Taylor v Santos Limited & Ors No. Scgrg-96-2015 Judgment No. S74

TAYLOR V SANTOS LIMITED & ORS

[1999] SASC 74

JUDGE BURLEY. Plaintiff’s amended application dated 8 August 1997 for further and better discovery.
In his statement of claim the plaintiff pursues a number of causes of action against the defendants which the plaintiff contends arises out of circumstances which gave rise to an alleged wrongful dismissal from employment with the first defendant. The plaintiff had at all material times been employed as a senior executive by the first defendant. During the course of that employment he was seconded to Santos Europe Ltd (SEL) in the United Kingdom and whilst there undertook an investigation of the appropriateness of SEL acquiring what has been referred to as the Armada Unit. The plaintiff alleges that, as a result of rivalry between himself and others, the defendants, or some of them, conspired to undermine his position within the corporate group. The plaintiff alleges that a misleading estimate of gas reserves was put to the first defendant’s Board over the name of the plaintiff. This had the effect of distorting the value to be ascribed to the Armada Unit.
The plaintiff has pursued two applications for discovery from the defendants in this action. Although the original applications were filed at about the same time, it was decided that they would be pursued separately because one involved, essentially, the question of whether or not the first defendant was obliged to discover documents in the custody, possession or power of a subsidiary, and the second, whilst raising the same point, also raised the discoverability of various categories of documents named in the application which did not depend upon a determination as to whether or not documents held by a subsidiary were within the power of the parent company.
The argument on this application was concluded before an appeal from my decision in respect of the first application had been determined by the Full Court. The appeal involved the question of whether or not a parent company had power over documents held by its subsidiary. That appeal has now been determined: see Taylor v Santos Ltd & Ors (1998) 199 LSJS 122. The Full Court came to the conclusion that, in the circumstances before it, the first defendant, the parent company, did not have power over documents held by its subsidiary Santos Europe Ltd (SEL) which were otherwise material to the matters in question in this action.
Because argument was completed on this application prior to the Full Court’s decision, I deferred consideration of paragraphs 1.1, 1.2, 1.5, 1.6, 1.8, 1.15 and 1.24 of the application because those aspects of the application involved at least in part an examination of whether or not the first defendant had power over documents held by its subsidiaries, SEL and Santos Americas and Europe Corporation (SAEC). Now that the Full Court has handed down its decision on the question of power, it seems to me that paragraphs 1.1, 1.2, 1.5, 1.6, 1.8, 1.15 and 1.24 should be refused, at least to the extent that the documentation sought by the plaintiff is in the custody, possession or power of a subsidiary of the first defendant. This is so whether the subsidiary be SEL or SAEC. With the former, the Full Court held that the first defendant did not have power in respect of the documentation held by the subsidiary. With the latter, the case for either actual or legal control in respect of such documentation was not as strong as the case with SEL and it would follow that, as a matter of law, the first defendant does not have power over documentation held by SAEC.
In arriving at this conclusion, I have taken into account the plaintiff’s submission that, in the case of documents held by SEL, SEL had declined to provide the documentation to the first defendant and thus was to be distinguished from the position of SAEC, in respect of which there was no evidence of a refusal to provide the documentation sought by the plaintiff. In my opinion, the lack of evidence of a refusal by SAEC to provide documentation does not make any material difference. The Full Court decision did not depend on the fact of refusal by SEL to provide the documentation requested.
There were two other aspects argued by the plaintiff in relation to the deferred paragraphs of the application: first, it was contended that the first defendant or, indeed, any of the defendants, had a duty to inquire of either SEL or SAEC, as the case may be, as to whether or not any or all of the documentation sought by the plaintiff could be obtained from them or either of them. Reliance was placed on Re McGorm (1989) 86 ALR 275. Second, that insofar as the second, third and fourth defendants (particularly the second and third defendants) were concerned, if they have or have had custody of material documentation in their capacities as officers of either or both of the subsidiaries, they individually were required to give discovery of such documentation notwithstanding that their custody in respect of the documentation was as an officer of the subsidiary and therefore on behalf of the subsidiary.
Re McGorm involved a question of discovery in bankruptcy proceedings. A creditor sought a declaration that a Deed of Assignment was void for certain reasons. It was necessary for the debtor to give discovery, but when ordered to do so, he filed an affidavit of discovery which was to the effect that all of his records had been given to his trustee in 1982 and that he believed the documents still to be in the possession of the trustee. The case involved whether or not there was a sufficient description of the documentation in the affidavit and von Doussa J held that there was not. He said that there was an obligation upon the debtor to make enquiries from the person in whose possession the documents were in order to obtain a sufficient description of the documents.
In the course of his judgment von Doussa J said (at 278):
“The obligation resting on a party obliged to give discovery requires that he make proper inquiries and efforts to identify and disclose all relevant documents that are not in his possession. The obligation extends to making inquiries from the person in whose possession the documents now are: see Mertens v Haigh (1863) 3 De GJ & Sm 528 at 531; 46 ER 471 at 472. It was said in the nineteenth century case of Taylor v Rundell (1841) Cr & Ph 104; 41 ER 429 at 433 by Lyndhurst LC: ‘If it is in your power to give the discovery, you must give it; if not, you must show that you have done your best to procure the means of giving it’; see also Palmdale Insurance Ltd (in liq) v L Grollo and Co Pty Ltd [1987] VR 113.”
Taken without qualification the above statements may seem to be at odds with the cases relating to whether or not documentation is within the power of a person required to give discovery. If, as in this case, documents held by SEL and SAEC are not within the power of the first defendant and have not otherwise been in its custody, what point is there in requiring the first defendant to make inquiries in relation to that documentation which is otherwise material to the matters in question in this action? If the documentation is not within the power of the first defendant, it is not required to give discovery in relation to such documentation, and making inquiries of a subsidiary would not advance the process of discovery in the action.
It was argued by Mr Wells QC, counsel for the plaintiff, that the plaintiff would, if inquiries were to be made, gain knowledge as to the nature of the documentation held by the subsidiary which would in turn assist it in deciding whether or not to make an application for non-party discovery against the subsidiary. However, that does not, in my view, overcome the contention that a parent company should not be required to make inquiries of a subsidiary in respect of documentation held by the subsidiary which is not within the power of the parent company. To say otherwise would be to undermine the principles enunciated by the Full Court in Taylor v Santos (supra) and the cases referred to therein.
In my view, a clear distinction is to be made: in Re McGorm the documentation was originally the debtor’s and was handed over to a trustee, whereas in this case the documentation sought has at all material times been in the custody, possession and power of the subsidiary. The decision in Re McGorm was directed to the requirement to make inquiries so that the documents could be adequately described. In those circumstances I do not think that the principles enunciated by von Doussa J in Re McGorm have any application to the circumstances of the matter before me.
The essential distinction between cases such as Re McGorm and this case is best demonstrated by looking at the case where parties to proceedings have had documents in their custody (that is, not as the owner of the document) but have handed them back to the owner. If the documents are otherwise material, it seems that those parties to the proceedings are obliged to give discovery in respect of such documentation. In other words, they must state that they have had the relevant documents in their custody but they no longer have them in their custody because they have been returned to the owner, stating when that occurred. This is so because “custody” involves the physical holding of a document without necessarily the right to its retention: see “Discovery and Interrogatories”, Simpson, Bailey and Evans, 1984 at page 32 paragraph B and “Civil Procedure (SA)”, para 58.01.20. In those circumstances, if a party is unable adequately to describe the documents without making inquiry of the person to whom they have been returned, the principle in Re McGorm requires inquiries to be made so that a proper description of the documents may be given. Where, on the other hand, in the case of a parent company and its subsidiary, the document has always been in the possession and physical custody of the subsidiary, the parent company is under no obligation to make inquiries as to the document even if the parent company is aware that the subsidiary has the document because the document has never been within the custody, possession or power of the parent company.
If this reasoning is correct it means that the plaintiff may only obtain from the defendants, or any of them, discovery (as opposed to production) of documents which have actually been at the very least in the custody of the defendants or any of them at some stage. If there is any difficulty with providing an adequate description of the documents, then to that extent, under the principles in Re McGorm, the particular defendant is obliged to make inquiries of the person or company to whom the document was given by the defendant who had what might be described as temporary custody of the document for a period of time. In addition, if a defendant in these proceedings has custody of a document which belongs to the subsidiary, the defendant is nevertheless obliged to discover that document. In that case there will be no need to make inquiry of the subsidiary so far as discovery is concerned because presumably a proper description of the document can be given by the defendant who has custody of the document. That is not to say that production of the document will necessarily be ordered. This being an application for further and better discovery I do not need to, nor should I, express an opinion as to whether or not the document might in due course be required to be produced.
The second matter said to support some or all of the deferred paragraphs of the application gives rise to the question of whether or not, where a company holds material documentation and does so through the medium of an individual, that individual, joined as a party to the proceedings, is required to give discovery of such documentation. For example, if it is assumed that a company secretary has responsibility for the maintenance and retention of the company’s records of whatever nature and if it is assumed that all of that documentation is kept in the office of the company’s secretary, is the individual who is the company secretary required to give discovery of such documentation (assuming it is otherwise material) in proceedings where the company secretary has been joined but the company has not? I shall return to this question later in these reasons when I deal with paragraph 1.8 of the application.
Before turning to each of the categories of further and better discovery sought in the application, I mention briefly the applicable legal principles. The application has been made pursuant to SCR 58.04(e).
The relevant principles relating to discovery are conveniently set out in the decision of Lander J in Beneficial Finance Corporation Ltd v Baker (Unreported, delivered 15 July 1997, Judgment No S6269) and the cases cited therein. As to SCR 58.04(e) his Honour said:
“It can be seen from the form of the rule that the obligation to make discovery does not arise until the pleadings are complete. Moreover, the obligation to make discovery is in relation to any matter in question in the action. Both of those matters reinforce what is a fundamental rule of discovery and that is that a party’s obligation to make discovery is limited to questions and issues raised on the pleadings.
In Mulley v Manifold (1959) 103 CLR 341 Mr Justice Menzies said at 345:
‘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.’
There is no doubt in my mind that it is the structure of pleadings and one of the fundamental reasons for the existence of pleadings which governs the making of discovery in civil litigation. It is also clear, in my opinion, that a party’s obligation to make discovery is limited to those matters raised on the pleadings. Once the obligation to make discovery arises, as Menzies J said in Mulley v Manifold (supra), the obligation is to discover any document which may lead to a train of inquiry and any document which may either advance a party’s own case or damage that of a party’s adversary.
The general rule relating to discovery is that any list of documents or any affidavit of documents is conclusive as to the obligation to make discovery at the interlocutory stage (see Mulley v Manifold (supra)). However, the rules do allow for a party who is dissatisfied with the opposing party’s discovery to make an application for further and better discovery.
Rule 58.04(e) of Supreme Court Rules provides:
‘Where it appears to the Court that there are grounds for a belief that some document or class of documents relating to any matter in question in the proceedings may be or may have been in the possession, custody or power of a party, order that party:
(i).... to file an affidavit stating whether that document, or any of that class, is or has been in his possession, custody or power and, if it has been, but is not presently, to state when he parted with it and what has become of it;
(ii)... to deliver the affidavit to any other party.’
It is clear that the rules assume that applications for further and better discovery will be infrequent. That is so because the rules assume, as do the authorities, that a list of documents or an affidavit of documents would ordinarily be conclusive. However, if a party is able to persuade the court that there are grounds for a belief that some document or class of document relating to any matter in question in the proceedings have not been discovered and obtain further and better discovery in those circumstances, that party may also obtain an order requiring the other party to make that discovery on oath.
It is not sufficient, however, for the party seeking an order for further and better discovery to simply assert, without any capacity to establish, that some document has not been discovered. The party seeking the further and better discovery must be able to identify from the pleadings or in the documents discovered or in some other way that there are documents which are or ought to have been discovered.”
The elements of an application for further and better discovery to be discerned from the authorities are as follows:
(a).... grounds for the relevant belief must be established;
(b).... that the documents do or may exist;
(c).... that the documents relate to any matter in question in the sense that their discovery may lead to a train of inquiry as referred to in Mulley v Manifold (supra) and the passage from the judgment of Lander J just cited;
(d).... that the documents may be or may have been in the custody, possession or power of the respondent to the application;
(e).... that the burden of providing the discovery sought must not be oppressive;
(f).... that an applicant cannot embark upon a fishing expedition.

It follows from the above reasoning that the defendants are not required to discover any document belonging to a subsidiary unless they either have the document in their custody at the time that the discovery is required to be made, or have had temporarily in their custody the document prior to the time at which discovery is to be made.
In light of the above, the only documents belonging to either of the subsidiaries which must be discovered by the defendants, or any of them, are those documents or copies thereof which are, or have been, in the custody of the defendants or any of them. If an adequate description of the documents to be discovered cannot be given, the appropriate inquiry should be made of one or more of the subsidiaries of the first defendant to see whether or not one or both of those subsidiaries will provide information which will enable a sufficient description to be given of the same by the particular defendant. I have used the word “custody” deliberately because possession denotes, at least in part, ownership, and “power” has been excluded by virtue of the Full Court decision in Taylor v Santos.
I turn to a consideration of the individual paragraphs of the application. Paragraph 1.1 seeks discovery of all documents relating to the matters in question in this action in the possession, custody or power of SEL. This aspect of the application must be refused because the Full Court has held that such documents are not within the power of the first defendant. This aspect of the application must be taken as applying only to the first defendant because it has not been demonstrated that any of the other defendants are obliged to give such discovery on the basis that such documents are within their power. It does not seem to me that particular documents or classes of documents can come within the ambit of paragraph 1.1 which is completely general in its terms. If discovery of particular documents or classes of documents are to be the subject of an order for discovery under SCR 58.04(e), that can only be by reference to those parts of the application which seek discovery of specific documents or classes of documents. Paragraph 1.1 must be refused.
Paragraph 1.2 of the application refers to all documents relating to the matters in question in the action in the possession, custody or power of SAEC. In my view the Full Court decision in Taylor v Santos requires this aspect of the application to be refused. For the same reasons given in relation to paragraph 1.1, it cannot be used as a vehicle for seeking particular documents or classes of documents.
Paragraph 1.3 has not been pursued.
Paragraph 1.4 seeks discovery of each and every copy of a report prepared by Spencer Stuart in respect of the recruitment of the fourth defendant which are in the custody, possession or power of the defendants, including annotated and amended copies.
It is said that this document and the annotated copies thereof are material to paragraph 32(b)(vi) of the statement of claim, which is as follows:
“(vi). In breach of their duties Adler, Armstrong and Gibson sought to avoid for both Adler and Armstrong any potential embarrassment and/or negative impact upon their respective careers and standing within Santos caused by the resignation of Gibson in circumstances where Adler and Armstrong were primarily responsible for the recruitment and employment of Gibson.”

The resignation of Gibson and his subsequent withdrawal of the resignation are referred to earlier in the statement of claim (page 20, sub-paragraphs (d), (e) and (f)).
At paragraph 10 of his affidavit sworn on 25 February 1997 (Document 44) the plaintiff says:
“10... Peter Goode, General Manager Petroleum Development Santos Ltd, has informed me on two separate occasions and I truly believe that he forwarded a copy of the Spencer Stuart report to the second defendant with a handwritten annotation made by him regarding the unsuitability of the fourth defendant for the position of General Manager Santos Europe Ltd. Mr Goode also informed me that the second defendant returned that copy of the Spencer Stuart report to Mr Goode with a handwritten annotation made by the second defendant to the effect that the second defendant agreed with Mr Goode’s view and that Mr Goode should contact the third defendant to inform him that the recruitment of the fourth defendant should not proceed. This document has not been discovered by the defendants.”
The affidavit material does not directly disclose to whom the Spencer Stuart report belonged. However, even if the second and third defendants only have or have had custody (as opposed to possession) of a copy, custody is sufficient: see Simpson, Bailey and Evans, 1984 at p32, para B.
I agree that the document is material if it exists and I do not stay to consider whether it is peripherally material or directly material. That serves no useful purpose.
Mr Gray QC, counsel for the defendants, informed me from the Bar table that his instructions were that a search has been made for an annotated copy of the Spencer Stuart report but none has been found. This is to be compared with paragraph 10 of Mr Taylor’s affidavit where he presents hearsay evidence that the second defendant had an annotated copy of the Spencer Stuart report at some stage. Whilst I accept the validity of Mr Gray’s criticism of paragraph 10 that the detail is sparse, I think it is sufficient to raise a ground for belief that the document may have been in the custody of the second defendant. I am not convinced that this aspect of the application can be taken any further than that. In other words, the request is for discovery of all copies but the evidence only gives rise to a ground for belief in the possibility of the existence, or existence in the past, of an annotated copy such as that described in paragraph 10 of Mr Taylor’s affidavit. As such I think that it calls for affidavit response pursuant to SCR 58.04(e)(i). Whilst I do not doubt for a moment that Mr Gray was accurately recounting his instructions, an affidavit is in any event necessary because there is no affidavit material filed by the defendants which deals with the allegations in paragraph 10 of Mr Taylor’s affidavit.
Paragraph 1.5 of the application seeks each and every copy of a report prepared by Arthur Andersen referred to in the pleadings. Mr Wells submitted that the report related to the allegations in paragraphs 30(m) and (w) of the statement of claim. Paragraph 30 sets out the matters upon which the plaintiff relies in furtherance of its allegation of a civil conspiracy which is set out at paragraph 29 of the statement of claim. Paragraph 29 is as follows:-
“29... Adler, Gibson and Armstrong acting on their own behalf and on behalf of Santos entered into the following agreement, at times and places unknown to the Plaintiff, in or about August to September 1996 (the September Agreement) and/or decided upon the following course of action:
(a).... That Gibson would withdraw his resignation as an employee and officer of Santos Europe and would resume his employment with that company;
(b)... That Adler would procure Santos and/or Santos Europe to accept Gibson’s withdrawal of resignation:
(c)... That Adler would remove the Plaintiff from the Guildford office and relocate him to Adelaide.
(d)... If the Plaintiff did not agree to such relocation forthwith, the Plaintiff’s employment with Santos would be terminated.
(e)... That they would ensure that the purchase by Santos and or Santos Europe of an asset known as the Armada Unit would not proceed.”
Sub-paragraphs (m) and (w) of paragraph 30 are as follows:-
“(m). The board paper arbitrarily reduced the price for uncontracted gas to 12.5 pence per therm contrary to the advice contained in the UK Gas Study Report commissioned by Santos from Arthur Andersen.

PARTICULARS
(i).... The board paper reduced the price for uncontracted gas to 12.5 pence per therm without having any regard to the appropriate price for which such gas would be likely to be sold.
(ii)... The price for uncontracted gas was reduced in the board paper to 12.5 pence per therm by the authors of the board paper, Gibson and Armstrong.
(iii).. The UK Gas Study Report was a report commissioned by Santos from Arthur Andersen at a cost of about $150,000 to enable Santos to form a view as to the long term outlook for gas prices in the United Kingdom for the purpose of evaluating gas asset acquisition opportunities in the United Kingdom.”
“(w)On or about 6 September 1996 the Board of Directors of Santos met and considered the board paper and authorised the making of a non-indicative bid for the purchase of the Armada Unit.”

In paragraph 11 of his affidavit of 25 February 1997 the plaintiff says:-
“11... Each of the defendants, Messrs Goode, Maloney and McArdle of Santos Ltd and each of the non-executive directors of Santos Europe Ltd were provided with copies of the Arthur Andersen report referred to in the proceedings herein when that report was produced. None of those copies have been discovered by the defendants.”
It is conceded by the plaintiff that at least one copy of the document has been discovered, but the plaintiff says that the defendants are obliged to discover all copies distributed to the second, third and fourth defendants and to Messrs Goode, Maloney and McArdle. The explanation of the apparent contradiction between paragraph 11 of Mr Taylor’s affidavit and the fact of discovery of at least one copy, is that the statement by Mr Taylor in his affidavit that no copies had been discovered by the defendants preceded supplementary discovery given after the affidavit was sworn.
As I understand the essence of Mr Wells’ submission, it is that all of the defendants have had (and perhaps one or more of them still have) in their custody a copy of the Arthur Andersen report. The report is material to sub-paragraphs 30(m) and (w) of the statement of claim. Only one copy has been discovered. Each of the defendants should give discovery of the copies they have or have had in their custody and in the case of the first defendant in its possession and custody.
In opposing paragraph 1.5 of the application, Mr Gray drew my attention to the provisions of SCR 58.07(5)(c), the relevant parts of which are as follows:-
“(5).. Unless the Court otherwise directs the following documents need not be included in a list or affidavit of documents unless the existence or non-existence of such a document is relevant to the determination of an issue in the proceedings:
...
(c)... Copies of documents where the original or another copy has been included in the list or affidavit of a party making discovery where the first mentioned copy does not contain any note or endorsement which would itself be discoverable; ...”
I accept Mr Gray’s submission that the plaintiff’s argument does not involve an assertion of annotations on any copies that have not been discovered. In the absence of such reliance, Mr Gray said that this aspect of the plaintiff’s application could only be regarded as being vexatious.
I must first determine the extent to which SCR 58.07(5)(c) applies. In my view, where there are multiple plaintiffs or defendants, the rule applies to each of those parties such that it has no application to multiple copies where more than one of the parties have or have had in their custody, possession or power a copy of a particular document. In this case and in most, if not all, cases involving either multiple plaintiffs or multiple defendants, each of the individual parties, be they corporate or natural, files a list of documents because it does not necessarily follow that all of the plaintiffs or defendants, as the case may be, have had precisely the same possession, custody or power in respect of documentation as the others.
In light of those conclusions, my view is that SCR 58.07(5)(c) does not absolve the individual defendants from discovering copies of documents which they have or have had in their custody, possession or power.
According to paragraph 11 of Mr Taylor’s affidavit, the second, third and fourth defendants have at least had custody of a copy of the Arthur Andersen report. I agree with Mr Wells’ submission that the fact of custody is material to the question of whether or not the plaintiff can make out a case of civil conspiracy against the defendants. Even if I am wrong in my view about the applicability of SCR 58.07(5)(c), I would give a direction that the second to fourth defendants file the appropriate affidavit as to whether they have or have had in their custody, possession or power a copy of the Arthur Andersen report because I think that fact of holding or having held a copy is material to the allegations of civil conspiracy.
Contrary to Mr Gray’s assertion, I do not consider that the discovery of the distribution list of the Arthur Andersen report is sufficient. That may form part of the plaintiff’s case which relies upon an assertion that the defendants had copies of the Arthur Andersen report, but it does not prove that those defendants, in particular the second to fourth defendants, received a copy of the report. If the second to fourth defendants have or have had in their custody, possession or power a copy of the Arthur Andersen report and if they so state by way of affidavit, the plaintiff thereby has proof of receipt of the copy of the report and the period for which it was held by the individual. That, in my view, is a legitimate course to be pursued by the plaintiff on this application for further and better discovery.
As to paragraph 1.6 of the application, on 14 August 1998 I made an order that the application by paragraph 1.6 be dismissed unless on or before 1 September 1998 the plaintiff files and serves an application to amend paragraph 1.6. This occurred because the plaintiff did not pursue paragraph 1.6 in its original form and during the course of argument handed up to me a proposed amendment which to some degree restricted the breadth of the original paragraph 1.6. The application for leave to amend was opposed, but as at 14 August 1998 it had not been argued and adjudicated upon. The application to amend paragraph 1.6 has not been filed and so paragraph 1.6 of the application in its present form stands dismissed.
Paragraph 1.7 has not been pursued.
Paragraph 1.8 of the application seeks discovery of all facsimile transmissions and other written communications sent from the third defendant to the plaintiff. Mr Wells submitted that these documents were material to the allegation in paragraph 30(c)(v) of the statement of claim, which is as follows:-
“(v).. From about 29 July 1996 Armstrong ceased material contact and/or discussions with the Plaintiff regarding Santos Corporate Development matters in the United Kingdom and Santos Europe business generally whereas prior to that date Armstrong had contacted the Plaintiff on almost a daily basis by telephone and facsimile transmission to discuss such matters with the Plaintiff.”
In his affidavit of 25 February 1997 the plaintiff says at paragraph 14:-
“Prior to 29 July 1996 and in my position as Manager Corporate Development Santos Ltd the third defendant had practically daily contact with me by facsimile transmission. None of these transmissions have been discovered by the third defendant or the other defendants.”
If the facsimile transmissions are material to paragraph 30(c)(v) of the statement of claim, I have to determine whether or not there are grounds for a belief that the third defendant has or has had in his custody the facsimile transmissions referred to. I say “custody” because it is clear that the facsimile transmissions belong to SEL.
Are the documents material in the sense that they may assist the plaintiff’s case or defeat the defendants’ case, or that they may lead to a train of inquiry relevant to the matters in issue in the action? Contrary to Mr Gray’s submission I think that they are. It is likely that at trial the plaintiff’s counsel will cross-examine the third defendant as to the frequency of facsimile transmissions between him and the plaintiff prior to the end of July 1996 and in relation to the extent of communications between the two after that date. It is likely that the cross-examination will deal with what the plaintiff now contends as an effective cessation of communication after 29 July 1996. Such communications , or lack thereof, include facsimile transmissions. If the cross-examination is to be effective the plaintiff should have the opportunity of considering at this stage whether or not an application for non-party discovery will be made against the subsidiaries, in particular SAEC, so that the relevant documentation can be available to be put to the witness during the course of cross-examination. These are not mere matters of credit because, if they were, there would be no right to discovery. They go to the attitude, which the plaintiff perceived to exist after the end of July 1996, displayed by, in this case, the third defendant towards the plaintiff. In those circumstances it seems to me that the third defendant should be required to file an affidavit stating whether he has or has had in his custody, possession or power the facsimile transmissions referred to. Prior to the swearing of such an affidavit he will have to give consideration as to whether or not it is necessary in accordance with the principles in Re McGorm to make inquiries in order adequately to describe the documentation sought.
With regard to paragraph 1.8 of the application, to the extent that it is said that the officers or agents of the corporation (in this case, the third defendant) are not required to give discovery of documentation which they may hold on behalf of a corporation, I disagree with such a contention. Mr Gray referred to the reasons published by me on 17 April 1998 in relation to the first discovery application. At page 4 of those reasons I said:-
“... However, the physical possession and control of the Armada documentation remains with the corporate entity SEL and not individual employees or officers thereof. Thus, their control of the documentation, to the extent that they have any, is limited to control as agent for SEL as opposed to the sort of control which would enable them to require SEL to give them, as individuals, the physical custody or possession of the Armada documentation.”

By that passage I did not mean, nor should I be taken to mean, that the employee or agent of the company who holds documentation on behalf of the company is not required to give discovery of it. I referred earlier in these reasons to a passage from “Discovery and Interrogatories”, Simpson, Bailey and Evans and to “Civil Procedure (SA)” para 58.01.20. It is clear from those texts and the cases cited, and I accept as a correct statement of the law, that where a person has custody of a document on behalf of another, the person having custody is required to give discovery of the document to the extent that the document is or was in that person’s custody.
Paragraph 1.9 of the application seeks discovery of a bundle of memoranda sent by facsimile transmission from the plaintiff to the second defendant on about 15 May 1996. It is said to be relevant to paragraph 30(j) of the statement of claim, the point in issue being whether an annual review of the plaintiff’s employment had taken place in May or September 1996. It is quite an important point because the ability of the first defendant to relocate the defendant as part of his employment coincided with the annual review. It is said by the defendant that the annual review took place in September and at that time the defendant was asked to relocate to Australia, whereas the plaintiff says that the annual review took place in May 1996 and no request to relocate was then made.
The position of the second defendant is that if the documents existed they may be material, but that the second defendant cannot locate the documents.
The plaintiff says in paragraph 15 of his affidavit of 25 February 1997 that the original of the documents either remain with SEL or have been destroyed. He does not say by whom they might have been destroyed or, for that matter, why.
The plaintiff has to establish the relevant grounds for belief. If I were satisfied that grounds for belief had been established, there is no doubt that the second defendant should be required to file the appropriate affidavit in accordance with SCR 58.04(e)(i). However, the paucity of the information given by the plaintiff in relation to the original documents, ie those documents which he used for the purposes of sending the facsimile to the second defendant, is a matter of concern to me. When this is added to the fact that the plaintiff has not discovered the documentation himself, some doubt must be cast on whether the plaintiff has fulfilled the relevant onus in this regard. It must be remembered that, just as the defendants are required to make enquiries of the holders of documents that were once in their custody if it is necessary to do so to provide a clear description of the documentation (Re McGorm), so is the plaintiff in relation to this documentation. It appears from paragraph 15 of his affidavit that the documentation may be held by SEL. There is no evidence that, in accordance with the principles in Re McGorm, the plaintiff or his solicitors have written to SEL in order to ascertain the nature of the documentation so that he can adequately describe it in his own list of documents. For that matter there is no evidence that such enquiries are necessary. I just do not know one way or the other. In all those circumstances I do not think that the plaintiff has established the relevant grounds for belief as required by SCR 58.04(e). Paragraph 1.9 of the application must be refused.
Paragraph 1.10 has not been pursued.
Paragraphs 1.11 and 1.12 of the application were dealt with by the plaintiff together. The documents sought are:-
1.11. All copies of the Board paper dated 5 September 1996 in relation to the potential acquisition of the Armada Unit submitted to the Santos Limited Board of Directors.
1.12. All working papers and other notes of the Directors of Santos in relation to the Board paper dated 5 September 1996 and the potential acquisition of the Armada Unit.
The documents are said to relate respectively to paragraphs 30(k) and 30(x) of the statement of claim, which are as follows:-
“(k).. That in or about early September 1996, Armstrong and Gibson prepared a paper to be submitted to the Board of Directors of Santos in order to obtain their approval to submit an indicative non-binding bid for the acquisition by Santos Europe of a gas interest in the Central North Sea known as the Armada Unit (the board paper).”
“(x).. The offer by Santos was rejected by the vendors of the Armada Unit as unacceptably low by letter from Fleming & Co to Gibson dated 16 September 1996.”

The defendants do not dispute the materiality of the document and have discovered some copies of the Board paper. In paragraph 17 of his affidavit of 25 February 1997 the plaintiff says that the defendants have not discovered any notes of individual directors made in respect of the Board papers submitted to them.
There is no evidence that the directors made notes in respect of the Board papers submitted to them, nor is there any evidence of the existence of working papers as referred to in paragraph 1.12. In my view, this aspect of the application cannot succeed.

Turning to paragraph 1.11, the complaint essentially is that discovery has not been given of the directors’ copies. In my view, this aspect of the application comes within SCR 58.07(5)(c), at least insofar as the first defendant is concerned. To that extent it calls for the production of copies which are not shown to be material to the issues in question in this action. However, consistent with my earlier interpretation of that rule, I think that the second defendant is required to discover his copy of the Board paper if he has or has had one. Again, I do not doubt that Mr Gray accurately recounted his instructions which were to the effect that the first defendant concedes that it had a copy of the Board paper at some stage but no longer has a copy of it. However, for the reasons given earlier in relation to the same point, I think that the position should be stated by way of affidavit from the second defendant.
Paragraph 1.14 seeks the five year plan for the Santos Group submitted to the Board of Directors of Santos Limited for consideration at its February 1997 Board meeting. It was said by Mr Wells to be material to paragraphs 30(a) and (b) and paragraph 32(b)(ii) and (iii) of the statement of claim. In essence, it relates to the complaint that there was an arbitrary depression of gas prices for the purposes of formulating a bid for the Armada Unit. Mr Wells’ submission proceeded on the assumption that the five year plan would show gas prices inconsistent with the price fixed in relation to the offer to be put in respect of the Armada Unit calculated during the period August and September 1996. Objection was taken by the defendants to this approach because, it was submitted, there was no evidence of what were the contents of the five year plan and, in particular, there was no evidence that there were gas prices referred to therein and, further, no evidence (if gas prices were referred to) of what they were. It was submitted that it was only speculation on the plaintiff’s part that having access to the five year plan would enable the plaintiff to make the comparison referred to in Mr Wells’ submissions.
I agree with the defendants’ contentions that it is a matter of speculation what the content of the report might reveal and speculation of a nature that does not give rise to the requirement on the part of the first defendant or any other defendant to give discovery of such a document. In O Company v M Company (1996) 2 Lloyds LR 347, Coleman J said at 350:-
“The principle [in the Peruvian Guano case] was never intended to justify demands for disclosure of documents at the far end of the spectrum of materiality which on the face of it were unrelated to the pleaded case of the plaintiff or defendant and which were required for purely speculative investigation ...
On the contrary, the document or class of documents must be shown by the applicant to offer a real probability of evidential materiality in the sense that it must be a document or class of documents which in the ordinary way can be expected to yield information of substantial evidential materiality to the pleaded claim and the defence to it in the broad sense which I have explained. If the document or class cannot be demonstrated to be clearly connected to issues which have already been raised on the pleadings or which would in the ordinary way be expected to be raised in the course of the proceedings, if sufficient information were available, the application should be dismissed.”
In my view the plaintiff’s request for discovery of the five year plan is speculative in the sense referred to by Coleman J and, accordingly, paragraph 1.14 of the application should be refused.
In arriving at that conclusion I take into account that Mr Wells informed me that his instructions were that the plan would contain gas prices, but he was unable to state whether or not those gas prices would be greater or less or the same as those prices used in relation to the proposed acquisition of the Armada Unit.
Paragraph 1.15 of the application seeks each and every copy (including drafts and all working papers) of a plan or plans for the future growth, development or strategy for development of the business of SEL prepared by or at the direction of the fourth defendant, including all documents relating to the potential or hypothetical acquisition of the Armada Unit prepared subsequent to 9 September 1996.
Assuming the documents are material, this is essentially a matter which is governed by the decision of the Full Court relating to whether or not documents of SEL are in the power of the first defendant, with the exception of the position of the fourth defendant.
In paragraphs 20 and 21 of his affidavit of 25 February 1997, the plaintiff said:-
“20... I was informed by John Elgar, an employee of Santo [sic] Europe Ltd, in September 1996 and truly believe that subsequent to the submission of the non-binding indicative bid to Agip the fourth defendant instructed employees of Santos Europe Ltd to prepare, and himself prepared, a strategic plan document which contained scenarios for the future growth of Santos Europe Ltd. One of the scenarios was based on the hypothetical purchase of the Armada Unit by Santos Europe Ltd and projected the value of the Armada Unit to Santos Europe Ltd calculated on gas price assumption for uncontracted gas sales beyond 2000 of 15 pence per therm. That document either in final or draft form has not been discovered by the defendants.
21.... I was present at parts of the meeting of the board of directors of Santos Europe Ltd held in Guildford in August 1996. Whilst I was present the second defendant informed the meeting that the fourth defendant would present his strategy for the future business development of Santos Europe Ltd at the next meeting of the board. The defendants have not discovered the strategy prepared by the fourth defendant or the minutes of the subsequent meeting of the board.”
Apart from the reference to the minutes of meeting in paragraph 21 of the plaintiff’s affidavit, there does not seem to me to be any difference between the documents referred to in paragraphs 20 and 21 of the plaintiff’s affidavit and those referred to by the first defendant at sub-paragraphs (xix) and (xx) at page 9 of the fourth defendant’s defence (Document 30). There are similar references made in the defences of the other defendants. In my view this request by the plaintiff is more appropriately the subject of an application under SCR 59.02 which enables an order to be made for production of documents referred to in the pleadings. As a matter of discretion, I refuse paragraph 1.15 of the plaintiff’s application insofar as it relates to such documentation.
As to the minutes of meeting, there is nothing to suggest that any of the defendants have copies of the minutes of meeting. The proper inference to be drawn in the circumstances is that those minutes are within the possession of SEL and are therefore not required to be discovered by any of the defendants. To that extent the application by paragraph 1.15 is also refused.
Paragraphs 1.16 and 1.17 have not been pursued.
By paragraph 1.18 of the application, the plaintiff seeks the Development Committee papers and Board papers relating to the acquisition by the Santos Group of the petroleum interests of MIM. The plaintiff contends that the documents are relevant to sub-paragraphs 25.3(b) and (e) of the plaintiff’s reply to the defence of the first defendant and to sub-paragraphs 18.3(b) and (e) of the plaintiff’s reply to the defence of the second defendant. They are in the same terms and are as follows:
“[The plaintiff] says that neither Adler, Gibson, Armstrong nor Taliangis could reasonably have concluded that the Plaintiff consented to the insertion of his name at the foot of the Board paper because;
(b).... The established practice of the Santos Group to require acquisition proposals to be reviewed and endorsed by the Development Committee prior to the submission of the proposal to the Board of Directors of Santos was not observed by Adler, Gibson, Armstrong and Taliangis in relation to the submission of the proposal for the acquisition of the Armada Unit as set out in the Board paper;
...
(e).... The proposal for the acquisition of the Armada Unit contained in the Board paper was not consistent with other recent acquisition proposals submitted to the Board of Directors of Santos, especially with respect to the appropriate discount rate used to value the assets and the failure to apply a premium to the fundamental valuation to determine a bid price.

Particulars
Acquisition by Santos of MIM’s petroleum interests and the acquisition by Santos of the majority of Parker and Parsley’s Australasian petroleum interests.”

The first defendant has discovered documents regarding the Parker and Parsley acquisition. The defendants’ solicitors have acknowledged the existence of the documentation sought but deny that it is relevant. According to the affidavit of 30 April 1997 (Document 52) paragraph 8, the defendants say that the acquisition of the MIM interest was quite different from a proposed acquisition of the Armada Unit. Mr Wells argued that such a submission may well be relevant at trial but not on the question of discovery. He argued that the plaintiff had the right to put its argument at trial as to the applicability of the documentation sought regarding the acquisition of the MIM interest and could not properly do so unless discovery was given of those documents at this stage. In essence, his argument was that the materiality of the documentation had been raised in the two replies where reference to the acquisition of the MIM interest was given under the heading “Particulars”.
Mr Gray contended that this request for discovery was purely speculative. In referring to the affidavit of Mr Feary, one of the defendants’ solicitors, he pointed out that the proposed acquisition of the Armada Unit involved a non-binding indicative bid whereas the papers relating to the acquisition of the MIM interest involved a competitive bid which if accepted would be binding. Consequently, there could be no proper comparison of the procedures followed by the Santos Group in relation to the two different procedures.
I accept Mr Wells’ submission that it is not appropriate on a discovery application to determine in a final way the sufficiency of the plaintiff’s contention in relation to the bid for the MIM interests, but such a contention can only be sustained if the plaintiff establishes that the contention constitutes a triable issue. In other words, if a plaintiff raises a point in a pleading, the arguability of which cannot be made out on a discovery application, it must follow that the opposing party is not required to give discovery in respect of that point. This may be only another way of saying that the point raised in the pleading is or is not speculative. It may be similar to the situation where discovery is disallowed on matters raised in a pleading by the party seeking discovery which do not have any purpose other than an attempt to enlarge the boundaries of discovery. However the situation may be characterised, it seems to me that the plaintiff on this application must demonstrate by the proper affidavit evidence that the discovery sought relates to a matter which might properly be argued at trial. I do not think that the plaintiff has discharged that onus in relation to this aspect of his application. In my view it is a matter of speculation as to whether or not the documents relating to the acquisition of the MIM interest may be material to the matters in question in this action as raised by the relevant parts of the two replies, and I form that view in light of the content of Mr Feary’s affidavit. There is no demonstrated comparison of like with like and as such this aspect of the plaintiff’s application should be refused.
Paragraph 1.19 of the application seeks the 1996 diary of the second defendant used and maintained by him in relation to his work appointments and schedules. Discovery has been made of extracts from the 1996 diary but the plaintiff does not concede that all relevant portions of the diary have been discovered. The plaintiff complains that when the diary was discovered it was substantially masked and it seeks an order that the second defendant verify on oath that all entries relating to the matters pleaded in the statement of claim (paragraphs 30(e), (f), (h) and (j)) have been exposed for inspection. In my view this is not an application for further and better discovery but one for verification of a list of documents once it has been filed. I therefore refuse paragraph 1.19 of the application.
The documents referred to in paragraph 1.20 of the application are the subject of another application by the plaintiff and the plaintiff has not pursued an application for further and better discovery of the documents referred to in paragraph 1.20.
By paragraph 1.21 of the application, the plaintiff seeks the original letters sent by the plaintiff to each member of the Board of Directors of the first defendant dated 9 October 1996 and 12 October 1996. It is not in dispute that the plaintiff sent pro forma letters to each of the directors of the Board of the first defendant which were dated respectively 9 October 1996 and 12 October 1996. The defendants say that they are not material in that they do not relate to a matter in question in the action. It was pointed out that there has been no direct reference to the correspondence in the pleadings. However, Mr Wells contended that the receipt by the directors of the Board of the first defendant of the letters was material because it was part of the sequence of dealings between the plaintiff and the defendants which gave rise to the issue of these proceedings. In a general sense I think that is correct and that it is a sufficient basis for establishing materiality.
Mr Gray argued that the letters were sent to the Board members as opposed to the first defendant and by that I took him to mean that the documents were not in the custody, possession or power of the first defendant. I do not accept that submission. In my view, the letters were clearly sent to the individuals in their capacity as directors of the first defendant. At the very least, the second defendant, as managing director of the first defendant, is obliged to give discovery in relation to the letters received by him because it has been shown that the copy sent to him was in his custody at least for a period of time. It is possible to infer on the affidavit material that at least one copy of the letter directed to the directors has been retained by the first defendant. To that extent there is a requirement upon the first defendant, by its proper officer, to give an explanation as to whether or not it has retained such a copy or copies.
To the extent that the first defendant may have retained multiple copies of the letters, I do not think that it is necessary for the first defendant to discover multiple copies (if in fact it has retained multiple copies) for the reasons given by me previously in relation to SCR 58.07(5)(c).
Paragraph 1.23 of the amended application seeks pages 2 to 4 of the copy facsimile transmission from the first defendant’s office to the third defendant dated 24 February 1996, being Document 149 of the third defendant’s supplementary list of documents. I take it, therefore, that this aspect of the application relates to the third defendant because nothing has been said about the original of the document which must have been brought into existence for the purposes of sending a facsimile copy of it. The plaintiff complains that page 1 of the facsimile transmission has been provided on inspection but not pages 2, 3 and 4. Mr Gray’s reply was that the document as produced dealt with more than one topic. He said that the document, to the extent that it raised matters material to the matters in issue in this action had been discovered and produced and that there was nothing to suggest that the discovery was inadequate. I agree with that submission. The third defendant’s discovery must be taken as conclusive unless the plaintiff is able to disclose grounds for belief that something that should have been discovered has not been discovered. I do not think that such grounds have been disclosed and, accordingly, I refuse paragraph 1.23 of the application.
Paragraph 1.24 of the application refers to minutes of meeting of the Board of SEL held on 2 August 1996 or any copy thereof. At the time, the second and third defendants were directors of SEL. To the extent that the application seeks an order against the first defendant, the same should be refused in light of the Full Court’s decision.
The minutes of meeting are material to the matters raised in paragraph 30(g) of the statement of claim. I infer that the minutes may have been in the custody of the second and third defendants for at least a limited period of time because normally, minutes taken at a particular meeting are circulated amongst the directors after the meeting and before the next meeting with a view to having them confirmed as a correct record of proceedings. Thus, an order should be made in respect of the second and third defendants.
For the above reasons, paragraphs 1.1, 1.2, 1.9, 1.12, 1.14, 1.15, 1.18, 1.19 and 1.23 of the application will be refused. There will be an order in favour of the plaintiff in respect of paragraph 1.4 (limited to the first three defendants), 1.5, 1.8 (limited to the third defendant), 1.11 (limited to the second defendant), 1.21 (limited to the first and second defendants) and 1.24 (limited to the second and third defendants). The wording of the order is to be by reference to paragraph 3 of the application. Minutes of order should be brought in by the plaintiff’s solicitors and there will be liberty to speak to the Minutes.
I will hear counsel as to costs.

[1999] SASC 74

5 March 1999