelly &; Co
Counsel for respondent: Mr T A Gray Qc With Mr R J Whitington QC and Mr M C Hoffman
Solicitors for respondent: Crown Solicitor
ORDER
Appeal allowed.
JUDGE1 COX J
1. This is an appeal against certain interlocutory orders made in this action by Olsson J (187 LSJS 273). The nature and background of the appeal are described in the reasons of Perry J. There are two main issues - whether the learned Judge was in error in making an order for discovery and production of documents against the defendant relating to its professional indemnity insurance and, secondly, whether the defendant should have been required to produce copies of certain documents relating to its insurance cover which were referred to in an exhibit to an affidavit of its solicitor, Mr Forbes, filed with respect to the application for discovery.
2. I turn first to the order for discovery. So far as the principle of the matter is concerned and the interpretation of the relevant Supreme Court Rules, there is a great deal in the reasons of Perry J with which I respectfully agree, and if the matter were res integra I would agree with him that the appeal should be allowed. Discovery in an action, whether of documents or of facts, has never been at large but has always been confined to documents or facts relevant to the matters in issue between the parties - typically the plaintiff's cause of action and the defendant's answer to it. It has never been considered that this includes the defendant's ability to satisfy any judgment that might be given against him; otherwise there would be a routine obligation on any defendant to a money claim or a damages action to discover documents or answer questions relating to his assets and income. Whether or not the defendant was insured seems to me to stand in exactly the same position. (See Bolckow Vaughan and Co. v Young
(1880) 42 LT (NS) 690. The situation is a liquidator's examination under the Companies Code, considered in such cases as Gerah Imports Pty Ltd (in liquidation) v The Duke Group Ltd (1993) 61 SASR 557 and Kelly v Murphy (1993) 12 ACSR 365 and Re BPTC Ltd (in liquidation) (1994) 14 ACSR 460, is, in my view, fundamentally different.) I do not interpret rule 8.01 ("any matter in question in the action") as changing the law in this respect and rule 58.04, in my opinion, does not enlarge the subject matter of a discovery order but is concerned rather with the enforcement of orders and in a proper case their limitation. Discovery before action and third party discovery do not really take the matter any further, for it would not be a proper use of the Court's powers in those respects to make orders enabling a plaintiff or prospective plaintiff to fish around to see what evidence he might be able to discover about another person's ability to satisfy an adverse judgment in an action that is not directly concerned with that person's post- judgment financial worth. Nor, in my view, can considerations of case flow management or the possibility of mediation ordinarily, and certainly in an action such as the case at bar, justify requiring a defendant to disclose his financial position including his right to seek indemnity against an insurer. It is true that par(g) of rule 3.04 is expressed in very broad terms but I should not have supposed that it could be used to support orders for discovery - a subject dealt with elsewhere in the rules - that are made in aid of a possible application by a plaintiff to join another defendant. However, it is not necessary to express a firm opinion about that because I consider, for the reasons that Perry J has given, that no arguable case for joining the defendant's insurers has been advanced in this matter. The orders made in J.N. Taylor Holdings Limited (in liquidation) v Bond (1993) 59 SASR
432 were exceptional, for the reasons that are explained in the judgement, and the case is clearly distinguishable. There is much to be said, then, for allowing the appeal against the rule 58 order.
3. However, that is to disregard the authority of the Full Court's decision in State Bank of South Australia v Smoothdale (No. 2) Limited
(1993) 174 LSJS 378 upon which Olsson J understandably relied here. Duggan J had made an order for discovery against the defendant in a negligence and misrepresentation action in order that the plaintiff could identify and possibly join as defendants certain former shareholders of the defendant company who had evidently undertaken to indemnify the defendant against any loss arising from the plaintiff's claim against the defendant. It appears that there was no issue between the defendant and the shareholders as to the latter's obligation or willingness to indemnify the defendant, so that case, like this, was importantly different from J.N. Taylor. However, Duggan J reached the conclusion that there was at least an arguable case for joining the shareholders and he upheld the application for discovery under rule 58.04 on the ground that, having in mind the possibility of a joinder application, any document relating to the indemnity could be said to relate to a "matter in question in the proceedings" within the meaning of rule 58.04. An appeal from that decision was dismissed. The Full Court, in a judgment delivered by Olsson J, gave an expansive interpretation to rule 58.04, holding that it was not to be "read down" in the light of rule 58.01. On the contrary, rule 58.01 had to be read in the setting created by rule 2.01 and rule 3.04(g) and rule 58.04 itself. The result was an amplitude of power in the Court to order discovery in circumstances that carried the notion of discovery well beyond its traditional formulation in such cases as Mulley v Manifold
(1959) 103 CLR 341. The Full Court also agreed with Duggan J that there was at least an arguable case for joining the shareholders, once they were identified, and that the discovery application had to be considered with that in mind. The Full Court emphasized the desirability of avoiding a multiplicity of actions but did not examine closely the merits or otherwise of bringing the shareholders into the action. Of course, it was not directly concerned with any joinder application at that stage. Perhaps despite their interrelation in that case it took the view that discovery is one thing and joinder very much another, however important tactically the consequences of a defendant's disclosing his potential asset backing to a plaintiff might be. No matter how it is interpreted, Smoothdale is strongly supportive of the respondent's case in this appeal.
4. I do not think that Smoothdale can be distinguished. Perry J disagrees with the Full Court's liberal interpretation of rule 58.04 and the effect that this is said to have on rule 58.01, and he also maintains the irrelevance to the present question of the case flow management rules. He regards Olsson J's views on those subjects as dicta that should not be followed and would confine the authority of Smoothdale to its interpretation and application of rule 3.04(g). In my opinion it is not open to us to discriminate in this way between the several strands of Olsson J's reasoning in Smoothdale. The learned Judge (with whom, as I say, the other members of the Court agreed) relied, I think, on the combined effect of the several rules that he discussed in upholding Duggan J's order; alternatively, it could be said that his Honour was of the view that the order was justified by any of rule 58.04 and rule 58.01 (interpreted in the light of rule 58.04) and rule 3.04(g). In one way or another the learned Judge was relying on all three rules for his decision and his treatment of all three formed the ratio decidendi of his judgment. I do not think that what his Honour said by way of interpretation of any of those rules can be regarded as obiter dicta. It is simply a case of a judge having more than one reason, or a complex of reasons, for his decision on a point of law. The application of the common law doctrine of precedent in that situation was explained thus by Devlin J in Behrens v Bertram Mills Circus Ltd [1957] 2 QB 1 at 25 -
"It is well established that if a judge gives two reasons for his
decision, both are binding. It is not permissible to pick out one
as being supposedly the better reason and ignore the otherÉ"
5. Mr Spigelman QC, for the appellant, submitted that Smoothdale could be distinguished on two other grounds. First, he said, there was an actual application for joinder before the Court in that case, and there is no such application here. However, the joinder application was adjourned by Duggan J pending the outcome of the discovery that he ordered. Its only relevance to the order was that it gave actuality, I suppose, to the justification that the plaintiff in that case gave for seeking discovery, namely, that it might well want to join the former shareholders, though it was not then in a position to do so. Mr Gray QC, for the present respondent, made it quite clear that this is what he has in mind here - all he needs is the information, including the identity of the insurer, which he expects that the appellant's documents will give him. There is no distinction in this respect between the two cases. Secondly, it was pointed out that Olsson J, when dismissing the defendant company's floodgates argument, observed (174 LSJS at 384) that "in many insurer situationsÉ no issue of a possible refusal to indemnify arises." I do not interpret this comment as qualifying in any way his Honour's reasoning as to the meaning and general application of the rules of court under discussion.
6. For these reasons it is not possible, in my opinion, to distinguish Smoothdale. If it is binding on us, it is binding in all its relevant aspects.
7. The appellant's alternative submission was that, if Smoothdale could not be distinguished, it should nevertheless not be followed. Smoothdale is a recent and considered decision of the Full Court. No doubt the earlier Court was pressed with the same sort of arguments that we have heard - the fundamental irrelevance of the alleged indemnity to the substantive issues between the present parties, the apparent lack of any justification for forcing the prospective defendants into proceedings in which there was no issue between them and either the plaintiff or the defendant, and a comparison with the clearly distinguishable situation in J.N. Taylor where the insurer had denied liability on grounds that in large measure duplicated the factual and legal issues between the plaintiff and the defendant in that case so that the argument for a saving of time and resources had real merit - and there is no sense in which the decision in Smoothdale could be regarded as having been made per incuriam. What the appeals in Smoothdale and the present case demonstrate - and this should not occasion any surprise - is that judges can disagree on their general attitude to these procedural rules including those rules, such as rule 3.04(g), that are expressed in very broad terms. I happen, with respect, to disagree with certain of the reasoning of the Full Court in Smoothdale but I do not think that its decision can be described as "plainly wrong" as the test for declining to follow an earlier decision understands that expression. The reason for that test, and for the principle of stare decisis that it supports, is to produce finality and predictability in the interpretation and application by the courts of the laws of the land. If the doctrine of precedent recognizes a general exception in the case of procedural laws - a point that was not argued and about which I express no opinion - the exception should not be permitted, in my view, to assist the appellant here. It is obviously desirable that litigants know where they stand on the important subjects of discovery and joinder. It cannot be enough, for one Full Court to override the decision of another, that the decision of the first was the product of a liberal, even very expansive, approach to the interpretation problem in hand with which the second Court, differently composed, strongly disagrees. If we were to decline to follow Smoothdale there would be no guarantee at all that another Full Court, again differently composed, would not later restore Smoothdale's standing. It is desirable that the authority of our decisions should endure beyond the rising of the court. Furthermore it is not irrelevant to observe that if the Supreme Court Judges as a whole do not like the way the Supreme Court Rules are being interpreted, they can easily change them.
8. The view has been expressed that the Full Court may reconsider one of its previous decisions where it appears that the decision is in conflict with a decision of a court of co-ordinate jurisdiction. See Jenerce Pty Ltd v Pope (1971) 1 SASR 204, per Wells J at 216 and the judgments in The Queen v White [1967] SASR 184. Mr Spigelman referred us to the recent decision of the Court of Appeal of Victoria in C.E. Heath Casualty and General Insurance Ltd v Pyramid Building Society (in liquidation) (23 October 1996, unreported), upon which Perry J has made some comments. It may be thought that the reasoning of the Judges in that case was generally inconsistent with the approach which informed the Full Court's decision in Smoothdale, but the Victorian case was about joinder, not discovery - Smoothdale is not referred to in the judgments - and the case could not be regarded as bearing upon the interpretation of the South Australian rules of court that are under consideration in the present appeal. I do not think that the Pyramid case provides a justification for our reviewing Smoothdale.
9. For these reasons I consider that we are bound by Smoothdale and that case, in my judgment, provides support for the orders that Olsson J made in the present case. He was exercising a discretion and doing so in a matter of procedure. In my opinion, we cannot interfere with his discovery order.
10. The appeal with respect to the rule 59 order, relating to Mr Forbes' affidavit, stands differently. I do not think in the circumstances that the plaintiffs were entitled to the order that they obtained on the basis of a literal but, in my view, unfair application of rule 59.02. I agree with what Perry J has written on this subject. I also consider that, once the plaintiffs' right to the document had been disputed, the matter could have been disposed of, with the same desirable result, under rule 59.03. I would therefore allow the appeal in this respect and set aside paragraphs 2 and 3 of Olsson J's order of 8 August 1996. In other respects the appeal should, in my opinion, be dismissed.
11. Since preparing these reasons I have had the opportunity of reading the reasons of Lander J. As it is desirable that we give judgment in this matter before the Court rises for the Christmas break, and as mine is a minority view anyway, I do not stop to consider any grounds, additional to Perry J's, upon which Lander J would allow the appeal. Obviously I am generally sympathetic to Lander J's criticism of Smoothdale and of the orders under appeal. I express no opinion about his Honour's interpretation of rule 59.02 which would exclude from the rule's reach a document referred to in an exhibit to an affidavit rather than in the affidavit itself.
JUDGE2 PERRY J
12. This is an appeal from orders made by a Judge of this Court on the application of the plaintiffs that the defendant give discovery of, and produce certain documents to the plaintiffs, who are the respondents to the appeal.
13. The defendant, a firm of chartered accountants and auditors, who is the appellant in this Court, complains that the order for discovery was not a proper exercise of the jurisdiction of the Court with respect to discovery conferred by SCR R 58. It further complains that the learned Judge erred in holding in the alternative to his reliance on SCR R 58, that production was required by SCR R 59.
14. For convenience I will continue to refer to the parties as the plaintiff and the defendant.
15. The litigation is an attempt by the State Bank of South Australia (now South Australian Asset Management Corporation) and a related company, Beneficial Finance Corporation Ltd to recover what is said to have been substantial, indeed vast, losses suffered by them and the other plaintiff, the State of South Australia, by reason of alleged breaches of various duties of care owed by the defendant at common law and by statute. The claim is for damages of the order of $1 billion. The action is one of two major proceedings of a similar kind arising out of the collapse of the State Bank group.
16. In his reasons given in support of the making of the order appealed from, the learned primary Judge, Olsson J, commented: "Both individually and in their totality the actions are said to be virtually unprecedented in Australian judicial history, in terms of their monetary size and complexity."
17. At the time of the making of the order under appeal, which was dated 1 August 1996, the action had been in train for almost two years. The nature and complexity of the pre-trial proceedings, the conduct of which rests with the learned primary Judge, is such that it will be a long time before the action comes to trial. The trial will be lengthy, and according to Olsson J's estimate, will involve "a period well in excess of twelve months". The legal costs will total many millions of dollars. Liability to pay any judgment, including the liability to the plaintiffs for costs, will rest with the individual partners in the defendant firm.
18. The plaintiffs' investigations into the worth of the partners, the results of which are set out in a confidential affidavit which was before Olsson J, suggested to him that "the known assets of the partners would probably not extend far beyond (if at all) any anticipated liability for the total legal costs involved in the action".
19. Against that background, the plaintiffs' advisers turned their minds to the question whether the defendant might be insured, and whether within the limits of any such insurance, recourse to the insurer might enhance the otherwise slim chance of making an effective recovery.
20. In the result, by an application taken out on 24 May 1996, the plaintiffs sought orders:
"1. That the defendant make discovery and provide inspection within
twenty-one (21) days of the applicable policy or policies of
professional indemnity insurance of the defendants who have
appeared in these proceedings together with any documents
evidencing (but not limited to):
1.1 notification of claims to underwriters consequent upon the
plaintiffs' claims in the within action;
1.2 confirmation or otherwise by the underwriters of any
notification of claim made by the defendant as a result of the
plaintiffs' claims in the within action;
1.3 confirmation or otherwise by the underwriters of their
agreement to indemnify the defendant.
2. In the alternative to the orders sought in paragraph 1 above:
2.1 that Dennis Dall, national managing partner of the defendant,
Price Waterhouse of 75 Hindmarsh Square, Adelaide, 500 in the State
of South Australia, attend before a Master of the Supreme Court in
Chambers on a date and at a time to be appointed for the purpose of
being examined on oath in relation to the existence, terms and
applicability of any policy or policies of professional indemnity
insurance to the plaintiffs' claim in these proceedings and any
notification by the defendant of the claim and its acceptance or
otherwise by the defendant's professional indemnity insurer;
2.2 that at any examination ordered pursuant to paragraph 2.1
above, the defendant, by its managing partner, Dennis Dall or
otherwise, produce to the Master of the Supreme Court any documents
falling within the terms of paragraph 1 hereof which are within the
defendant's custody or control."
21. In response to that application the defendant filed an affidavit sworn by Roger Forbes, a partner in the firm of Mallesons Stephen Jacques, which has the conduct of the defence on behalf of the defendant through the South Australian solicitors on the record. Mr Forbes referred to an annexed letter dated 21 June 1996 from Clyde &; Co, a firm of solicitors practising in London and elsewhere, which identified itself as the solicitors for the defendant's professional indemnity insurers. The letter was addressed to another partner in Mallesons Stephen Jacques.
22. The letter reads as follows:
"I confirm that this firm represents the Professional Indemnity
insurers of Price Waterhouse.
Price Waterhouse gave notice to its Professional Indemnity insurers
of circumstances which could give rise to a claim against Price
Waterhouse by a letter dated 28 March 1991 following the State
Government's announcement of the establishment of a Royal
Commission to investigate the affairs of the State Bank Group, and
the issuing of a Summons by the Auditor General on 15 March 1991
seeking audit working papers of Price Waterhouse covering the years
ended 30 June 1985 to 30 June 1990.
The effect of the notice dated 28 March 1991 is that any claim made
in relation to the notice, attaches to the professional indemnity
policy which commenced on 1 June 1990 and expired on 1 June 1991,
irrespective of when the events the subject of the claim took
place.
Since the proceedings brought by Beneficial Finance Corporation
Limited, South Australian Asset Management Corporation and the
State of South Australia against Price Waterhouse in action no.
1289 of 1994 in the Supreme Court of South Australia were filed in
August 1994, they have been treated by Price Waterhouse and its
insurers as attaching to the policy for the period 1990/91 referred
to above. The professional indemnity insurers of Price Waterhouse
have not denied liability to indemnity Price Waterhouse in respect
of those proceedings and the matter is being treated by the
insurers as a claim which attracts indemnity under the 1990/91
policy."
23. Disclosure of that letter in the affidavit provoked a further application by the plaintiffs, which was taken out on 28 June 1996. That application sought an order pursuant to SCR R 59.02 that the defendant furnish to the plaintiffs copies of the letter from the defendant to its professional indemnity insurers dated 28 March 1991, and the defendant's professional indemnity policy which commenced on 1 June 1990 and expired on 1 June 1991. Those two documents were, of course, referred to in the letter of 21 June 1996 from which I have just quoted.
24. Olsson J heard both applications together, following which he made an order in terms of paragraph 1 of the application for discovery, and the order for production as sought in the second application. It is from those orders that the present appeal is brought.
25. In an affidavit filed just before the hearing of the applications, one of the solicitors for the plaintiffs, Ms Agata Jirbin, stated that the reason for seeking discovery of the documents was to enable the plaintiffs to join the insurer as a defendant in the action. It was common ground on the hearing of the appeal that if the application for joinder was to succeed the plaintiff would seek a declaration that the insurer is liable to indemnify the defendant in respect of the plaintiffs' claim.
26. That an insurer may in such circumstances properly be joined as a defendant is illustrated by the decision of this Court in J.N. Taylor Holdings Ltd (In Liquidation) and Anor v Alan Bond and Ors. In that case, the plaintiffs, two companies which were in liquidation, brought an action against three of their former directors claiming, inter alia, damages for alleged breaches of common law, fiduciary and statutory duties owed by them as directors.
27. The insurer had issued a policy of insurance indemnifying each of the defendants against loss arising from claims made against them jointly or severally by reason of any wrongful act as defined in the policy committed by them in their capacity as directors or officers of the companies. When the liquidator of the plaintiff companies enquired of the insurer whether it accepted liability to indemnify the directors in respect of the plaintiffs' claims, the insurer replied denying liability to do so.
28. The plaintiffs thereupon sought to join the insurer as a defendant in order to seek a declaration that the insurer was obliged to indemnify the directors.
29. It was conceded in the course of the proceedings that the plaintiffs had no direct right of action against the insurer for the recovery of any loss which they might have sustained by reason of the alleged wrongful acts of the directors, or for the amount of any judgment which they might obtain against the defendants.
30. After considering the breadth of the jurisdiction to grant declaratory relief pursuant to s32 of the Supreme Court act 1935, King CJ (with whom Prior and Perry JJ agreed) held that the jurisdiction was wide enough to encompass the joinder of the insurer in those circumstances, and further, that the jurisdiction should be exercised in favour of the plaintiffs' application to join the insurer.
31. The defendant does not challenge the correctness of the decision in J.N. Taylor Holdings. However, it seeks to distinguish the case on the footing that in J.N. Taylor Holdings the insurer denied liability to indemnify the directors, whereas that is not the case here. I deal further with that aspect of the matter in due course.
32. It should be noted that Olsson J did not have before him an application to join the insurer. Indeed, no such application could yet be brought as the plaintiffs were, and remain, unaware of the identity of the insurer. Putting aside the application under R 59, His Honour was faced with an application for discovery of specific documents, or for the examination of a person who might be expected to be able to furnish the necessary information and produce the documents, so that the plaintiffs would be able to find out what they needed to know in order to bring the application for joinder.
33. The application bears the usual endorsement identifying the rules under which it is brought, namely, SCR rules 2, 3, 58 and 78.04. The endorsement also invokes the inherent jurisdiction of the court.
34. R 78.04 permits the examination of any person on oath before a Judge or Master or other officer of the court. That rule was relied upon by the plaintiffs to support that part of the application in which an order was sought (in the alternative to discovery by the defendant of the insurance documents) for Mr Dall of the defendant firm to be examined on oath with respect to details of the professional indemnity insurance policy or policies. His Honour did not consider it necessary to deal with that part of the application, given that he ordered disclosure of the insurance documents in response to the claim advanced in the first part of the application.
35. R 2, a rule of relatively recent origin, sets out the principles of case flow management which now permeate the pre-trial procedures in this Court.
36. R 3 deals with the general powers of the court, the most relevant of which is R 3.04(g) to which I will in due course refer.
37. R 58 deals with discovery.
38. While Olsson J had much to say about the application of case flow management principles, and while the matter is not entirely clear from his reasons, it appears that the orders for discovery and production of documents which were ultimately made, apart from the order for production under R 59, were regarded by him as an exercise of the powers conferred by R 58, that is, the rule dealing generally with discovery.
39. At the outset of his discussion of the principles involved Olsson J refers to the decision of this Court in State Bank of South Australia v Smoothdale (No 2) Ltd. Those proceedings also involved litigation relating to the collapse of the State Bank.
40. In that case, the State Bank sued the defendant Smoothdale for loss and damage said to have resulted from various alleged breaches of duty, negligence, misrepresentations and misleading and deceptive conduct with respect to Smoothdale's sale to the plaintiff of shares in a New Zealand company. During the course of the proceedings the plaintiff became aware of the fact that Smoothdale had been indemnified by its former shareholders against any loss, which presumably included any loss which might arise from the plaintiff's claim against it. On becoming apprised of that fact, the plaintiff brought an application seeking orders that the former shareholders be joined as defendants, that Smoothdale "preserve and retain" the documents comprising the indemnity, and that it make discovery of the documents comprising the indemnity pursuant to R 58, or alternatively, that the company secretary be examined on oath as to the indemnity pursuant to R 78.04.
41. A single Judge of this Court took the view that there was power to make the order sought under R 58.04, and further, that in the exercise of his discretion, the order for discovery of the indemnity documents should be made. The appeal to this Court from that order was dismissed.
42. The reasons supporting the dismissal of the appeal were given by Olsson J, with whom King CJ and Millhouse J agreed.
43. During the course of his reasons Olsson J said:
"The principal issues arising on the appeal necessitate a review of
the salient features of the Supreme Court Rules ("SCR"). In
embarking upon that exercise it is stating the obvious to say that
the older published authorities (particularly those arising in
other jurisdictions) bearing on the topic of discovery need to be
read with considerable care because they were patently the product
of the rules environment in which they were decided. There have
been recent dramatic changes in the SCR both in form and in
underlying philosophy. The concept of case flow management has
infused substantially new concepts. Moreover, the modern approach
to practice and procedure in this court has been to focus on the
most efficient and expeditious review of the merits of the case and
to eschew undue technicality and, wherever possible, avoid any need
for a multiplicity of process and proceedings."
44. His Honour then goes on to refer to R 2.01 which provides as follows:
"These Rules are made for the purpose of establishing orderly
procedures for the conduct of litigation in the Court and of
promoting the just and efficient determination of such litigation.
They are not intended to defeat a proper claim or defence of a
litigant who is genuinely endeavouring to comply with the
procedures of the Court, and are to be interpreted and applied with
the above purpose in view."
45. He proceeds to cite R 3.04(g), which relevantly provides:
"The Court shall have power to act at any time to give effect to
the purpose of these Rules and, without limiting the generality of
this power, it may in any case in which it thinks it just do to so:
(a) ...
(g) do all or any acts or give any directions relating to the
conduct of an action subject to such terms as to costs or otherwise
as it thinks proper;".
46. After referring to that rule, Olsson J pointed out that R 3.06 provides that "The provisions of these Rules" (which presumably means R
3 but I suppose may possibly be intended to refer to all of the Supreme Court rules) "are in addition to, and shall not derogate from, any inherent jurisdiction of the Court".
47. Against that background, Olsson J then refers to R 58, which deals more specifically with discovery.
48. The obligation as to discovery as defined in R 58.01(1) is for each party to make discovery by the filing and delivery of lists of documents at the time and in the manner set out in the rules, being the documents "that are, or have been, in his possession, custody or power, relating to any matter in question in the action".
49. Olsson J cites the well known dictum of Menzies J in Mulley v Manifold: "Only a document which relates in some way to a matter in issue is discoverable, but it is sufficient if it would, or would lead to a train of inquiry which would, either advance a party's own case or damage that of his adversary."
50. Olsson J then refers to R 58.04, which relevantly provides:
"The Court may on application for discovery made at any stage of
the proceedings:
(a) order any party to file and deliver to any other party;
(i) a list of documents;
(ii) an affidavit verifying a list of documents;
(b) order that-
(i) discovery be limited to certain documents or classes of
documents related to the matters specified in the order;
(ii) discovery be made by phases in relation to any class or
classes of documents in such manner as may be specified in the
order;
(iii) notwithstanding Rule 58.01, a party be exempted from making
discovery of any specified document or class or classes of
document either conditionally or unconditionally and wholly or to
a specified extent or for a specified time. Factors to be
considered in making or refusing any order under this subrule
shall include the likely time, cost and inconvenience of making
discovery of any documents or classes of documents by way of
comparison with the amount involved in the action, the relative
importance or likely relevance of them in relation to any issue
or issues in the action and the probable effect on the outcome of
the action of a party obtaining access to the document or class
of document.
(c) ..."
51. As to that rule, Olsson commented:
"It is at once to be noted that this rule is expressed in the
widest possible terms. Indeed that was the clear intention when it
was enacted. Whilst there is a superficial attraction in the
argument advanced on behalf of the appellant that it ought to be
read down in light of SCR 58.01, that is not indicated by the rule
itself and is inconsistent with the patent intention of the Judges
to invest the individual judicial officer with an unfettered
judicial discretion to make any order which, in the specific case,
is considered necessary and appropriate to ensure that all
questions to be litigated between the parties are addressed in the
most efficacious manner; and that undue multiplicity of proceedings
is avoided. SCR 58.01 now needs to be read in such a setting.
Furthermore, the fallacy of the contention of counsel for the
appellant that SCR 58.04 is strictly limited in its operations to
the Mulley v Manifold formulation is instantly revealed by the fact
that, in terms, the rule permits an application to be made at any
stage of an action. It may well be that an order is sought before
any issues at all have been defined by formal pleadings between the
parties.
I consider that SCR 58.04 is an apt vehicle for and was intended to
permit the making of any order which, in the circumstances, is
warranted to deal with all matters which either arise on existing
pleadings in a case or those which fall to be determined in
relation to the proper disposal of any pending issue arising out of
interlocutory proceedings in the case - in the present context, the
application for joinder and the basis upon which it is being
pursued. Moreover, it is also available as a vehicle for the
exercise by the Court of its inherent powers, as preserved by SCR
3.06."
52. His Honour goes on to observe that the question of joinder of additional parties was "an important and substantial issue". The "resolution" of that issue would require a consideration of the material to be discovered. Although discovery of the material could be obtained in separate proceedings, that would lead to a "multiplicity of actions" which was to be discouraged.
53. Before disposing of the appeal in that case, Olsson J pointed out that the order there under review could have been made under the inherent powers of the court. He emphasised that what was in issue in the case was not a "potential mere investigation of assets and solvency of the defendant per se" but "a reasonable desire based upon specific information to ensure that parties are joined in a manner which at the same time assures to the plaintiff potential for its litigation and avoids multiplicity of proceedings".
54. On the hearing of the appeal in the present case, the Court was invited to overrule the decision in Smoothdale (No 2) to the extent that it might be thought to stand in the path of a resolution of the appeal in favour of the defendant.
55. It would be unusual for this Court to overturn a judgment decided so recently, other than a decision reached per incuriam. But, it was, after all, a decision on an appeal as to a matter of practice and procedure in which the question raised was as to the propriety of the exercise of discretion by the primary Judge which resulted in an order for discovery. It is not in the same category as a decision on a question of law which, consistently with the principles of stare decisis, would not be lightly interfered with other than on appeal from this Court.
56. For reasons which I come to, in my view the result in Smoothdale (No 2) is justifiable, if at all, by a somewhat different process of reasoning from that of Olsson J, with whose reasons , in part, I respectfully disagree.
57. A distinction needs to be drawn between applications for joinder and applications for discovery in anticipation of and in aid of a proposed joinder.
58. In considering the propriety of an application of the latter kind, with respect to the view expressed by Duggan J at first instance and by the Full Court on appeal in Smoothdale (No 2), I do not think that there should be any requirement that there should be an "arguable case" for joinder before allowing an application for discovery. That would put too high an onus on the party applying for discovery. But equally clearly, the party opposing such an application, that is, an application for discovery in aid of joinder, may successfully defend such an application if he or she can demonstrate that there could be no arguable case for joinder, even if discovery in aid of joinder was to be permitted. There are other grounds upon which such an application might properly be refused.
59. It would be proper to refuse an attempt to obtain information to enable an application to be made for joinder where any such application was, in the circumstances, vexatious, or when it arises at a time, such as in the course of a trial of existing proceedings, when it would obviously be impossible sensibly to contemplate joinder, when the information could be more conveniently obtained by other means, or as I have said, if the opposing party can demonstrate that there could be no arguable case for joinder, even if the order sought was to be made.
60. Furthermore, with great respect to Olsson J, I am unable to agree with his comments made in Smoothdale (No 2) and in his decision now under appeal to the effect that an application for disclosure of documents or other information thought necessary to enable an application to be made to join other parties to proceedings should properly be regarded as within R 58. In particular, in my view, the discovery contemplated in R 58.01(1), when it uses the expression "any matter in question in the action", must be taken to relate to documents which in one way or another might be thought to advance the case of one party or another, or to attack the case of the other, in the sense identified in the passage from the judgment of Menzies J in Mulley v Manifold (supra) which I have cited above.
61. Neither, with respect, am I able to agree that the fact that under R 58.04 the court may entertain an application for discovery at any stage of the proceedings, which could be before the completion of formal pleadings, should lead to the view that discovery might be ordered to be made of documents that are irrelevant to the case sought to be made, or anticipated, by any existing party to the action vis a vis another existing party.
62. The words "any matter in question" in R 58.01 are arguably of wider import than "any matter in issue". But even if not, the fact that under R 58.04 discovery may be ordered before the formal joinder of issues by the exchange of pleadings, is no warrant for regarding the process of discovery in those circumstances as legitimising an attempt to obtain access to documents which cannot conceivably be regarded as relating to the advancement of the case pleaded in the statement of claim against the then existing defendant, or for that matter, any conceivable defence which the defendant may wish to raise.
63. In most cases parties do not have any real difficulty in identifying documents which are, or are likely to be, relevant to a "matter in question" in the proceedings, ahead of the exchange of pleadings. For example, parties commonly assemble the documents which they consider are likely to be relevant to the action before instituting proceedings. In the case of substantial commercial litigation, this can amount to collections involving thousands of documents. It has become common place in proceedings of that kind for an order to be made that the plaintiff discover all such documents ahead of the delivery of the defence on the footing that to do so will often make it less likely that there will be future applications to amend the defence if the process of discovery is left to a later stage of the action.
64. So that nowadays, if it seems convenient to do so, the court does not wait for the completion of pleadings before directing discovery. As I have said, parties may be taken to realise what documents they have which relate to the proceedings and would sensibly be regarded as discoverable within the proceedings. The days are past when the courts were distracted by arid arguments over the niceties of the precise joinder of issues in the context of discovery. The importance of the Mulley v Manifold formulation does not lie in the words "matter in issue" but in the concept that the documents must fairly be regarded as relating to the advancement of a party's own case or the defence of the opposing party's case.
65. That is not to say that when the formal issues are struck by the completion of pleadings some further refinement of the discovery process may be warranted in order to cause discovery to be made of documents which relate to specific issues which by then might have been pleaded.
66. With respect to Olsson J, and in particular the observations made by him in Smoothdale (No 2), for the reasons which I have given, I am unable to agree that the terms of R 58.04 expand the category of documents liable to be produced on discovery. I would have thought that, relevantly, the rule only goes to the timing and manner of making discovery. Indeed, most of the order deals with a narrowing down of the scope of discovery eg R 58.04(b), which enables an order to be made confining discovery to certain classes of documents, and R
58.04(c) which enables postponement of discovery on some issues.
67. Neither, with respect, am I able to agree that case flow management rules, in particular R 2, have anything to do with the scope of discovery. In particular, I am unable to accept that the case flow management rules are a warrant for overturning the construction which over the years has been placed on long-standing procedures such as the rules as to discovery, in favour of an amorphous application of them said to be justified in the interests of securing an expeditious disposal of the proceedings. The flexible application of the Rules of Court so as to keep pace with the changes in the manner in which and the pace at which litigation is conducted has always been part of the exercise of the pre-trial jurisdiction of the court. But if that process is taken too far, there is a risk of destabilising the pre- trial process with a consequent interference with the very purpose said to underscore the case flow management procedures, namely, the prompt and orderly disposal of litigation.
68. In my opinion, the discovery contemplated by R 58, whether it is effected upon the completion of the pleadings by the exchange of a list of documents pursuant to R 58.01(1), or by order of the court under R
58.04 at any other stage of the proceedings, must have a direct relationship to the proceedings instituted between the parties and the matters to be agitated in those proceedings, having regard to the cases presented or to be presented by each of the parties. Authorities such as Mulley v Manifold (supra) and Compagnie Financier v The Peruvian Guano Company must in the sense which I have explained still be taken broadly to govern the process of discovery envisaged by R 58, at whatever stage the action may have reached when any question of discovery arises.
69. If discovery is to be made before the formal exchange of pleadings, the considerations to which I have referred should confine its scope to documents which relate to the case pleaded by the plaintiff and any defence which might reasonably be anticipated at that stage.
70. To the extent that my views just expressed do not reflect what was said by Olsson J in Smoothdale (No 2), the dicta to the contrary in Smoothdale (No 2) should not be followed. That is not to say, however, that I would go so far as to suggest that the outcome of that case should be interfered with, as the order made in that case could, as was recognised in the reasons of Olsson J, be justified by reference to other rules, and in particular R 3.04(g). In that sense I do not suggest that the decision be overruled but only that it be justified on one rather than the other of the bases identified within it to support the order which was made in that case.
71. It follows that the order under appeal could not, in my view, be justified as a proper exercise of the discretion under R 58.04. It does not seem to me that however the contention is put, discovery of documents apt to identify the appellant's professional indemnity insurer, and the scope of the cover afforded by the policy or policies of insurance by which that indemnity is given, could have any effect upon the resolution of the issues likely to arise upon the presentation of the case of the plaintiff against the defendant or upon the consideration of any defence to be advanced by the defendant.
72. The suggestion that knowledge of the extent of the appellant's insurance cover might assist in the process of mediation does not, in my opinion, afford a proper basis to justify the order under appeal as being within the scope of R 58. R 58 relates to discovery relevant to the trial of the action, not to documents which might be thought to be relevant to the process of mediation. True it is that documents relevant to the trial of the action may also be relevant to mediation. But it does not follow that documents which could only be relevant to the process of mediation become, by reason of that fact, discoverable under R 58, or for that matter, liable to be produced by reference to any other rule.
73. Mediation is an entirely different procedure from the trial of an action at law. While mediation may be mandated, nonetheless it is essentially a consensual procedure. It would be contrary to the proper disposal of pre-trial procedures relating to proceedings in the civil jurisdiction of the court (as opposed to mediation) to confuse those procedures by taking steps which might be thought desirable if there was to be a mediation.
74. For example, it might be highly relevant to the process of mediation to know how much money the State government was prepared to put towards the costs of the plaintiffs' conduct of the proceedings. But no-one could suggest that documents which might indicate the position in that regard could possibly be, for that reason, discoverable under R 58.
75. It was contended that disclosure of the extent of the indemnity available to the defendants might have an effect upon decisions taken by the plaintiff as to what issues it will pursue at the trial, with a potential saving in cost if the issues were for that reason reduced. I do not see that as a matter which would justify joinder or discovery in aid of discovery. Ordinarily, matters of that kind might well emerge at the pre-trial conference stage. But unless a party sued volunteers the information, there is no right in a plaintiff to examine a defendant ahead of the trial in an endeavour to elicit information about the defendant's means, with a view to deciding whether it is worth his or her while to go on with the case, or some part of it.
76. An order in the terms of paragraph 1 of the order under appeal, that is, that the defendant make discovery and provide inspection of the policy or policies of professional indemnity insurance and any documents evidencing notification of claims to the underwriters and the outcome of the notification of such claims, could be justified, if at all, only by reference to powers of the court other than those to be found in R 58. In particular I would look to R 3.04 and the general powers of the court to give directions, and in particular the power under that rule-
"... in any case in which it thinks it just to do so: ... (to)
(g) do all or any acts or give any directions relating to the
conduct of an action ..."
77. The possible joinder of another party to an action relates to the conduct of the action within the meaning of that rule.
78. However, even allowing that an application such as that now in question may be entertained under R 3.04, the question still arises whether it has been shown that there would be no arguable case for joinder even if the application was otherwise to succeed.
79. The question of the propriety of the proposed joinder has been fully addressed by counsel, both before the learned Judge appealed from and before this Court. Indeed, it is the principal ground upon which the defendant resisted the making of the orders under appeal. It is, therefore, necessary for this Court to rule on the merits of that argument, on the footing that if there appears that there could be no arguable case for joinder, the orders appealed from should be quashed.
80. I am reinforced in the view that the appeal should be approached in that way by reason of the fact that, given the terms of the letter from Clyde and Co, it seems hardly likely that disclosure of the policy and documents relating to any claim under it could reveal a basis for joinder not so far apparent.
81. Despite the understandable interest and concern of the plaintiffs to ascertain the extent of the cover available to the appellant, it is another matter altogether as to whether or not the insurer should be joined to permit a stranger to the insurance contract to seek declaratory relief against it going to that question.
82. In the first place, the case is distinguishable from the decision in J.N. Taylor where the insurers denied liability.
83. Olsson J in his reasons for the orders under appeal, stressed that there was "no unequivocal acceptance by the insurer of liability". Indeed, he went on to say that the letter written by the solicitors for the professional indemnity insurers of the appellants was "É remarkable for what it does not say as for the information which is imparted by it".
84. With respect to Olsson J, I do not think that any prudent insurer could have responded to the request made of it in any different fashion. The letter from Clyde and Co expresses no more or less than what I would have expected an insurer to say, namely, that it had received notice of circumstances which give rise to a claim; that it had not denied liability to indemnify the respondent; and that the matter was being treated by it as a claim which attracts indemnity under the policy. The insurer is perfectly entitled to await the outcome of the proceedings, in the meantime conducting the defence to the proceedings if it wishes, in order to determine whether at the conclusion of the litigation the view which it took at an early stage ought to be confirmed. It is quite possible that matters might arise during the course of the proceedings which would cause a change in its willingness to indemnify the respondent. That is entirely a matter for the insurer, not one upon which the plaintiffs will have any say.
85. Clearly, there does not appear to be any issue at this stage between the defendant and its professional indemnity insurer. The plain fact of the matter is that the insurer is not denying liability under the policy. Any attempt to have access to the insurance documents must, in those circumstances, amount to nothing more than a fishing exercise designed to reveal whether those documents indicate a basis for seeking a declaration, the necessity or desirability of which cannot be demonstrated at this stage.
86. In not dissimilar circumstances, the Court of Appeal of the Supreme Court of Victoria quashed an order for the joinder of the professional indemnity insurers of auditors who were defendants to proceedings seeking damages in the wake of the collapse of the Pyramid Building Society. In particular the judgments of Ormiston and Phillips JJA in that case deserve the most careful consideration. There are a number of points made in the course of those judgments which are pertinent to the case at bar.
87. The existence of common questions of fact, coupled with the suggestion that it is necessary for the insurer to be made a party to the action in order for it to be bound by the determination of the issues at the trial, is a consideration which loomed large in J.N. Taylor, and is the subject of extended commentary by the Court of Appeal of Victoria in the Pyramid case.
88. But as was made clear in the Pyramid case, in the ordinary course, an insurer, even though not a party to the action, will be bound by the outcome to the extent that the judgment delivered after the trial determines the liability of the insured defendant to the plaintiff. There is no reason to suppose that that will not be the case here.
89. The J.N. Taylor case was unusual in that there were overlapping questions of fact. The insurer had denied liability upon the basis that the conduct of the defendant directors was such as to disentitle them to indemnity. The same conduct would need to be scrutinised to determine whether the plaintiff's claim against the directors should succeed. See the observations by King CJ:
"There are very strong considerations in favour of disposing of the
issues of the liability of the defendant directors to the
plaintiffs and the liability of the insurer to indemnify the
directors in the one trial. The trial of the action against the
directors seems likely to be very lengthy, very complex and very
costly. The prospect of a subsequent trial of comparable length
complexity and expense, might be prohibitive. It is clear that
much of the ground would have to be covered again. In the action
against the insurer, it would be necessary to prove the nature of
the breaches of duty in order to establish that they amounted to
wrongful acts within the meaning of the policy. At least some of
the breaches of duty pleaded against the defendants could come
within an exclusion in the definition of "wrongful act" in the
policy, namely "acts or omissions done or alleged to have been done
in conflict or in preferment of the interests of the Company over
those of a Subsidiary Company or vice versa". Some could fall
within an exception to liability relating to "dishonest fraudulent
criminal or malicious or wilful or reckless" acts or omissions.
The resolution of those issues would involve canvassing much the
same evidentiary ground as will be involved in the trial of the
action against the directors."
90. The decision in J.N. Taylor Holdings must be confined to its special facts, and in particular the fact that not only was there in that case a denial of liability on the part of the insurer, but the facts and circumstances relevant to the grounds upon which liability were denied were more or less co-extensive with the factual inquiry which would be necessary in order to dispose of the issues raised as between the parties in that case other than the insurer. That will not often be the case. More commonly, I would have thought any denial of liability on the part of the insurer will not involve the need to address questions of fact which are common to the questions arising in the context of the resolution of the claim against the insurer.
91. In this case, whether or not any common questions of fact in any real sense will arise depends upon what stand the insurer ultimately takes, and the ground upon which, at some stage, it might be prompted to deny liability, if it does so at all. Unlike the situation in the J.N. Taylor case, it is impossible in this case to forecast those matters at this stage. The most which can be said is that there is no present indication that liability will, at any stage, be denied, let alone that any such common question of fact will arise before the trial of the proceedings as presently constituted.
92. Of course, the court must endeavour to avoid multiplicity of actions. That has been so for many years before the passing of the rules relating to case flow management, indeed, since the Judicature Acts.
93. As to that aspect of the matter, if the appeal is disposed of in conformity with the views held by me, it would technically be possible for the plaintiffs to take out an application under R 60 for discovery against Mr Dennis Dall.
94. However, any such action would necessarily be vexatious, in that the decision in this appeal would, for all practical purposes, be determinative of the issues which would arise in any such application.
95. A finding in the course of the disposal of this appeal that there was no arguable case for joinder of the insurer, would necessarily result in the dismissal of any R 60 application designed to achieve the same result as that sought to be achieved in the proceedings under appeal. In those circumstances, any R 60 application would necessarily stand to be characterised as a mere "fishing expedition".
96. So that there is no risk of a multiplicity of actions with respect to discovery, if the appeal is disposed of in the manner contemplated by me.
97. What the foreshadowed application for joinder boils down to is that it represents an attempt by the plaintiffs to lock the insurer into a position not only where it acknowledges a present willingness to indemnify under the policy, but to obtain a certainty that it will do so, come what may.
98. Whatever the commercial desirability from the plaintiffs' point of view of attempting to lock in the insurer in that fashion, it would be both impracticable and unfair to make that attempt at this stage.
99. For the plaintiffs to be permitted to join the insurer for the purposes of advancing a claim for declaratory relief, they will necessarily have to invent issues which at the present time do not exist, that is, create issues between the defendant and its insurer which, as between the defendant and the insurer, do not presently exist and may never exist.
100. Furthermore, to permit such a course may have the undesirable result of causing the insurer to have to obtain separate representation, that is, to pay for two sets of solicitors. Given the obvious conflict which would arise, one solicitor would be needed to conduct the defence to the substantive proceedings (if that is what the defendant's insurers decide to do) and another in addition, in order that the insurer might be separately represented in defending the declaratory proceedings.
101. In the circumstances of this case, it would be wrong even to contemplate binding the insurer to findings as to its liability to indemnify the defendant before it has had the opportunity to consider the outcome of the litigation between the plaintiffs and the existing defendant.
102. In my opinion, for these reasons, even if the application for information to be furnished by way of discovery of the insurance documents was to be allowed, no arguable case for joinder could be mounted.
103. The application under R 58 should be rejected on the wider grounds to which I have referred. Insofar as it is advanced under R 3.04(g), it should be rejected on the merits, as should the application to examine Mr Dall. Reference to the inherent jurisdiction takes the matter no further.
104. It remains only to deal with the appeal against the order made by the learned Judge at first instance under R 59.
105. Again, I have the misfortune to disagree with the reasoning which led the learned Judge at first instance to make an order for production under this rule.
106. The rule relevantly provides:
"R 59.02 Where a party has filed a pleading or an affidavit
referring to a document he shall within seven days of receipt of
any request from another party in accordance with the request
either make such document available for inspection by that other
party, or furnish that other party with a copy of the document at
that party's cost."
107. Put shortly, Olsson J held that the affidavit sworn by Mr Forbes, to which I have already referred, "attracts the mandatory provisions of SCR 59.02". That being so, and given that an exhibit to an affidavit stands on the same footing as the affidavit itself, it followed that the professional indemnity policy which commenced on 1 June 1990 and expired on 1 June 1991 and the notice by letter dated 28 March 1991 from the appellant to the insurer, being documents referred to in the letter of Clyde &; Co dated 21 June 1996, exhibited to the affidavit, fell to be produced on request from the plaintiffs.
108. That request having been made in the letter from the Crown Solicitor's Office, acting on behalf of the plaintiffs dated 26 June 1996 addressed to Malleson Stephen Jacques, and the documents not having been supplied in response to that request, it was open to the Court, so the argument went, to make an order in aid of the enforcement of the rule.
109. In my opinion, the learned Judge at first instance erred in relying on the rule in that way. To do so was to adopt a literal interpretation at the expense of the requirements of justice and fairness.
110. The rule should not be construed so as to oblige a party to produce a document which it has referred to in the context of an affidavit sworn to support an objection to the production of the document.
111. Mr Forbes affidavit in paragraph 2 states: "I swear this affidavit in connection with the plaintiff's application filed on 24 May 1994 for orders that, inter alia, the defendant make discovery and provide inspection of the applicable policy or policies of professional indemnity insurance."
112. So that the affidavit was filed in answer to that application. In my opinion, to refer incidentally to a document which is the subject of an application for discovery in order to advance an objection to the production of it, cannot sensibly expose the party to a liability to produce it. The Rules of Court should be interpreted and applied consistently with the requirements of justice, not so as to defeat those requirements.
113. If the learned primary Judge was correct in his view as to the application of the rule, it would mean that a party opposing production of a document could never refer to it, at least in a pleading or in an affidavit in the course of advancing that opposition. I would not be prepared to give R 59.02 a construction which would lead to such a strange result. If necessary, I would achieve a just result by applying the general dispensing power to be found in R 3.04(a). Such an approach is supported by reference to R 2.01. Although the heading to the rule is "R 2 - Case flow management", I assume it to be of application to the rules generally.
114. R 2.01 provides:
"These rules are made for the purpose of establishing orderly
procedures for the conduct of litigation in the Court and of
promoting the just and efficient determination of such litigation.
They are not intended to defeat a proper claim or defence of a
litigant who is genuinely endeavouring to comply with the
procedures of the Court, and are to be interpreted and applied with
the above purpose in view."
115. Since dictating the above, I have had the benefit of perusing in draft a copy of the reasons to be published by Cox J.
116. With respect to him, I would not be prepared to accept that, as a matter of stare decisis, Smoothdale (No 2) (supra) stands for the proposition that joinder is arguably justified in circumstances such as this, where there has been no refusal to indemnify. True it is that there is no indication in the judgment given in that case that the liability of the indemnifying former shareholders would, if they were to be joined, be disputed. But neither is there any indication in the published reasons the other way. Olsson J did, however, comment: "In many insurer situations, for example, no issue of a possible refusal to indemnify arises."
117. There is no reference in the published reasons to any argument that joinder could not arguably be justified if there was to be no challenge to the obligation to indemnify. If anything, the passage in the reasons of Olsson J to which I have just referred points the other way.
118. In those circumstances I could not regard it as part of the ratio decidendi of Smoothdale (No 2) that joinder may be justified where there is no suggestion that indemnity might be refused. With respect to Cox J, I would not be prepared, for the purposes of identifying the ratio of Smoothdale (No 2), to presume that the court in that case "was pressed with the same sort of argument that we have heard".
119. I cannot, with respect, accept that in Smoothdale (No 2) this Court must be taken to have been of the view that it is even arguable that a plaintiff is entitled, effectively, to hijack a defendant's rights of indemnity against its insurer when there is no justiciable issue as to the exercise of those rights.
120. I remain of the view that joinder in this case could not even arguably be justified, and that in those circumstances, discovery in aid of the proposed joinder should be refused.
121. I would allow the appeal to the intent that the order of Olsson J dated 8 August 1996 be quashed, and that there be substituted for it an order dismissing both of the plaintiffs' applications.
JUDGE3 LANDER J
122. This appeal raises a number of important and difficult matters.
123. First it raises the question whether or not a party is entitled to require the opposing party to discover and make available for inspection details of that party's policy of insurance in circumstances where there is no suggestion that the underwriters have declined to offer indemnity. Secondly it raises the question whether or not those documents are entitled to be obtained for the purpose of a forensic advantage in the proceedings. Thirdly the appeal raises the question of whether or not substantive rights which the parties enjoyed at common law are entitled to be overridden by reason of case flow management or in order to ensure the more orderly disposition of proceedings or even the expedition of proceedings. Fourthly the appeal raises the question whether or not a party when faced with an application for a document in opposing that application is required, in alluding to the existence of that document, to present that document for inspection, so therefore defeating any rights that party might have had in opposing the principle relief sought in the application.
124. The claim is for the sum of $1 billion dollars which, as the learned Judge from whom the appeal comes observed, is for an amount in excess of the known assets of each of the partners of the appellant firm. The claim therefore if successful would have the effect of depriving each of the partners of the appellant firm of all of their assets.
125. The action is most complicated involving an examination of complex facts over a long period of time. The trial of the action would undoubtedly be long and involved and it would involve very great expense in its preparation and the conduct of the trial. The respondents estimate their costs of action could be in excess of $13 million dollars at the conclusion of any trial.
126. It is therefore not irrelevant that the appellant may be insured and, as well, it would be relevant to tactical considerations for the respondents to be aware of the underwriters, the limits of the policy and the terms of the indemnity. In particular all of those matters would be relevant for the purpose of determining how the case may be framed, that is to say as to the extent of the limits of the case as it is pursued, and generally for the purpose of determining the tactics appropriate for settlement negotiations.
127. There can be no doubt for all of those reasons that it would be an advantage for the respondents to be aware of all of the matters to which I have referred.
128. The order from which the appeal has been brought relevantly provides:
"1. That the defendant make discovery and provide inspection within
fourteen (14) days of the applicable policy or policies of
professional indemnity insurance of the defendants who have
appeared in these proceedings together with any documents
evidencing:
1.1 notification of claims to underwriters consequent upon the
plaintiffs' claims in the within action;
1.2 confirmation or otherwise by the underwriters of any
notification of claim made by the defendant as a result of the
plaintiffs' claims in the within action;
1.3 confirmation or otherwise by the underwriters of their
agreement to indemnify the defendant.
2. That pursuant to Rule 59.02, within fourteen (14) days the
defendant furnish to the plaintiffs copies of:
2.1 the letter from the defendant to its professional indemnity
insurers dated the 28th day of March 1991;
2.2 the defendant's professional indemnity policy which commenced
on the 1st day of June 1990 and expired on the 1st day of June
1991;
which are referred to in exhibit "RJF1" to the affidavit of Roger
John Forbes sworn in this matter on the 24th day of June 1996.
3. That the application of the defendant made orally on the 1st day
of July 1996 that compliance with Rule 59.02 be dispensed with in
relation to the documents referred to in order 2 be dismissed."
129. It can be seen that the order goes further than providing the respondents with the information to which I have referred but also requires the appellant to make discovery and provide inspection of any documents evidencing the three matters referred to in paragraph 1. It would require the discovery and provision for inspection of correspondence passing between the appellant and its underwriters relating to the notification of claim. It also requires the discovery of and provision for inspection of documents which not only show the commercial arrangements that subsisted between the appellant and its underwriters before notification of this claim, but also whatever commercial arrangements might have been made between the appellant and its underwriters leading to the confirmation or otherwise by the underwriters of their agreement to indemnify the appellant. A good deal of that information is highly confidential. The terms and conditions of the policy of insurance, premiums payable and other commercial arrangements between the appellant and its insurers are commercial matters which both the appellant and the underwriters would not wish their competitors in their respective businesses or indeed the respondent to be aware of. The provision of such information, whatever the terms of the order as to confidentiality made, will necessarily mean that confidential information will come into the public domain, which may be used in other circumstances contrary to the interests of the appellant or its underwriters. An example of that is established in this application. The respondents, in support of this application tendered an affidavit of Mr Mark Hoffman (to which I will make further reference) who relied upon the reasons for judgment of Olsson J in another matter in which the appellant is defendant, Health &; Lifecare Limited (Receivers &; Managers Appointed) v Price Waterhouse (1993) 11 ACSR 326, where His Honour in his reasons referred to the fact that the appellant was covered by an insurance policy. That information in that other case was used for establishing the existence of a policy of insurance in this matter. There was also evidence in that case of the extent of the insurance cover, but His Honour did not refer to the extent of cover in his reasons.
130. It is the case that professional people and their underwriters are anxious not to publish details of their insurance cover. There is a perception in the commercial world that the existence of appropriate cover of insurance is not only a protection from, but as well, a magnet for claims, because plaintiffs perceive a chance of recovery from a party who is insured. Where the insured parties and non insured parties are joint or concurrent tort feasors it means those who have insurance cover will more likely attract proceedings than those without cover and in due course, even if only partly responsible for the damages become liable for the whole (Wrongs Act).
131. Apart from the odium associated with a claim of professional negligence, it is recognised claims brought against professional people, even if unsuccessful, cause an increase and sometimes a significant increase in the premium paid for professional indemnity cover.
132. The reason I have referred to these matters is to make clear that at least in the mind of the appellant there are good reasons to resist a request to divulge its insurance arrangements and to resist an application which will require the divulging of that information.
133. It should not be overlooked that whilst the order requires the discovery of all of the commercial arrangements between the appellant and the underwriters it does so in circumstances where the underwriters were not heard in relation to the impact of the order on its commercial interests, although the respondents would answer that by pointing to the fact that they were unable to notify or serve the underwriters as their identity is not known to the respondents.
134. The order has perhaps an even more significant effect. It requires that the appellant disclose to the respondent: "any documents evidencing notification of claims consequent upon the (respondents) claims in the within action".
135. That may well mean handing over documents containing information relating to the action itself including perhaps the statements of partners commenting upon the claim or the claim for damages. The documents might refer to the appellant's attitude to the appropriateness of the claim. None of these matters would ordinarily come to the attention of a plaintiff in proceedings but this order has the potentiality to give to the respondents information of the most damaging kind provided by the appellant for the purpose of advising its insurers.
136. It might be said that if the documents contained information of that kind the appellant, ought, on this application, to have said so. However the appellant was in the difficult circumstance that if it referred in these proceedings by affidavit to a document it ran the risk that the respondents would claim an entitlement to inspect that document, which would of course mean that the very defence to the application ensured the application's success. In fact such an application was made by the respondents and acceded to by the learned Judge. Whilst I have no doubt, with respect, that His Honour was wrong to make that order (and I will shortly give reasons for that opinion) the fact that such an order was made showed the dilemma facing the appellant.
137. The order reflects paragraph 1 of the application upon which the order was made. The application which was brought pursuant to rules 2, 3, 58 and 78.04 sought alternative orders including an order for the examination of the national managing partner of the appellant for the purpose of being examined on oath in relation to the existence terms and applicability of any policy or policies of professional indemnity insurance to the respondents' claim in these proceedings, and any notification by the appellant of the claim and its acceptance or otherwise by the respondents' professional indemnity insurer. Having regard to the order made in paragraph 1 the learned Judge had no need to consider the alternative orders sought in paragraph 2 of the application. It was recognised by the parties that if an order was appropriate in respect of paragraph 1of the application there was no need for an order under paragraph two. So also if the Court was of the opinion that no order ought to be made in respect of paragraph 1, it would follow that the order sought in paragraph 2 ought also to be refused.
138. The application for discovery was supported by an affidavit of Mr Hoffman, a solicitor retained to act on behalf of the respondents. That affidavit was sealed pursuant to an order of Olsson J made on 11 June 1996.
139. A number of matters were raised in that affidavit. First it was asserted that the appellant did have a policy or policies of professional indemnity insurance. That assertion relied upon regulations relating to Certificate Of Public Practice issued by the Institute of Chartered Accountants in Australia and also an earlier judgment of this Court in relation to other proceedings against the appellant. Mr Hoffman asserted that the policy of indemnity would be not less than a very large sum which he mentioned in the affidavit itself. He also asserted various terms of the policies of professional indemnity insurance. He also deposed to the fact, as I have already mentioned, that a previous decision of this Court showed that the appellant was covered by a policy of professional indemnity insurance.
140. The affidavit showed that on 22 March 1996, Mr Hoffman had written to the solicitors acting for the appellant requesting that the appellant make discovery and provide inspection of its policy of professional indemnity insurance in respect of the relevant policy together with documents evidencing:
1. The notification of claims to underwriters and
2. acceptance or otherwise of claim by underwriters.
141. The letter also required the appellant to confirm that there was no more than an amount of money (which he nominated in the affidavit) in assets directly and personally available to the partners who have appeared in the proceedings, to meet any judgment the respondents may obtain. The letter required an answer within fourteen days.
be bound to those findings (for I think that for all practical
purposes in relation to any dispute over the insurance they will
probably be bound anyway) and it follows that the respondents
failed to demonstrate that there were questions arising which, even
if it was just and convenient to have them determined as between
the plaintiff and the auditors, it was (in terms of Rule 9.06) just
and convenient to have determined also as between "all parties",
which would include the appellants."
212. I agree, with respect, with the decision of that Court.
213. An application for joinder in these proceedings would inevitably fail for the reasons that there are no issues, at the present time, between the appellant and its insurers. Moreover none are contemplated. If there are no issues between those parties, a fortiori, there are no issues, apart from hypothetical ones, between the respondents and the appellant's insurers.
214. Further there is no reason to think that the decision in the claim for principal relief, if successful, would not bind the insurers. It must not be overlooked that the appellant is a commercial entity, who would be at least as keen as the respondents to ensure that if this claim is successful the insurers are bound. It would not be appropriate to allow the respondents to intermeddle in the affairs of the appellant and its insurers absent a scintilla of evidence or even suspicion that there might or could be a dispute now or in the future. It could be unjust to the appellant by requiring it to be separately represented, and it could be unjust to both the appellant and its insurers by having the effect of interfering with the ability of the insurers to conduct the appellant's defence.
215. Not only is there no evidence of a dispute between the appellant and its insurers there is no evidence that the insurers would not consider themselves bound, nor is there any suggestion that in the practical sense the insurers could avoid being bound.
216. For those reasons joinder if pressed will fail and that being so an order for discovery need not be made.
217. That would be enough to dispose of this appeal but I ought, because I am differing from the learned Judge deal with the other matters upon which he relied for his decision. The learned Judge in his further reasons said:
"The underlying concepts of case flow management principles well
nigh demand such a conclusion.
Quite apart from aspects related to potential joinder of the
insurer as a defendant, other factors also arise for consideration.
These relate both to aspects bearing on the economic conduct of the
litigation and case flow management features.
Mr Gray QC made the valid practical point that, if discovery of the
indemnity insurance policy revealed that the total potential
availability of assets to satisfy a judgment proved to be far less
than the sum presently claimed by the plaintiffs, then, as a matter
of practicality, the plaintiffs may well give consideration to
limiting the scope of their claim; and, thus, the issues to be
tried. The net effect upon the length and cost of trial could be
significant; and the public interest would be served by a
consequent reduction in demand on judicial resources and other
court related expense.
That, in itself, is an important case flow management concern, as
is the possible facilitation of mediation."
218. His Honour not only relied upon case flow management, but said:
"Moreover, having regard to the ingrained feature of ADR, as
referred to processes in SCR 56, as an integral, if not pivotal,
feature of the case flow management principles currently applied by
this court, it simply cannot be said that discovery as an aid to
facilitating a mediation process is being sought for an
impermissible, collateral purpose. This is the more so when it is
borne in mind that the legislature has now amended the Supreme
Court Act to invest the Court with power to actually mandate
mediation. The disclosure of the relevant information is a
potentially important factor which would facilitate the case flow
management processes now required. It is not merely the desired
object of some strategic ploy on the part of the plaintiffs, as was
suggested. Rather, it is directly related to the proper
facilitation of processes required by the Court itself."
219. I regret that I am unable to agree with any of those further reasons which caused His Honour to reach the conclusion at which he arrived.
220. Case flow management is a concept developed out of a recognition by the courts that upon invoking the courts jurisdiction the court not only assumes a responsibility to decide the subject matter of the suit but also assumes a responsibility to ensure that the proceedings are conducted with due expedition and without any undue delay.
221. As King CJ said in Kenny v State of South Australia (1987) 46 SASR
268 at 271:
"The decision of policy was that the Court, in order to give effect
to the principle, would assume control of the place of litigation
by means of a process of surveillance of the progress thereof.
This surveillance has been effected by means of the compulsory
summons for directions. Four principle reasons underlie the new
procedure. The first is to ensure, and to make clear to the
community, that the system of justice operates effectively and
efficiently and expeditiously. The second is to contribute towards
the goal of maximum utilisation of the resources committed to the
court by eliminating the unnecessary hearings, attendances and
other procedures brought about by the dilatory conduct of
proceedings. The third is to protect, in an era in which those
awaiting justice are delayed by the pressure of business in the
courts, other litigations from unnecessary delays caused by the
dilatory parties and the additional hearings and procedures which
they cause. The fourth is to protect the parties to litigation
against cost and delay imposed upon them at times by the neglect of
their legal representatives."
222. His Honour's words are clear enough recognition that the concept of case flow management arises out of an assumption of responsibility by the courts to ensure that so far as the courts are able that litigation will proceed expeditiously and inexpensively without unnecessary hearings and delay either on the part of the litigants themselves or their representatives. Moreover a principle underlying case flow management is to ensure the maximum utilisation of the courts resources. That can only happen if the courts are able to conduct their own business in an orderly fashion, which will not occur without corresponding efficiencies on the part of litigants and parties advising litigants.
223. His Honour's statement is consistent with r2.02 of the Supreme Court Rules which reads:
"2.02 With the object of:
(a) promoting the just determination of litigation;
(b) disposing efficiently of the business of the Court;
(c) maximising the efficient use of available judicial and
administrative resources; and
(d) facilitating the timely disposal of business at a cost
affordable by parties; actions in the Court will be managed and
supervised in accordance with a system of positive case flow
management. These Rules are to be construed and applied and the
processes and procedures of the Court conducted so as best to
ensure the attainment of the above objects."
224. I cannot agree that the system of case flow management entitles or disentitles a party to a substantive right that the party did not or did enjoy prior to the introduction of the system except to disentitle parties from conducting their litigation otherwise than efficiently and expeditiously.
225. More particularly case flow management, in my opinion, cannot be used for the purpose of making discoverable a document which would otherwise not be discoverable nor can it be used for the purpose of justifying the joinder of a party otherwise not susceptible to an order for joinder.
226. Case flow management ought to be understood as no more than the court assuming the obligation of ensuring that litigation proceeds in accordance with the objectives stated in Rule 2.02.
227. No doubt the concept of case flow management may be an important consideration, although probably not decisive, in any application relating to matters of non compliance with the rules. However case flow management is not a relevant concept, in my opinion, in an application by discovery from another party, nor may it be used for the purpose of widening the scope of discovery contrary to either the rules themselves (Rule 58.01), or as laid down in the Peruvian Guano case. (The Compagnie Financiere et Commerciale du Pacifique v The Peruvian Guano Company (1882) 11QB 55).
228. So also, in my opinion, case flow management is not relevant to a determination whether it would be appropriate to join a party in proceedings except to the extent that it is a consideration if there is to be a duplication of proceedings.
229. In so far as His Honour relied upon case flow management for the purpose of arriving at his decision that the documents ought to be discovered and allowed to be inspected, in my respectful opinion he was wrong.
230. Next His Honour relied upon Alternative Dispute Resolution, because it was submitted to His Honour, the respondents may well give consideration to limiting the scope of their claim and thus the issues to be tried. So also His Honour said that the possibility of mediation was a fact relevant to the making of this order.
231. Again I cannot agree with the learned Judge. Because a court may require parties to submit to mediation is not, in my opinion, in any way relevant to determine whether or not a party ought to make discovery of a document which records its commercial relationship with a party, not then a party to the proceedings, and in circumstances where the document is not relevant to any matter currently in the proceedings.
232. The matters of Alternative Dispute Resolution or mediation are not good reasons to override a party's right to keep its commercial documents or any of its documents confidential, nor are they a reason to allow one party to intermeddle in the affairs of another party and its insurers.
233. I cannot therefore agree that case flow management or Alternative Dispute Resolution are relevant considerations, except to the extent I have mentioned, in an application for discovery of documents presently not relevant to any issues on the pleadings.
234. It is clear enough that His Honour relied upon the decision of this Court in State Bank of South Australia v Smoothdale (No. 2) Limited (1993) 174 LSJS 378 in which His Honour wrote the judgment with which King CJ and Millhouse J agreed.
235. In that case the plaintiff brought action against the defendant for a very large sum of money, in negligence, misrepresentation and for misleading and deceptive conduct as a result of which it was alleged the plaintiff in November 1988 purchased shares owned by the defendant in a subsidiary of the defendant. During the course of the interlocutory proceedings the defendant published, as it was obliged under the Corporations Law, its annual return. Annexed to that return were the audited accounts for the year ended 30 June 1992. The accounts showed that the company's net assets exceeded its liabilities by $7,040. The accounts included notes to the accounts, one of which read:
"Contingent Liabilities
Details of contingent liabilities (for which no provisions are
included in the accounts) arising in respect of
Company
A claim for unspecified damages was lodged against the Company
during the year. The Company has been indemnified against any loss
by the former shareholders of Smoothdale No 2 Limited. The
Directors do not believe any loss will result from this claim."
That note gave rise to an application by the plaintiff that
(1) the former shareholders of the appellant be joined as
defendants in this action;
(2) the appellant preserve and retain in its possession the
documents comprising the indemnity referred to in the accounts;
(3) the appellant make discovery of those documents or,
alternatively, the secretary of the appellant be examined on oath
before a Master in relation to the indemnity.
Before the Trial Judge the second and third applications only were pursued. At first instance Duggan J, relying upon J N Taylor v Bond (supra), concluded there was an arguable case for joinder, and the Full Court agreed with that opinion. Duggan J, relying upon Rule 58.04, ordered that the defendant make discovery of the documents comprising or including the indemnity referred to in the defendants financial accounts for the financial year ended 30 June 1992 and any documents relating to the indemnity in the defendants possession, custody or power.
236. The Full Court determined that His Honour was right to adjourn the question of joinder until inspection had taken place.
237. The reasoning on which Olsson J based his decision in State Bank of South Australia v Smoothdale is apparent from the following:
"The principal (sic) issues arising on the appeal necessitate a
review or the salient features of the Supreme Court Rules ("SCR").
In embarking upon that exercise it is stating the obvious to say
that the older published authorities (particularly those arising in
other jurisdictions) bearing on the topic of discovery need to be
read with considerable care, because they were patently the product
of the rules environment in which they were decided. There have
been recent dramatic changes in the SCR, both in form and in
underlying philosophy. The concept of case flow management has
infused substantially new concepts. Moreover, the modern approach
to practice and procedure in this court has been to focus on the
most efficient and expeditious review of the merits of the case and
to eschew undue technicality and, wherever possible, avoid any need
for multiplicity of process and proceedings."
238. Whilst I do agree that the modern approach to practice and procedure eschews technicalities and endeavours to focus the attention of the parties upon a consideration of the merits of the matters in issue, the adoption of such a philosophy does not carry with it a rejection of pre-existing substantive rights of the parties. I have already expressed my reasons for that proposition.
239. His Honour went on to discuss Rule 58 itself. He concluded that Rule 58.04 in its terms was wide enough to require a party to make discovery of documents which are not relevant to an issue in question. He said, in reference to Rule 58.04:
"It is at once to be noted that this rule is expressed in the
widest possible terms. Indeed that was the clear intention when it
was enacted. Whilst there is a superficial attraction in the
argument advanced on behalf of the appellant that it ought to be
read down in light of SCR 58.01, that is not indicated by the rule
itself and is inconsistent with the patent intention of the Judges
to invest the individual judicial officer with an unfettered
judicial discretion to make any order which, in the specific case,
is considered necessary and appropriate to ensure that all
questions to be litigated between the parties are addressed in the
most efficacious manner; and that undue multiplicity of proceedings
is avoided. SCR 58.01 now needs to be read in such a setting.
Furthermore, the fallacy of the contention of counsel for the
appellant that SCR 58.04 is strictly limited in its operations to
the Mulley v Manifold formulation is instantly revealed by the fact
that, in terms, the rule permits an application to be made at any
stage of an action. It may well be that an order is sought before
any issues at all have been defined by formal pleadings between the
parties.
I consider that SCR 58.04 is an apt vehicle for and was intended to
permit the making of any order which, in the circumstances, is
warranted to deal with all matters which either arise on existing
pleadings in a case or those which fall to be determined in
relation to the proper disposal of any pending issue arising out of
interlocutory proceedings in the case - in the present context, the
application for joinder and the basis on which it is being pursued.
Moreover, it is also available as a vehicle for the exercise by the
Court of its inherent powers, as preserved by SCR 3.06."
240. His Honour's reasoning requires a rejection of the Peruvian Guano case. His Honour also distinguished the decision of Mulley v Manifold
(1959) 103 CLR 341, because Rule 58.04 allows for an application for discovery to be made at any time. It follows, he reasoned, that the Rules do not restrict the obligation of a party to make discovery to the documents identified by Menzies J in Mulley v Manifold (supra). In that case Menzies J said at 345:
"I now turn to the pleadings to determine what are the matters in
issue between the parties, because discovery is a procedure
directed towards obtaining a proper examination and determination
of these issues - not towards assisting a party upon a fishing
expedition. Only a document which relates in some way to a matter
in issue is discoverable, but it is sufficient if it would, or
would lead to a train of enquiry which would, either advance a
party's own case or damage that of his adversary."
241. In my opinion the point of distinction made by His Honour is untenable. The Rule of Court, which the High Court was considering, was relevantly in the same terms as Rule 58.04 in that it allowed for an order to be made at any time. I set out the Rule of Court (Order 32 Rule 18) which I have taken from the report of the High Court at 342:
"(1) The Court or a Justice may -
(a) on the application of a party to a proceeding at any time;
and
(b) whether or not an affidavit of documents has already been made
or ordered, make an order requiring another party to state by
affidavit
(c) whether a particular document or documents, or a class are, or
has or have at any time been, in his possession, custody or power;
and
(d) if it or they is or are not then in his possession, custody or
power, whether and when he parted with it or them and what has
become of it or them.
(e) The application shall be made on an affidavit stating that in
the belief of the deponent the party against whom the application
is made has, or has at some time had, in his possession, custody or
power the particular document or documents, or the class or classes
of documents, specified or indicated in the application, and that
they relate to a matter in question in the proceeding."
242. I therefore do not think that Mulley v Manifold can be distinguished upon the basis of His Honour's reasons.
243. Moreover I disagree with His Honour that Rule 58.04 is not to be read in conjunction with and subject to Rule 58.01.
244. On His Honour's reasoning neither Rule 58.01 nor Mulley v Manifold applies, and if that is so, it might be asked what then are the limits of discovery?
245. If Rule 58.04 is not read subject to Rule 58.01 then how is a party to know the outer limits of that party's obligations to make discovery in an application for further and better discovery?
246. Rule 58.04 does not make discoverable documents which would not be discoverable under Rule 58.01. The Court may oblige a party to make discovery earlier or later than the party is obliged under Rule 58.01 (Rule 58.04(a); Rule 58.04(c)). It may limit discovery to documents or classes of documents (Rule 58.04(b)(i)). It may require discovery be made in phases (Rule 58.04(b)(ii)). It can exempt a party from making discovery (Rule 58.04(b)(iii)).
247. Lastly it can require a party to give further and better discovery (Rule 58.04(c) of documents "relating to any matter in question in the proceedings" but not otherwise. Whilst the words in Rule 58.04(c) talk of orders for discovery of documents "relating to any matter in question in the proceedings" and Rule 58.01 talks of "relating to any matter in question in the action" the result is the same. Rule 58.04 does not in my opinion authorise the Court to make discovery of documents which would not otherwise be discoverable under Rule 58.01, and within the class of documents referred to in Mulley v Manifold.
248. I therefore do not agree with His Honour's reasons in that further respect in State Bank of South Australia v Smoothdale.
249. His Honour relied on the power of the Court to make an order in the inherent jurisdiction of the Court. He said (384):
"Quite apart from the provisions of SCR58.04 standing alone, I am
of the opinion that Duggan J was entitled to make the order now
sought to be impugned in exercise of the inherent powers of the
Court, both generally and also those of the nature of the ancient
Bill of Discovery. With respect I agree with Young J where, in
McLean v Burns Philp Trustee Co Pty Ltd and Ors (1985) 2 NSWLR 623
at 646 he commented that, in any event, it is unwise to seek to
restrict the inherent power of the court to order discovery to the
type of situation strictly falling within Norwich Pharmacal Co &;
Ors v Customs and Excise Commissions (1974) AC 133 (the so called
"name" cases), or to cases that would have been covered by the old
Bill of Discovery procedure. The power does clearly extend further
to cover any situation in which, in the opinion of the court, the
justice and practicalities of the situation require particular
procedural relief to be granted."
250. Again, I cannot, with respect agree with His Honour. I do not agree that "the power does clearly extend further to cover any situation in which, in the opinion of the Court, the justice and practicalities of the situation require particular procedural relief to be granted". Such an approach can only lead to uncertainty, which I would have thought the Rules of Court are, in part, designed to avoid.
251. The remarks of Young J in McLean v Burns Philp Trustee Co Pty Ltd (supra) followed his discussion of Norwich Pharmacal Co v Customs and Excise which Young J categorised as a 'name case'. Young J then went on to make it clear that the Courts inherent jurisdiction would allow for orders in the nature of discovery in circumstances outside "name cases" and he instanced orders in aid of Anton Pillar orders. He did not conclude, in my opinion, that the Court, notwithstanding its own, rules and procedures, can oblige a party to make discovery of a document which has no relevance to the matter in issue in the proceedings as framed.
252. There are other circumstances where the Court may order discovery, e.g. in aid of a Mareva order or for the purpose of tracing the proceeds of a fraud: Bankers Trust Co v Shapira (1980) 1 WLR 1274;
(1980) 11 ER 353. It may be enough to found jurisdiction that the third party "should have become mixed up in the transaction concerning which discovery is required" and it is "just and convenient" to make the order: Mercantile Group AG v Aiyela [1994] QB 366 at 374. However I do not agree that the power is as wide as His Honour states it in his reasons.
253. The appellant submitted that State Bank of South Australia v Smoothdale was wrongly decided and ought not to be followed. The reasoning which appealed to His Honour in that case has been applied in this case. I must say I cannot distinguish State Bank of South Australia v Smoothdale from the case under consideration. If the case is followed it is, I think, decisive of this appeal.
254. This Court considers itself bound by previous decisions unless it is satisfied that the previous decision is plainly wrong; White v The Queen (1967) SASR 184; Devlin v Collins (1984) 37 SASR 98; Pooraka Holdings Pty Ltd v Participation Nominees Pty Ltd (1989) 52 SASR 148 and Pashalis v Workcover Corporation (1994) 63 SASR 71.
255. It can be seen from what I have already said that I cannot agree with the reasoning of the Court in State Bank of South Australia v Smoothdale and it follows for all the reasons I have given that I consider the decision plainly wrong. I am therefore bound to say that I think it would be wrong for this Court to follow that decision.
256. In my opinion the appeal ought to be allowed and paragraphs 1, 2, 3 and 5 of the order made by Olsson J on 8 August 1996 ought to be set aside and instead an order made dismissing both the respondents applications.
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