South Australian Financing Authority v Bank of NZ No. Scciv-99-1428

[2001] SASC 24

SOUTH AUSTRALIAN FINANCING AUTHORITY v BANK OF NEW ZEALAND & ORS
[2001] SASC 24

Civil

1................ DEBELLE J...... This is an application for further and better discovery. The application is made by the second and third defendants. It is supported by the first defendant. I will call the first and second defendants “the BT companies”.

1. In this action, the plaintiff, the South Australian Government Financing Authority (“SAFA”), seeks rectification of a document called “a side letter” as against the first defendant, the Bank of New Zealand. SAFA claims damages in negligence against the BT companies. The side letter was prepared in respect of an issue of zero coupon bonds.

2. Shortly stated, SAFA’s case is that it engaged the BT companies to assist it in raising funds by an issue of zero coupon bonds and the BT companies agreed to advise and assist SAFA in respect to the issue and marketing of the bonds. The statement of claim pleads that the BT companies both jointly and severally undertook to provide advice and documents in relation to the issue of these bonds. SAFA pleads that, in all the circumstances, the BT companies owed a duty of care to it in respect of the issue and that duty of care was breached in the preparation of the side letter. It is alleged that the side letter did not correctly record what had been agreed. That gives rise to the application for rectification as against the Bank of New Zealand. It is also alleged that the BT companies were negligent in preparation of that side letter and that, as the BT companies owed a duty of care to SAFA, the BT companies are liable in negligence for damages.

3. Shortly stated, the case of the BT companies is that it did not owe any duty of care to SAFA. Their case is that they were at all times acting at arm’s length and did not in any respect act in a way or agree to act in a way which would give rise to a duty of care. In short, their case is that all parties were acting as principals and in particular the BT companies were not in any respect acting as an agent of any kind for SAFA. Hence, they say, they have no duty of care.

4. It is common ground that SAFA had earlier entered into three separate transactions involving the issue of zero coupon bonds in the period from about September 1984 to November 1984. I will call these “the relevant transactions”. BT says that it is entitled to require SAFA to discover documents relating to the relevant transactions. It contends that it is necessary to have discovery to assist it in establishing that SAFA was acting as independent principal in its dealings with the BT companies and that it was not in any sense relying on the skill and expertise of the BT companies so that no duty of care was owed by the BT companies. The application is opposed by SAFA.

5. The question whether the BT companies owed a duty of care to SAFA would depend on the terms of the contractual or other arrangements as between SAFA and the BT companies. When I refer to other arrangements, I mean to include all of the facts and circumstances which prove the nature of the dealings between SAFA and the BT companies. The question whether a duty of care exists is to be determined by reference to what occurred as between SAFA and the BT companies and not by reference to what SAFA might have done in relation to other zero coupon bond issues. It is, in effect, BT’s case that SAFA is an experienced participant in bond issues and in dealings relating to bond issues. That may well be so. The BT companies can lead evidence or cross-examine to that effect. But the circumstances of these three prior zero coupon bond issues are separate and distinct from the circumstances of this transaction and the question of what reliance, if any, SAFA placed on the BT companies will, I repeat, depend on what occurred in these particular transactions. It will not be assisted by the examination of what occurred in other transactions. Indeed, the position might be tested by pointing out that, no doubt, SAFA engages in financial transactions other than zero coupon bond issues. That does not mean that all of its dealings in relation to those issues are relevant. For these reasons, the application for further and better discovery is dismissed.

6. The conclusion I have reached is reinforced by the fact that an examination of the statement of claim discloses that essentially this case turns on the terms and conditions of the side letter, and whether the terms and conditions of that letter correctly reflect what was agreed and what ought to have been included in it. That again will turn on what in fact occurred as between the parties to this transaction. It will not in any way be assisted by discovery of documents in another transaction. In other words, each transaction is to be viewed as a separate and discrete transaction and whatever duties might exist in relation to this transaction will depend only upon that which occurred in relation to it.

7. For these reasons, the application is dismissed.