Southern Equities Corporation Ltd (in Liq) v Bond (No 2) No. Scgrg-96-113

[2000] SASC 213

SOUTHERN EQUITIES CORPORATION LTD (IN LIQ) & ORS v
BOND & ORS (NO 2)
[2000] SASC 213

Civil

1................ DEBELLE J...... In this action, the plaintiffs have filed and delivered a notice to admit facts and documents pursuant to Rule 54 of the Supreme Court Rules.  The notice is addressed to the first and fourth to eighth defendants inclusive.  The action has been discontinued against the second and third defendants.  Judgment has been entered against the ninth defendant.

1. The fourth, fifth and sixth defendants have joined in one application for an order dispensing with the requirements of Rule 54 that they answer the notice to admit or, in the alternative, that the notice be struck out in whole or in part.  The application is made on the ground that the notice does not comply with the Supreme Court Rules or is otherwise prejudicial, embarrassing, or unnecessary for the just disposal of the action.  In the further alternative, these defendants seek an order extending the time within which to answer the notice.  The eighth defendant has made an application in similar terms.  All of these defendants advance the same submissions in support of their respective applications.  The first and seventh defendants supported the submissions made on behalf of the other defendants.

2. Shortly stated, the plaintiffs’ claim in these proceedings is that a number of paintings belonging to the first and second plaintiffs have been misappropriated by the defendants.  The plaintiffs allege that the defendants, Alan Bond and Peter Beckwith, in breach of their fiduciary and statutory duties as directors of the plaintiff companies, entered into dealings for the purpose of enabling the paintings to be acquired by the defendant, Craig Bond, who is a son of Alan Bond.  It is alleged that the fourth to ninth defendants all participated at different times in a number of transactions intended to achieve the goal that they would end up in the hands of Craig Bond or entities controlled by him.  The plaintiffs seek relief on a number of grounds including an order for the delivery up of a painting which is a portrait of Captain Cook, restitution of the other paintings, damages for the detinue or conversion of the paintings, and damages for the loss of the use of money.

3. The liquidator of the plaintiff Southern Equities Corporation Ltd (in liquidation) has, pursuant to orders made under s 596A and s 596B of the Corporations Law or their respective statutory predecessors, conducted examinations of each of the defendants and of other persons.  Those examinations have been conducted in Australia, in England and in other places.

4. The notice to admit is a very substantial document, particularly when regard is had to the 18 volumes of documents, each in itself substantial, which accompany it.  The notice seeks admissions of facts and documents.  It comprises 106 pages.  It contains many paragraphs seeking admissions, most of which have separate subparagraphs.  Treating each subparagraph as a separate request for admission, the notice contains approximately 1000 requests for admissions.  About half seek admissions of facts and half seek admissions as to the authenticity and admissibility of documents.  Admissions are not sought in respect of every allegation of fact in the statement of claim but, it is fair to say, admissions are sought in respect of most of them.  The same notice is addressed to all of the defendants upon whom it has been served.

5. The defendants point to what they assert to be particular defects in some of the requests for admissions.  I will deal with them in a moment.  It is convenient to deal first with the complaints which stem from the bulk of the notice of the accompanying documents.  The defendants contend that the notice is of such bulk that the defendants should not be required to incur the cost of responding to it.  They assert that it is oppressive and an abuse of process.  The defendants also assert that the notice is vexatious and prolix and will cause prejudice.  Those latter grounds are essentially particulars of why the notice is said to be oppressive.

6. The defendants submit that the minimum time required to answer the notice would be 24 working days.  I would not dissent from that estimate.  My own rough estimate is that it would occupy about 30 days.  The defendants estimate the approximate cost of answering the notice to be in the order of $40000.  That is not an unreasonable estimate.  The defendants go on to assert that these estimates do not allow for the time required to take more detailed instructions from the defendants, formulate the individual responses, settle the responses, obtain instructions approving the settled responses and finalising the responses.  It is said that, allowing for this additional work, the process would occupy three months and cost several tens of thousands of dollars.  I think this is a generous over-estimate of time and do not accept it.  In my view, about two months is sufficient time in which to answer the notice.  It is difficult to determine the cost.  Some of these costs might be shared between the defendants who have common interests in relation to a number of the requests for admissions.  However, I do not place too much reliance on the possibility of common interest except in the case of the fourth, fifth and sixth defendants who have the same solicitor.  I accept that the costs will, in all likelihood, be about $50000.  For those reasons, the defendants submit that the effort and cost required to answer the notice would be out of all proportion to what would be gained by answering it.

7. The purpose of the notice to admit and the obligations on the parties upon whom the notice is served have been explained by Lander J in Rak v Coles Myer Ltd (1996) 68 SASR 272 and in Thompson Brindal Ltd v McLachlan (2000) 207 LSJS 90. I respectfully adopt His Honour’s observations and distil from them the essential points.

8. In relation to documents, the notice to admit aids a party to prove his case in two ways, namely,

   (a).... it allows a party to establish, well before trial, the authenticity of a document so that he can be confident at the trial that there will be no need to call formal proof to establish the provenance, execution, integrity, or the authenticity of that document; and

   (b)it allows a party to be confident, subject to a ruling by the trial judge, that the document will be admitted in evidence at the trial without the need for further proof or, except in unusual circumstances, further argument.

   For that reason, a party seeks his opponent’s concession that the documents are both authentic and admissible in order to make proof of his case easier and to save the cost of proving documents which may not be truly in issue.

9. Similarly, in relation to facts, the purpose of Rule 54 is to allow a party to establish a fact without the necessity of calling either oral evidence or documentary evidence to prove that fact.  Here again, the purpose of the rule is to make proof of that fact easier and to save costs and time in doing so.

10. When used properly, the Rule has the effect of narrowing the issues between the parties even further than pleadings, thereby avoiding unnecessary time and expense in the trial process.

11. The obligation to give reasons for declining to admit the authenticity of a document or the truth of a relevant fact is consistent with the modern concept of the orderly disposal of litigation.  The Rules reflect the fact that the court has a significant part to play, not only in the administration of justice, but also in the management of each individual action so as to ensure that the litigation proceeds smoothly and expeditiously and with the least cost to the parties.  As I will note in a moment, the Rules have the goal of seeking to limit the issues to be tried to what is truly in dispute.

12. The obligation of Rule 54 is to answer requests for admissions as to the authenticity and admissibility of documents is consistent with the enactment in recent years of statutory provisions designed to facilitate proof of documents, for example, s 45a, s 45b, s 45c and s 59j of the Evidence Act 1929.

The obligations of a party served with a notice to admit are onerous.  That is consistent with the modern approach to litigation which requires a party to face up, as early as possible, to the responsibility of decisions as to what truly is in dispute between the parties.  It is useful to repeat what Lander J said on this topic in Rak v Coles Myer Ltd (supra) at 279:

“       In circumstances, therefore, where there is no objection on the grounds of relevance or where the request does not raise a question of privilege or the request is not otherwise improper, then the only way the consequences of objections under r 54.02 can be avoided is by first denying the truth of the fact or the authenticity or admissibility of the document and secondly setting forth in detail the reasons why the party cannot make the admission.

All of that seems to me to be consistent with the modern concept of litigation which requires a party to face up, as early as possible, to the responsibility of decisions.  The responsibility of decisions includes making, as early as possible, a determination of the facts truly in issue between the parties.  The previous luxury of allowing a party to require the other party to prove formally each and every fact where those facts are not genuinely in dispute is no longer appropriate for litigation at the end of this century.  Neither the parties themselves nor the State can afford to allow parties to litigate at their own pace and with their own agenda because to do so would disadvantage the parties themselves and the other parties wishing to have their litigation dealt with.”

In my view, the fact that parties must address what is truly in dispute cannot be overstated.  Too often parties, or their legal representatives, fail to do so, thereby causing litigation to be unnecessarily protracted with the obvious consequence that the litigation is unnecessarily costly.

1. I do not underestimate the burden upon those defendants in this action who must answer this notice to admit.  By any chalk, it is a substantial exercise and will involve substantial expense.  However, the immensity of the task is not, standing alone, a sufficient ground to strike out the notice.  The task for the court is to balance the work involved in that task and its associated cost with the savings in time and costs at the trial.  I respectfully adopt the remarks of Master Burley in Sheahan v Hertz Australia Pty Ltd (1993) 171 LSJS 359 at 362:

   “I have already indicated that it seems to me to be clear that the extent of the enquiries likely to be necessary to furnish responses to the notice to admit is considerable if not daunting.  I also accept that there will be considerable expense incurred by the defendant to respond to the notice to admit.  If the application by the defendant to strike out the notice to admit were to be determined merely by reference to the factors just mentioned, it seems to me that no basis has been established for the striking out of the notice.  However, I must also consider whether the work, time and expense required to respond to the notice to admit bears a reasonable proportion to the saving in time and cost at the trial.  If the effort and expense required to respond to the notice to admit is out of all proportion to whatever saving may be gained at trial, then I consider that the notice to admit should be struck out.  In light of that reasoning it is obvious that I need carefully to consider the extent of the detriment to the defendant in responding to the notice to admit and compare that to the likely benefit that may accrue if the notice to admit is responded to.”

In other words, the parties seeking to strike out a notice to admit on the ground that it is oppressive will not succeed simply by proving that the time and cost involved in answering the notice is substantial or that it equates, broadly speaking, with the savings of time and cost at the trial.  It must be clearly demonstrated that the cost is out of all proportion to the savings at the trial.  That is consistent with the purpose of the notice to admit procedure as identified by Lander J.  Plainly, there are uncertainties in attempting to assess the time and cost involved in each.  That uncertainty only serves to underline that a party seeking to set aside a notice to admit has a substantial burden to discharge.

1. The issues in this action are complex.  The dealings are numerous, quite detailed and, to that extent, might be said to be involved.  The plaintiffs’ task of proving at the trial each step in the intricate web of alleged transactions will occupy an enormous time and will, in all likelihood, result in very substantial cost, a cost which will be quite disproportionately huge when compared with a particular fact or document to be proved.  That is why the administration of justice requires that parties should only have to prove what is truly in dispute.

2. This is a trial of substantial and complex issues.  The amount at stake is high.  The paintings were said to be very valuable.  It is alleged that they had an insured value in 1990 of some $6 million.  One painting, the portrait of Captain Cook, has been recovered.  Its value in 1990 is said to have been $3.4 million.  A substantial claim for damages, nevertheless, remains and the claim for damages is compounded by a Hungerfords v Walker claim for damages for the loss of the use of the money.

3. In addition, most, if not all, of the transactions alleged by the plaintiff occurred out of South Australia.  Many, if not the greater number, occurred out of Australia.  If each fact in each document has to be proved, the plaintiffs will have to incur considerable expense in bringing witnesses from overseas to prove what in some instances will be a few facts or a small number of documents.  Those are clear instances of disproportionate costs being incurred to prove facts or documents.  It is relevant also to note that, as the transcript of the examinations conducted by the liquidator show, a number of the defendants have been party to a number of the transactions the subject of the notice to admit.

4. However, the complexity of the issues should not be overstated so far as it bears upon the obligation to answer the notice to admit.  Broadly speaking, the notice deals with the course of dealings alleged by the plaintiffs in a chronological manner.  The notice is arranged so that most of the requests to admit a fact are followed immediately by a request to admit the document or documents which relate to that fact.  Each of the documents in the bundles has a tab which identifies the paragraph with the request to admit the document.  Thus, the notice proceeds in an orderly and chronological sequence with the relevant documents being clearly identified.  The arrangement of the notice assists the process of answering it, particularly as each request for admission of fact is immediately followed by the request for the admission of the relevant document.

5. The defendants submit that there are other procedures under the Rules which could be employed to streamline the conduct of the trial.  They refer to the use of affidavits, tender lists of documents and books of document.  This argument illustrates how the defendants who made this application so patently misconceive the function of the notice to admit procedure.  The use of affidavits is unlikely to reduce costs.  Implicit in the process of agreeing books of documents is agreement as to the authenticity and admissibility of the documents.  That is the very process the notice seeks to achieve when seeking admissions as to documents.  The process of preparing lists of documents to be tendered does not reduce time at the trial.  It requires the court to go through each document to ascertain whether the document is agreed or is in dispute.  Substantial court time will be occupied in resolving issues as to documents which can more effectively, more efficiently and less expensively, be conducted out of court by parties facing up to what, in truth, is in dispute.  What the defendants seek to do is to postpone to the beginning of the trial matters which they should now be addressing.  In short, if the defendants properly deal with the issues raised by the notice to admit and face up to the reality of what is truly in dispute, substantial time and cost in court will be saved.

6. For all of these reasons, while the task of answering the notices will be onerous, I am not persuaded that it will be oppressive or that the cost will be so disproportionate to the cost of the trial that it is not proper to require the defendants to answer the notice to admit.  The cost to the defendants in answering the notice will I think be more than off-set by the potential for substantial savings in cost of calling witnesses and reduction of time at the trial if the notice is answered.  The task will be burdensome but this is an instance of substantial litigation.  The trial will be the more burdensome and the more lengthy and, therefore, the more costly if the notice to admit is not answered.

Specific Issues

1. The defendants complain that the plaintiff has extracted certain paragraphs from the statement of claim and repeated them verbatim without attempting to recast them as distinct facts for the purpose of the notice to admit.  They assert that this had led to a number of defects in the notice.  I deal with each of the alleged defects.

2. Before doing so, it must be mentioned that, generally speaking, this is not the occasion for dealing with objections to specific questions in the notice.  Rule 54.02(1)(b) prescribes the procedure for objection.  It is clear that objections are to be taken to specific questions when answering the notice.  I deal with the specific issues raised in this case only because it is asserted that the defects are so pervasive as to render the notice oppressive.

3. The first is that the notice has incorporated from the statement of claim schedules of information containing a number of separate discrete facts.  This complaint is limited essentially to a few of the paragraphs in the notice.  The schedules are a convenient way of identifying particular questions of fact.  I do not think that this complaint constitutes a defect in the notice.

4. The next complaint is that the notice has incorporated expressions which are not defined.  Examples are, “the Bond interests”, “the Alan Bond collection” and “the SECL Group”.  These expressions are in large part defined in the statement of claim.  It is reasonable to infer that the same definitions have been utilised in the notice to admit.  Furthermore, if the defendants had any concern as to that issue, a simple request of the solicitor for the plaintiffs would have resolved the issue.  I direct that, where the notice to admit uses expressions defined in the statement of claim, those expressions will have the same meaning as in the statement of claim.

5. The other complaints can be dealt with together.  The first is that the notice incorporates paragraphs which contain within them not one discrete fact but several facts.  The next is that the notice includes pleas which have been expressed in the alternative in the statement of claim and are asked as alternative facts.  The third is that the notice includes pleas of what the statement of claim calls “purported” activities as though they are facts.  The latter two complaints especially are addressed to what amount to a relative few of the requests for admissions of fact.

6. A notice to admit is not to be expressed in the same way as a statement of claim.  By the time the solicitor for the plaintiff prepares the notice to admit, the solicitor knows what the defendant has or has not admitted in the defence.  The notice to admit must be prepared as a series of questions addressing particular facts or documents.  In the case of a request to admit facts relating to what might have been pleaded in the alternative in the statement of claim, the notice should, generally speaking, ask a question as to each of the alternative allegations of fact.  The manner in which a properly structured set of interrogatories is drawn will, in many cases, provide a useful model.  Thus, if it is alleged in the statement of claim that “A, or in the alternative B, paid $1000 into a named bank account”, the notice to admit must separately ask whether it is admitted that A paid $1000 into the bank account and, if not, whether it is admitted that B paid the sum of $1000 into the bank account.

1. Similarly, a notice to admit should not ask whether a person purported to act in a particular way.  The proper question is to ask whether a person did a particular act or series of acts or was party to a document or series of documents.  The question whether that person purported to act in a particular way is an inference to be drawn from the facts and documents.  Question 55.1 in this notice to admit is an example of the kind of question which ought not to have been asked.  It asks if, in a letter dated 2 January 1990, the defendant Beckwith purported to accept an offer and then the terms of the letter are set out.  The letter refers to the offer and accepts it.  That request is almost immediately followed by a request to admit the authenticity and admissibility of the letter.  It would have sufficed if the notice had asked the defendant to admit the fact whether Beckwith sent a letter dated 2 January 1990 in the terms set out in the question or, alternatively, the notice had simply sought an admission as to the authenticity or admissibility of the letter.

2. I have cursorily examined the notice to admit and more closely examined particular questions in the notice to admit of which the defendants complain.  Broadly speaking, these defects are not of so substantial a nature as to constitute an oppressive use of the procedure.  Further, they do not constitute an abuse of process since the Rules expressly contemplate the procedure and there is nothing to suggest that the plaintiffs are seeking to obtain a collateral advantage, or some other advantage, beyond that which the procedure allows: Williams v Spautz (1992) 174 CLR 509 at 523. The plaintiffs are seeking to bring about a process for which the Rules expressly provide though it might be suggested that they have not, in every single instance, gone about the task in an entirely correct way.

3. I repeat.  The proper means of answering a notice to admit facts or documents is set out in Rule 54.02(1).  Paragraph (b) of that rule sets out the manner in which a refusal to admit the truth of a fact or the authenticity or admissibility of a document may be made by reason of an objection grounded on privilege, irrelevance, or the impropriety of the request.  When taking objections, parties should be alert to the terms of Rule 54.02(3).  It is implicit in that rule that objections grounded on a pedantic construction of a question or which seek to evade the issue are not likely to be sympathetically considered.  This amounts to no more than emphasising the effect of the remarks of Lander J concerning the purpose of the notice to admit procedure and the need for parties to face up to the real issues and to identify what is truly in dispute.  Thus, in addition to being an example of an unfortunate question, Question 55.1 provides an example of how to answer a question about which there may be no dispute.  If the letter is admitted, the question could be answered by stating that it is admitted that the letter was sent but an objection is made to the balance of the question on the ground that it is improper and that the letter speaks for itself.

4. The final specific ground on which the defendants rely concerns those questions which seek admissions as to the authenticity and admissibility of documents.  A number of the requests seek admissions of the transcript of examinations conducted by the liquidator pursuant to s 596A or s 596B of the Corporations Law or of affidavits or statements provided by persons summonsed to appear for examination where the liquidator has accepted the affidavit and statement instead of requiring the person to attend for examination. No difficulty is said to arise in respect of requests for admission of the transcript of examinations of the individual defendants. They are admissible against the defendant by reason of s 597(14) of the Corporations Law.  The difficulties are said to exist in respect of the transcript of examinations, affidavits and statements of persons who are not defendants in this action.  For the reasons expressed in the previous paragraph, this is not the occasion to take such an objection.  I repeat that, if it is intended to refuse to admit the authenticity or admissibility of a document on the ground of privilege, irrelevance or impropriety, the appropriate course is to object in a statement in answer to the notice: see Rule 54.02(1)(b).  The objection relates only to certain of the requests to admit documents.  Those questions are not so pervasive that it is oppressive to require the defendants to state their position as to each document.  The objection is therefore premature.  It is not a ground for setting aside the notice to admit.

5. For all of these reasons, the applications to dispense the defendants from the requirement to answer the notice to admit or to strike it out are dismissed.  I had already indicated in the course of proceedings that the time within which the defendants must answer the notice will be extended to 7 August 2000.