Tabcorp Holdings Limited v State of Victoria (No 2)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT

No. S CI 2012 04846

TABCORP HOLDINGS LIMITED (ACN 063 760 709)	Plaintiff
v
STATE OF VICTORIA	Defendant

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JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF HEARING:	30 September 2013
DATE OF JUDGMENT:	18 October 2013
CASE MAY BE CITED AS:	Tabcorp Holdings Limited v State of Victoria (No 2)
MEDIUM NEUTRAL CITATION:	[2013] VSC 541

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EVIDENCE – Privilege – Client Legal Privilege – Adequacy of evidence in support of claim.

EVIDENCE – Privilege – Relevance of documents.

EVIDENCE – Privilege – Joint privilege – Evidence Act 2008 (Vic) s 124.

PRACTICE AND PROCEDURE – Discovery – Order for further discovery - Relevance of documents – Sufficiency of discovery - Adequacy of searches – Civil Procedure Act 2010 (Vic) s 55 - Supreme Court (General Civil Procedure) Rules 2005 r 29.01.1, r 29.08, r 29.11.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J.C. Sheahan SC with Mr R. Strong, and Mr P. Liondas	Herbert Smith Freehills
For the Defendant	Ms W. Harris SC with Dr S.B. McNicol SC Mr G. Mukherji, and Ms N. Hassan	Johnson Winter and Slattery

HIS HONOUR:

A. Introduction

On 13 June 2013 I published reasons for holding that the State of Victoria was not entitled to claim client legal privilege (‘CLP’) over 107 documents, called ‘the challenged documents’.[1] I held that the evidence did not establish that the dominant purpose of the challenged documents was the provision of legal advice and that in any event the privilege was a joint privilege. As a consequence, the defendant, the State of Victoria (‘the State’) was ordered to produce the challenged documents to the plaintiff, Tabcorp Holdings Limited (‘Tabcorp’).
[1]Tabcorp Holding Limited v State of Victoria [2013] VSC 302 (‘the Judgment’). The defined terms in the current reasons are the same as those in the Judgment and familiarity with the Judgment is assumed.

On 24 July 2013 the Court of Appeal dismissed the State’s application seeking leave to appeal the Judgment and orders.[2]
[2]State of Victoria v Tabcorp Holdings Limited [2013] VSCA 180.

Following my Judgment and the decision of the Court of Appeal, on 1 August 2013 Tabcorp sought production of 198 documents over which the State claimed privilege which had not been included in the list of challenged documents, as well as an additional 13 documents over which the State claimed part privilege. On 19 August 2013 a further request was made in a letter from Tabcorp’s solicitors to the State’s solicitors, seeking confirmation as to whether the State was maintaining its claim for privilege over an additional 34 documents over which a claim for public interest immunity (‘PII’) was also made (‘the Additional Documents’).[3]
[3]The claim for PII regarding the Additional Documents was not pressed.

The State responded in letters of 26 and 30 August 2013, by agreeing to produce a further 134 documents. An updated list of exempt documents was provided, comprising 64 documents remaining from the original list, and an additional seven documents which had not been on the original list (‘the Exempt Documents’). In a letter dated 6 September 2013, the State advised that it would not press privilege in respect of the whole of three and part of one of the Additional Documents, leaving 30 Additional Documents over which privilege or part-privilege was claimed.

The State also stated in the course of this proceeding that it will no longer press the claim of privilege over seven more of the Additional Documents. Accordingly, at the time of this application, the State asserts a claim of privilege over 95 documents which it has classified into three categories:

(a)Category 1, comprising 82 documents which the State asserts were created for the dominant purpose of providing legal advice solely to the State in relation to proposed legislation, including legislative amendment or drafting instructions (‘Category 1’).
(b)Category 2, comprising 11 documents which it was asserted were created for the dominant purpose of providing legal advice solely to the State, in relation to the conditions to be included in the statutory licences granted to Tabcorp or Tattersall’s (‘Category 2’).
(c)Category 3, comprising two documents which the State asserts were created for the dominant purpose of providing other legal advice solely to the State (‘Category 3’).

On 9 September 2013, Tabcorp filed and served a summons (‘the Summons’) relevantly seeking first, orders pursuant to r 29.11(b) and (c) of the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’) for the State to produce for its inspection the Exempt Documents and the Additional Documents. Secondly, Tabcorp seeks orders pursuant to rr 29.08(2) and 29.11(a) of the Rules, further or alternatively s 55 of the Civil Procedure Act 2010 (Vic) (‘the Civil Procedure Act’), that the State conduct further searches for documents falling within five categories listed in a schedule to the Summons which were documents required to be discovered under r 29.01.1(3) of the Rules.

By cross summons dated 20 September 2013, the State seeks declarations that identified documents from the lists of Exempt Documents and Additional Documents the subject of the Plaintiff’s summons are subject to CLP, being confidential communications created for the dominant purpose of providing legal advice to the State, and that privilege over these documents was not held jointly with Tabcorp.

Accordingly, two issues are before the Court for consideration:

(a)whether the Exempt Documents and Additional Documents are subject to privilege, and if so whether they are subject to the sole privilege of the State, or are subject to joint privilege and should be produced for inspection by Tabcorp (‘the Privilege Claim’); and
(b)whether the State has made sufficient discovery of documents within the five categories of the schedule attached to the Summons (‘the Sufficiency of Discovery Claim’).

B. The Privilege Claim
Category 1

The thrust of the State’s submission in relation to Category 1 documents was that communications in relation to the preparation and drafting of legislation are properly the subject of CLP and that the privilege is the sole privilege of the State. This was argued on the basis that there was no joint retainer in this regard and the advice was not for the benefit of TAB or Tabcorp because it involved the implementation of recommendations or policy which was exclusively a State matter and in any event went beyond the float of TAB and associated licensing by providing a broader and longer term framework in relation to the gaming industry.

Tabcorp contended that the evidential foundation for the claim for privilege had not been made out. Further it contended that the distinction between the formulation of policy and the implementation of such policy was illusory and artificial, and that in any event, it was directly and inextricably involved in the legislative process which was necessary and fundamental to the privatisation and licensing of Tabcorp within the framework of the newly regulated gaming industry.

The State maintained that its evidence was sufficiently focussed and specific to make out the claim for privilege. The State further contended that Tabcorp was not part of the ‘charmed circle’ despite being invited to comment on the proposed legislation.

In my opinion, despite some deficiencies and legitimate concerns about the quality of the evidence, and solely for the purpose of this application, I am prepared to accept that the claim for privilege has been made out. I do not intend to deal with the specific objections to aspects of the evidence in view of the decision I have come to and in particular having inspected all of the documents. Accordingly, I accept that the documents are privileged.[4]
[4]New South Wales v Betfair Pty Ltd and Others [2009] FCAFC 160, [21]–[24] is authority for the proposition that draft instructions and related communications between the State and third parties in relation to the drafting and amendments to legislation are subject to CLP.

However, a number of documents in this category, despite having been discovered and a claim for CLP made, are (despite being subject to CLP) simply not relevant to any issue in the case. These documents comprise Exempt Documents numbered 59, 91, 118, 44, 56, 57, 62, 4, 37-38, 91, 118-119, 133-135, 142-145, 147-149, 151, 152, 191-195, 202-203, 227-230, 231-232 and 239 and Additional Documents numbered 19, 23, 24. They need not be produced and should not have been discovered. They have almost nothing to do with the case. They relate, in the main, to that part of the legislation that dealt with more general regulatory matters with no or little connection to the Float or licensing.

I am further of the opinion that those Category 1 documents that may on a very generous view be relevant to the issues in the case (‘Relevant Privileged Documents’) are subject to CLP but that the privilege is a joint privilege of the State and Tabcorp.

Having examined the Relevant Privileged Documents in this category, I cannot understand what all the fuss is about. On one view the documents are all (save for perhaps one or two) irrelevant. It is difficult to comprehend how the tedious, cumbersome and time consuming process of drafting and reviewing legislation and continuous amendments has or can possibly have any bearing on the issues in dispute in this case. The documents may be privileged but their relevance is far from apparent. The other view which I have reluctantly (and with some generosity) taken is that they barely pass the relevance test. However, it is difficult to see how they will be of any assistance to any party in relation to any issue. I consider the entire exercise in relation to Category 1 to be a waste of time and resources. Establishing joint privilege over (at best) marginally relevant documents is hardly a victory for Tabcorp.

The privilege is a joint privilege for the reasons set out in the Judgment, the Court of Appeal decision and the matters set out hereunder.

First, the TAB was part of the Steering Committee. The Steering Committee was a working group that had broad responsibility including providing advice and oversight responsibility in relation to a number of matters including relevantly the preparation of the prospectus and the necessary legislation to bring about the Float. As part of the Steering Committee TAB was involved not only in policy formation but also implementation.

Secondly, as part of its responsibility and involvement, TAB reviewed and commented on the proposed legislation which was critical to establishing ‘the legal framework for the successful Float of the TAB as a public company’,[5] matters that it was directly interested in. The passing of satisfactory legislation was fundamental to the whole privatisation process including relevantly protecting the interests of Tabcorp.[6] TAB was in my view part of the ‘charmed circle’ even though it was not involved in every detail and every aspect of the drafting process and was not copied in or provided with a number of Exempt Documents. The fact that others were more involved (and received and were asked to comment on more documents) does not mean that Tabcorp did not have a sufficient interest in the relevant advice so as to be embraced by any retainer. Even without any direct involvement it had a sufficient interest and was embraced by the retainer so far as the retainer related to the implementation of that part of the legislation dealing with the Float and licensing issues. How much more so given that it was involved to an extent that was not insubstantial or inconsequential. That Tabcorp was not involved in all aspects of the process is not surprising. The proposed legislation dealt with numerous other matters relating to the gaming industry that had little to do with Tabcorp. Much of the discovery in this category is relevant to more general regulatory matters that have nothing or very little to do with this case. It is hard to comprehend why these documents were discovered.
[5]See Mr Stockdale’s second reading speech in relation to the Gaming and Betting Bill, Victoria, Parliamentary Debates, Legislative Assembly, 28 April 1994, 1313-1317 (Alan Stockdale).
[6]Ibid. Mr Stockdale stated that the independent incorporation of Tabcorp would ‘be of tremendous benefit to all Victorians’ and that ‘TAB will be freed from past constraints on its capital funding capacity’.

After the hearing of the application, the State referred the Court to the recent Federal Court decision of Asahi Holding (Australia) Pty Ltd v Pacific Equity Partners Pty Limited[7] in relation to the adequacy of evidence in support of a claim of privilege [8] and to sole privilege. However, there is nothing in Asahi that compels any other conclusion. So far as the finding of sole privilege in Asahi is concerned, it was a finding dictated by the specific facts of that case. Each case must be decided on its own facts.[9]
[7][2013] FCA 998 (‘Asahi’).
[8]It is not necessary to discuss this aspect of the case any further. The relevant paragraphs in Asahi are [39]–[49].
[9] Asahi concerned the sale of shares in a company to a purchaser. A limited number of documents were found to be subject to CLP despite the fact that the solicitors providing the advice were acting for both the seller and the company. The advice was specific and for the sole benefit of the seller to the exclusion of the company. Having taken control of the company, the purchaser was unable to establish joint privilege.

Category 2

Category 2 is essentially concerned with the conditions imposed on Tabcorp’s wagering and gaming licences and the antecedent negotiations in relation to such conditions. Tabcorp has conceded that advice during the negotiation stage is the sole privilege of the State. This concerns Exempt Documents 7, 9, 10 and 11. However it claims joint privilege in relation to the other documents in this category being Exempt Documents numbered 218, 219, 221, 224, 225-226 and Additional Document 31. The sufficiency of the evidence in support of the claim is challenged.

In relation to joint privilege the State contends that documents and advice relating to the conditions imposed on Tabcorp’s wagering and gaming licences was not legal advice for the benefit of Tabcorp, which had its own distinct considerations, and to this extent the interests of the State and Tabcorp were not always aligned. It was submitted that this advice was about the State’s own independent interests and for its sole benefit.

In support of its contention the State referred to a number of matters. First, insofar as the licence conditions were concerned the interests of the State were in direct conflict with the interests of Tabcorp. Secondly, the advice about the licence conditions was not advice about the Float. Finally, it was submitted that there was no evidence to suggest that the TAB or Tabcorp were privy to these communications.

Tabcorp contended that these documents were not different from the Challenged Documents and were clearly subject to joint privilege. Reference was made to the Judgment and the Court of Appeal judgment so far as the importance and inter-relatedness of the licences was concerned. Advice in relation thereto was fundamental to the proper implementation of the privatisation strategy and arrangements which affected both parties and was of vital interest to them.

With the same reservations as applied to Category 1, I accept for the purpose of this application that the claim to privilege has been made out and that the documents are subject to CLP.

However, I have inspected the Exempt documents referred to and consider them to be of no consequence and irrelevant to the dispute and issues in this case. They should not have been discovered and I will not order their production for inspection.

If I am wrong, to the extent that the documents are or may be relevant, the privilege is a joint privilege. Any advice was as much for the benefit of Tabcorp as it was the State. In relation to the specific advice fundamental to the implementation and operation of the Float, Tabcorp had an interest in and was embraced by the retainer.

Additional document 31 is different. The document is subject to CLP. The privilege is that of the State. There is no issue of joint privilege. The advice is clearly for the sole benefit of the State and was given well before the Steering Committee was formed and a day after the intention to privatise the TAB was announced.

Category 3

The third category comprises Exempt documents 8 and 216. I have inspected the documents and am satisfied that each document is subject to CLP. The privilege is that of the State alone. There is no issue of joint privilege. However, the documents have nothing to do with this case and should not have been discovered. I will not order their production for inspection.

C. The Sufficiency of Discovery Claim

Tabcorp, in a letter dated 15 November 2012, requested of the Department of Treasury and Finance (‘DTF’), pursuant to an application under the Freedom of Information Act 1982 (Vic) (‘the FOI Act’), to produce categories of documents including: notes, memoranda and minutes or briefs (of 1 March 1994 to 15 August 1994) referring to the State Agreement; drafts of the State Agreement and attachments (of 1 March 1994 to 15 August 1994); and notes, memoranda, minutes or briefs referring to the Treasurer’s Letter and drafts of the Treasurer’s Letter created in June 1994 (together ‘the FOI Request’). On 22 March 2013, Tabcorp commenced proceedings in the Victorian Civil and Administrative Tribunal (‘VCAT’) seeking review of the ‘deemed refusal’ of the DTF to grant access to the documents.[10] The DTF subsequently notified Tabcorp that it had located a small number of documents which fell within the scope of the request. As submitted by Tabcorp, in relation to the Treasurer’s Letter these comprised a copy of the Treasurer’s Letter and six duplicates of the letter. No notes, memoranda, minutes or briefs referring to the Treasurer’s Letter were produced and no documents relating to the State Agreement were produced. Tabcorp challenged the adequacy of the DTF’s searches for relevant documents, and sought orders that the DTF conduct a thorough and diligent search for documents.
[10]According to the affidavit of Bradley Kevin Holmes sworn 6 September 2013 (‘the Holmes Affidavit’) [66], the DTF did not respond to Tabcorp’s request within the statutory period. See FOI Act s 21.
Following VCAT orders of 29 April 2013 requiring the DTF to file an affidavit addressing the methodology of its search in response to the FOI Request, the DTF filed and served the affidavit of Jonathan Anthony Ciullo (‘Ciullo Affidavit’). The Ciullo Affidavit outlined the manner in which the discovery process was conducted. According to the affidavit, in processing the FOI Request, the DTF relied upon documents retrieved for discovery in the Supreme Court proceeding. The DTF identified documents for the purposes of discovery by conducting searches of an electronic index called ‘RecFind’, using certain keywords. Tabcorp submitted that, according to the Ciullo Affidavit, RecFind is an electronic index system, not an electronic document management system. It records the date and title of the files opened at the time of its use and where they are located, but does not contain files or copies of documents.
Based on the RecFind search, the Ciullo Affidavit referred to a list of 66 files as potentially relevant to the FOI Request. Senior Counsel for Tabcorp submitted that the fact that the DTF found so few documents the subject of the FOI Request gave rise to concerns about the accuracy and sufficiency of the process.

The State submitted that, according to the affidavit of Christopher John Connor sworn on 20 September 2013 (‘Connor Affidavit’), a file record on RecFind included the file name, the date on which it was created, its location and status, a notes section which could record various pieces of information including noteworthy documents included on the file, the date the file was archived, details of related files and reference to retention protocols. A keyword or date could be entered into the RecFind search engine to identify files with titles or any other information about those files, containing the keyword or relating to the date. In some cases this included descriptions of key documents contained in the file, which were also searchable. According to the Connor Affidavit, the results of the keyword[11] search were then physically reviewed by high level DTF lawyers and FOI officers. Senior Counsel for the State described a further process whereby 459 hard copy DTF files were reviewed by solicitors of the Victorian Government Solicitors Office. The State’s instructing solicitors and junior counsel were then provided 346 of these files, for further review for relevance.
[11]The Connor Affidavit provides a list of 38 search terms, which, Mr Connor stated, were widely drafted and encompassed variations in spelling of particular words sufficient to detect potentially relevant files and documents. Examples of the terms are: ‘TAB’, ‘TABCO’, ‘TABCORP’, ‘Gaming Trustees’, ‘Gaming’ and ‘Trustees’, ‘TATTS’ …. , ;’Gaming Act’, ‘Gaming’ and ‘Act’, ‘Gaming’, ‘Gambling’, …’Licen*’ etc.
In the course of the VCAT proceedings, Tabcorp pressed the DTF to conduct further keyword searches of the RecFind index. The State referred to an additional nine keywords[12] used in conducting further RecFind searches. The further searches failed to identify additional documents. The State contended that it was not surprising that the further search produced no further documents, as it was ‘inconceivable’ that keywords of the breadth of the original search would not identify the files relevant to the proceeding.
[12]The additional keywords were: ‘Treasurer’s Minute (and all variables of those words), ‘Treasurer’s Briefing (and all variables of those words), ‘State Agreement’, ‘Government Agreement’, ‘Memorandum of Understanding’ (and all variables of those words), ‘Prospectus’, ‘Letter of Comfort’, ‘Michael Roux’ and ‘Centaurus’.
In August and September 2013, in correspondence between Tabcorp and the State, Tabcorp requested that the State conduct further searches, including manual searches, in relation to particular categories of documents which it alleged had not been discovered. The State maintained that the searches which had been undertaken were comprehensive and sufficient, and that it was reasonable for the State to rely upon ‘widely drawn searches’ of the RecFind index, particularly as these initial searches were supplemented by physical inspection of the files.
In the Summons, Tabcorp sought orders that DTF conduct further searches for documents within the following five categories listed in the attached schedule:
(a)Minutes and briefs to the then-Treasurer Alan Stockdale in relation to the letter from Mr Stockdale to Tabcorp and VicRacing Pty Ltd (‘VicRacing’) dated 29 June 1994, and in relation to any drafts of the letter.
(b)Minutes and briefs to the then-Treasurer Alan Stockdale in relation to the Memorandum of Understanding (‘MoU’) dated 15 March 1994 signed by Mr Stockdale, and in relation to any drafts of the MoU.
(c)Minutes and briefs to the then-Treasurer Alan Stockdale in relation to the proposed Government or State Agreement.
(d)All correspondence between the then-Treasurer Mr Alan Stockdale on the one hand, and either or both of Mike Tilley and Michael Roux on the other hand, in relation to the Treasurer’s Letter, the MoU, the proposed State or Government Agreement, or the Prospectus.
(e)All documents referring to the amendment to the Joint Venture Agreement on or around 23 May 1994 to delete the condition precedent of a “Government Agreement” and to insert the condition precedent of a “non-binding instrument”.
The scope of the obligation to provide discovery is set out in r 29.01.1 of the Rules as follows:
29.01.1. Scope of discovery
(1)Unless the Court otherwise orders, discovery of documents pursuant to this Order is limited to the documents referred to in paragraph (3).
(2)Paragraph (1) applies despite any other rule of law to the contrary.
(3)Without limiting Rules 29.05 and 29.07, for the purposes of this Order, the documents required to be discovered are any of the following documents of which the party giving discovery is, after a reasonable search, aware at the time discovery is given-
(a)documents on which the party relies;
(b)documents that adversely affect the party's own case;
(c)documents that adversely affect another party's case;
(d)documents that support another party's case.
…
(5)For the purposes of paragraph (3), in making a reasonable search a party may take into account-
(a)the nature and complexity of the proceeding;
(b)the number of documents involved;
(c)the ease and cost of retrieving a document;
(d)the significance of any document to be found; and
(e)any other relevant matter.
Regarding applications for further or better discovery, r 29.08(2) of the Rules provides:
29.08 Order for particular discovery
(2)Where, at any stage of a proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on any other party an affidavit stating—
(a)whether that document or any, and if so, what document or documents of that class is or has been in that party's possession; and
(b)if it has been but is no longer in that party's possession, when the party parted with it and that party's belief as to what has become of it.
Pursuant to these provisions, Tabcorp submitted that (1) there were grounds to believe that relevant undiscovered documents may be or may have been in the possession of the State and/or (2) that a reasonable search had not been conducted. Tabcorp also relied upon r 29.11 of the Rules and on s 55 of the Civil Procedure Act to emphasise the Court’s discretion and power to make the order sought in the circumstances.[13]
[13]Rule 29.11 of the Rules provides, ‘Where a party – (a) fails to make discovery of a document in accordance with Rules 29.03 and 29.04 … the Court may order the party to do such act as the case requires.’ Section 55(1) of the Civil Procedure Act provides that ‘[a] Court may make any order or give any directions in relation to discovery that it considers necessary or appropriate’. The provision continues to specify that this includes making any order or giving any directions; requiring a party to make discovery to another party of any documents within a class or classes specified in the order; expanding a party’s obligation to provide discovery; and, modifying or regulating discovery of documents in any other way the court thinks fit (Civil Procedure Act ss 55(2)(a), (f) and (k)).
Regarding ‘reasonable grounds for belief’, Tabcorp submitted that according to r 29.08, it is only necessary to satisfy the Court that there are grounds for belief that a document or class of documents relating to a matter in question in the proceeding may be or may have been in the possession of a party, and that it is not necessary to establish the actual existence of the document or class of documents.[14] Tabcorp argued that such grounds were established by the fact that it would be expected that documents relating to issues such as the State Agreement or the Treasurer’s Letter would be found in DTF’s files and that there were particular documents or classes of documents which one would expect the State to have created and held, none of which were discovered. Further, Tabcorp argued that there were examples of documents that Tabcorp has discovered or will discover, which the State has not, where it is clear that the State or its agents must have received copies of the documents.
[14]Tabcorp referred to Lander J in Metcash Trading Ltd v Bunn [2010] FCA 8 [19] dealing with the relevantly equivalent rule in the Federal Court Rules 1979 (Cth) (O 15 r 8).
Senior Counsel for Tabcorp submitted that the State had identified only thirty documents relating to the State Agreement, and all but two of these were contained in the files of Tabcorp’s solicitors, Arthur Robinson & Hedderwicks (’ARH’). Likewise, all of the 17 documents discovered by the State relating to the Treasurer’s Letter were contained on ARH’s files. Tabcorp contended that it is highly improbable that the State’s own files would not have contained documents relating to these issues, and that the absence of discovered documents relating to them is strongly indicative both of the fact that a reasonable search has not been done, and that grounds exist to believe that further documents may be or may have been in the State’s possession.
Tabcorp further submitted that as a matter of general law, parties required to make discovery should search diligently to identify relevant documents, and that the scope of inquiries will depend upon the circumstances. Searches must be reasonable but do not demand that the party giving discovery go to lengths that are oppressive.[15] Tabcorp also emphasised that while the requirements for a ‘reasonable search’ are now expressly stated in the Rules,[16] the Court maintains a broad discretion as to the appropriate orders to make in a particular case, and that it is ultimately the task of the Court to decide whether the State’s search was reasonable.[17]
[15]Senior Counsel for Tabcorp referred to Re McGorm; Ex parte Co Operative Building Society of South Australia (1989) 20 FCR 387, 390; D L Bailey and E K Evans, Discovery and Interrogatories in Australia looseleaf, LexisNexis Butterworths), [9177].
[16]See r 29.01.1 of the Rules cited above paragraph [36].
[17]Tabcorp referred to Procter v Kalivis (No 2) [2010] FCA 663 [16] and Digicel (St Lucia) Ltd v Cable & Wireless plc [2009] 2 All ER 1094, [51]–[52] in the context of the relevant rule in the Civil Procedure Rules 1998 (UK).
In response to Tabcorp’s claim, the State argued that Tabcorp had failed to establish grounds to believe that there are additional undiscovered documents which are relevant to the issues before the Court in the proceeding, in the sense that they would advance or adversely affect either the State’s case or that of Tabcorp. Senior Counsel for the State submitted that the expression ‘any question in the proceeding’ in r 29.08 is to be understood in light of the limitation on the discovery obligation by operation of r 29.01.1(3).[18] That is, an order for further discovery pursuant to r 29.08 will not require a party to provide particular discovery of documents that do not fall within the categories identified in r 29.01.1(3).[19]
[18]See paragraph [36] above.
[19]The State referred to Metcash Trading Ltd v Bunn [2010] FCA 8 [16] where Lander J discusses the principle in the context of the relevantly equivalent O 15 r 8 of the Federal Court Rules 1979 (Cth).
Senior Counsel submitted that as such, the requested documents must be relevant to the three bases of Tabcorp’s arguments constituting the main issues in this proceeding:
(a)the ‘Statutory Claim’ regarding proper construction of the compensation provision in s 21 of the Gaming and Betting Act 1994 (Vic) (or its successor provision, s 4.3.12 of the Gambling Regulation Act 2003 (Vic)) or the provisions of the Gambling Regulation Amendment (Licensing) Act 2008 (Vic) and the Gambling Regulation Amendment (Licensing) Act 2009 (Vic) which introduced the new gaming regime and substantially amended the former legislation;
(b)the question of whether the Treasurer’s Letter and, in particular, the statement it contains regarding dealing reasonably and in good faith with Tabcorp, has contractual force (‘the Good Faith and Reasonable Dealing Agreement’); and,
(c)the question of whether a proposed indemnity foreshadowed in clause 10.3 of the MoU as being included in a proposed future Government Agreement became contractually binding on the State (‘the MoU Indemnity claim’).
Senior Counsel for the State argued that, in the circumstances of the case, the documents sought would be at the most of marginal relevance, and not relevant in the sense contemplated by Order 29 of the Rules.
The State argued against Tabcorp’s premise that the absence of ‘expected’ documents from the State’s discovery is grounds for belief that discovery has not been completed in accordance with the requirements of the Rules. Senior Counsel for the State referred to the State’s explanations in correspondence with Tabcorp, regarding the comprehensive search process undertaken and the reasons why the documents Tabcorp expected to exist might not in fact exist, or if they once did exist, are no longer in the State’s possession, power or control. Senior Counsel submitted that simply pointing to the lack of documents falling within certain categories which Tabcorp expected to be in the State’s possession, is not sufficient grounds for a belief that the documents exist or are in the possession, power or control of the State.

Regarding the criteria for a ‘reasonable search’ set out in r 29.01.1(5),[20] Senior Counsel for the State referred to the Federal Court decision, UBS AG, Australia Branch v Galileo Japan Funds Management Ltd; In the matter of Galileo Japan Funds Management Ltd (Responsible Entity)[21] in which the Court noted that in determining the scope of required discovery it may take into consideration the time, trouble and expense in finding a category of documents as compared with the likely benefit to be obtained by the party seeking discovery.[22] Senior Counsel also referred to Matthews v SPI Electricity Pty Ltd; SPI Electricity Pty Ltd v Utility Services Corporation Limited & Ors,[23] in which Zammit AsJ noted:

… [W]hen intervening in the discovery process, the Court must try to achieve an optimum balance so that discovery is undertaken by each party in the most timely, efficient and cost-effective manner, while ensuring that discovery is proportionate to the size of the case and appropriate to the interests of justice.[24]

[20]See paragraph [36] above.

[21][2012] FCA 364. The case dealt with the federal equivalent of r 29.01.1 of the Rules, r 20.14 of the Federal Court Rules 2011 (Cth).

[22]Ibid [31], [37].

[23][2011] VSC 401 (30 August 2011).

[24]Ibid [28].

The State submitted that on the evidence before the Court, the searches for discoverable documents conducted by the State in this proceeding were more than sufficient to meet the criteria of reasonableness as understood from these authorities.

In my opinion the further five categories of documents sought by Tabcorp, as set out in the schedule to the Summons, are either not relevant at all or are of such marginal relevance that does not justify the expense and inconvenience of conducting further searches.

The three claims or causes of action the subject of this proceeding are set out in the Judgment.[25] They comprise the Statutory Claim, the Good Faith and Reasonable Dealing Agreement and the MoU Indemnity.
[25]See also paragraph [39] above.

The questions to be determined by the Court in relation to the Statutory Claim are issues of statutory interpretation. There is no suggestion in Tabcorp’s submissions that the documents sought on the Summons could be relevant to determining the proper construction of the provisions in question.

In relation to the Good Faith and Reasonable Dealing Agreement, Tabcorp contends that a combination of the act of lodging the Prospectus for the Tabcorp float, the State consenting to the issue of the Prospectus, and statements contained in the Treasurer’s Letter gives rise to an enforceable contractual promise by the State to deal with Tabcorp reasonably and in good faith. The State denies that statements in the Treasurer’s Letter – including the statement that the government would ‘continue to deal with the Victorian Racing Industry and the TABCORP group of companies reasonably and in good faith’ – were contractually binding, and points to the explicit statement in the letter to the effect that:

… the statement of principles in this letter does not bind this Government or future Governments and, of course, … the Victorian Parliament has the power at any time to amend existing legislation or pass new legislation affecting the operations of the TABCORP group of companies, the Victorian Racing Industry or the terms on which those operations are conducted.

Tabcorp does not adequately explain how the categories of documents sought on the Summons are relevant to this issue. It is apparent that these documents which were internal to the State, were not communicated to Tabcorp or anyone outside the government or its agents.

Such internal documents, while potentially demonstrative of the unilateral intentions or subjective state of mind of the State in relation to the Treasurer’s Letter, could have no bearing on the determination of the issues raised by Tabcorp’s contentions with respect to the existence and terms of any Good Faith and Reasonable Dealing Agreement.[26] Senior Counsel for Tabcorp accepted this proposition but argued that the documents may well go beyond the subjective state of mind of the State, and evidence mutually known objective facts and circumstances. There is no basis for this submission. It is pure speculation and ‘fishing’.
[26]Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95.

Regarding the MoU Indemnity, Tabcorp’s claim that the MoU became binding, and that (notwithstanding that it was not a party to the document) it is therefore entitled to enforce an indemnity in the terms outlined in clause 10.3 of that document, depends upon an assertion, relevantly, that ’documentation in a form acceptable to all parties‘ was negotiated and agreed. In this regard, Tabcorp contends that this ‘condition’ was fulfilled upon the parties entering into documentation referred to in the particulars to paragraph 85 of the Statement of Claim and did not depend upon the coming into existence of the Government Agreement.

Again, then, the relevant issue is (a) the proper construction of the MoU; and (b) whether it had contractual force as between Tabcorp and the Government.

The first four categories of documents listed in the schedule to the Summons comprise documents which evidence internal communications between different representatives or emanations of the State. At best, they might evidence the unilateral and subjective intention or state of mind of the State with regard to the contractual status or meaning of the MoU. The documents would not provide evidence of mutually known, objective circumstances that could conceivably assist in the determination of any questions relating to the proper construction of the MoU or whether it had contractual force as between the State and Tabcorp.[27]
[27]Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451.

Category 5 in the schedule to the Summons is somewhat different in that it comprises documents pertaining to the drafting of a clause of the JVA. As described, this category could include documents transmitted or known to Tabcorp, however it is still quite unclear how documents in this category could be relevant to a determination of any issues in dispute in this proceeding, in particular the MoU Indemnity issue.

The JVA was an agreement between Tabcorp entities and VicRacing, which was ultimately executed on 25 May 1994. The State was not a party to the JVA. Clause 2.1(a)(v) of the JVA, as executed, provided:

(a) This Agreement … is conditional upon:
(i) – (iv) …
(v)The execution by the State, TABCO and VicRacing of an instrument setting out the objectives of the State, TABCO and VicRacing in connection with the establishment of the joint venture referred to in clause 2.1(b) (which instrument shall not create legal rights or obligations on the part of any of the State, TABCO or VicRacing).[28]

[28]Emphasis added.

Tabcorp appears to be asserting that earlier drafts of the JVA created prior to 23 May 1994 had referred to the “Government Agreement” rather than the “non-binding instrument” described in the parentheses. Tabcorp has not provided any evidence in support of this assertion. The Category 5 documents sought on the Summons apparently relate to this specific drafting change.

It is quite unclear on what basis Tabcorp contends that documents evidencing or referring to this asserted drafting change are relevant. It was conceded that the documents were not directly relevant. In any event, evidence of prior negotiations will generally not be admissible as an aid to construction of contractual terms.[29]
[29]Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 352; Byrnes v Kendle (2011) 243 CLR 253.

The Category 5 documents could, at best, provide evidence of negotiations between the parties ultimately culminating in the execution of the JVA on 25 May 1994. However, they can not, for the reasons explained in Byrnes v Kendle, be relied upon to establish the intention of the parties to that agreement as to its meaning.[30]
[30]Byrnes v Kendle (2011) 243 CLR 253, 295 [90]-[101].

Further and in any event, as submitted by Senior Counsel for the State, the Category 5 documents could only demonstrate the process of the drafting of the JVA itself, and the meaning of the JVA is not in issue. It is the meaning of the MoU – the proper construction of the preamble and clause 10.3, and the question whether it was intended to have contractual force as between the State and Tabcorp – which is in issue. The drafting change in clause 2.1(a)(v) of the JVA, occurring as it did two full months after the MoU was signed, cannot shed light on these questions.

Given the conclusion as to relevance, it is not necessary to deal with the remaining issues, namely, whether Tabcorp has established grounds for a reasonable belief as to the existence of the identified documents, and whether in such event any further search is justified.

I am prepared to assume that there is a basis for such a belief. However the belief is directed to irrelevant documents or documents of so little relevance that it is in the circumstances most undesirable that any further searches be conducted.

In any event, and on the assumption that the State considered that the documents may be relevant, searches and further searches were conducted with no return. I am satisfied that the searches though unnecessary were reasonable in the circumstances. To require further searches would not be proportionate to the benefit that may be derived, given the issues in the case and the interests of justice. Any further search would be unnecessary, unreasonable and oppressive.

Paragraph 2 of the Plaintiff’s summons will be dismissed.

I will hear from the parties as to the precise form of order. I am not inclined to make any order in relation to costs.

[2013] VSC 541

18 October 2013