Department of Natural Resources, Mines and Water v Stockland Development (Qld Holdings) Pty Ltd & Anor [2006] QLC 44

LAND COURT OF QUEENSLAND CITATION: Department of Natural Resources, Mines and Water v Stockland Development (Qld Holdings) Pty Ltd & Anor [2006] QLC 44 PARTIES: Chief Executive, Department of Natural Resources, Mines and Water (applicant/respondent) v. Stockland Development (Qld Holdings) Pty Ltd and Trust Company of Australia Limited as custodian. (respondents/appellants) FILE NO: AV2004/0152; AV2004/0153 DIVISION: Land Court of Queensland PROCEEDING: Application for Orders for Disclosure DELIVERED ON: 1 August 2006 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER: Mr RS Jones ORDERS: 1. Orders for further disclosure. Further submissions as to the final wording of the orders invited. CATCHWORDS: Practice and procedure – Disclosure – test of relevance to disputed issues – incomplete disclosure alleged – certain requests too wide – likelihood of existence of documents – documents supporting primary document disclosable. APPEARANCES: Mr D Fraser QC, with him Mr T Quinn, for the applicant/respondent Mr PJ Lyons QC, with him Mr R Anderson, for the respondents/appellants SOLICITORS: Legal Services, Department of Natural Resources, Mines and Water, for the applicant/respondent Corrs Chambers Westgarth for the applicant/respondent [1] These proceedings concern an application made on behalf of the Department of Natural Resources, Mines and Water ("the Department") seeking orders that the appellants make -- 1 of 10 -- 2 further disclosure of documents. There is no dispute that those Rules of the Uniform Civil Procedure Rules dealing with disclosure are relevant to the determination of this application. Those rules of course are to be applied in a manner consistent with s.7 of the Land Court Act 2000 which requires this Court to act according to equity and good conscience. [2] This application was heard together with an application for further and better particulars of the appellants' grounds of appeal on 13 July 2006. Orders dealing with the application for further and better particulars were made by me on 17 July 2006 leaving only the question of disclosure to be resolved. Background [3] The appellants have appealed the respondent's assessment of the unimproved value attributed to their land, pursuant to the Valuation of Land Act 1944 ("VLA") in the amounts of $11,300,000 and $19,000,000. The appellants contend that the correct unimproved value for the land is $6,000,000 and $13,000,000 respectively. The relevant date of valuation is 1 October 2002 for both valuations. The land concerned is located on the river side of Eagle Street within the Brisbane Central Business District and is occupied by premises known as Waterfront Place and Eagle Street Pier. Waterfront Place is a premium high rise office development. As I understand the evidence, Eagle Street Pier is a site likely to be redeveloped to achieve its highest and best use. [4] On 30 March 2006, for reasons which are not directly relevant to this application, the Land Appeal Court made a number of orders including an order that "the parties will make disclosure by list of all documents in their possession or within their power which are directly relevant to the matters in issue in the proceedings before the Land Court by 11 May 2006 and will complete inspection of such documents by 18 May 2006". The Land Appeal Court also ordered that these appeals be set down for further directions by the Land Court on 22 May 2006. When the matter came back before me on 22 May I made a number of orders including, relevant to this application, an order that the appellants make disclosure by list on or before Monday, 29 May 2006. [5] On 29 May 2006 the appellants provided a joint list of documents. The Department says that the disclosure is incomplete to the extent identified in two letters sent on its behalf to the appellants' solicitors. These letters are dated 5 May 2006 and 30 June 2006 respectively. The primary relief sought by the Department is that the appellants, by way of disclosure, deliver a list of the documents identified in those letters. [6] The letter of 5 May 2006 points out that one of the appellants, Stockland Development (Qld Holdings) Pty Ltd was the purchaser of a property which is located at 45 Eagle -- 2 of 10 -- 3 Street in February 2004. This sale was identified by the appellants in their further and better particulars of their grounds of appeal as being one of the comparable sales relied on to establish their estimate of the unimproved value of the land. The letter goes on to assert that Stockland Development (Qld Holdings) Pty Ltd is under a duty to disclose documents concerning that sale. These documents are said to include but not be limited to the contract of sale, pre-purchase valuations, board minutes and papers concerning the sale, investigations into planning approvals and redevelopment proposals, feasibility studies, depreciation schedules, due diligence documents and valuations of the property which might have been commissioned from time to time. On behalf of the Department it is also asserted that if either one of the appellants has been involved in the sale of any properties "comparable" to those properties under appeal, then there is a similar obligation to disclose the same classes or categories of documents as those identified in respect of the purchase of the 45 Eagle Street property. [7] The letter of 30 June 2006 identifies the documents required to be disclosed in the following way: "We have listed the further disclosable documents by reference to the number of the disclosed document and the page of that disclosed document. For ease of reference we have identified each document which the material indicates also exists or a particular concern raised by a separate number. Document 31 - Sale analysis Waterfront Place - CB Richard Ellis (undated) 1. This is a one page document which records that during late 2003 Stockland commenced due diligence for the acquisition of Waterfront Place and the adjoining Eagle Street Pier complex at a total price of $307,000,000.00. It also makes reference to an adjacent owner's deed to be executed and sets out its stipulations - none of the due diligence documents referred to have been separately disclosed. Document 32 - Draft Valuation Report from CB Richard Ellis providing a valuation certificate as to one of the appeal properties, Waterfront Place. The documents which are referred to and which plainly relate to the acquisition by your clients of the appeal properties include the following: 2. p. 7 - Proposed adjacent owner's deed for Waterfront Place and Eagle Street Pier. 3. p. 12 - Legal due diligence document prepared by Deacons Solicitors for your clients. 4. p. 13 - Schedule outlining the issues to be included in the proposed adjacent owners deed. Reference to a proposed redevelopment. 5. p. 19 - Technical due diligence budgets provided by your clients. 6. p. 20 - Advice estimate of $4,000,000.00 to replace VAVs and controllers. 7. p. 29 - Details of outstanding tenant incentives as at the date of valuation. 8. p. 34 - Tenancy schedule provided. -- 3 of 10 -- 4 9. p. 37 - Budgeted and estimated outgoings information for 2003 in addition to actual outgoings for 2002. Document 34 - 2004 Valuation Report of 50% interest by CB Richard Ellis 10. p. 12 - Schedule outlining the issues included in the adjoining owner's deed." "This valuation report includes reference to what appear to be many of the same documents as were identified in Document 32 to which reference is made above. Each of those documents ought be disclosed. Of course if it is the same document in each case only one copy of the document need be disclosed having regard to R.. 212(1)(c). The fact remains however, that the Appellants are obliged to disclose the documents which exist as separate documents separately in each case. 11. I also refer to Section 8 of this document which is on p. 55. Reference is made in that section to preliminary residential schemes proposed for the Eagle Street Pier site. The schemes have not been disclosed. 12. Appendix 1 of the document comprises a letter of instructions dated 3rd June, 2004, to the valuer who prepared the valuation report. On page 2 reference is made in the Special Instructions at para (viii) to a Development study commissioned by the owner. It has not been disclosed. Document 29 - Contract for the purchase of Eagle Street Pier dated 12th February, 2004. 13. p. 13 - Clause 7.4(m) refers to service contracts. If they are material to the transaction they are required to be disclosed. 14. p. 15 - Clause 7.5(e) identifies that all available reports, certificates, approvals and operating manuals relating to plant and equipment were to be provided. If there are any reports which record the plant and equipment then in the first instance you should supply all summary reports in your client's possession. 15. At pp. 26-29 Clause 13 deals with a dispute involving City Rowers which is included in the subject matter of the contract. While no doubt there are extensive documents in your clients' possession, for present purposes your clients are asked to disclose any document which provides a summary of the position which was relied upon (by) the purchaser in the acquisition of the property so far as that dispute is concerned. 16. After p.69 the depreciation schedule summary copy provided is partially illegible. Please provide a clear copy. 17. The same difficulty emerges in attempting to read each of the depreciation schedule summaries for Waterfront Place and Eagle Street Pier. There are a number of them which are unable to be read at the beginning and end of each of the sections dealing with the depreciable items. Please provide legible copies of each of those summaries. We refer again to earlier correspondence about your clients' duty of disclosure and my enumeration of the classes of documents which that duty will oblige your clients to disclose. It was flagged that plans relating to future redevelopment or expansion to properties and documents associated with redevelopment were required to be disclosed and although, as noted above, such plans are plainly in existence, your clients have not disclosed such documents. I repeat the observations set out in our earlier correspondence." [8] In his affidavit sworn 11 July 2006 Mr John O'Rourke, a solicitor employed by the Department, deposed to his belief that the documents referred to in his correspondence of 5 May and 30 June 2006 were likely to be in existence and in possession or under the -- 4 of 10 -- 5 control of the appellants. There was no attempt made to depose to the fact that the documents sought were directly relevant or how they might be directly relevant. The Uniform Civil Procedure Rules (UCPR) [9] Rule 211(1) of the UCPR states the obligation to disclose in the following terms: "A party to a proceeding has a duty to disclose to each other party each document - (a) in the possession or under the control of the first party; and (b) directly relevant to an allegation in issue in the pleadings; and (c) if there are no pleadings - directly relevant to a matter in issue in the proceeding" The duty of disclosure is an ongoing one pursuant to sub-rule (2) of Rule 211. [10] As was identified by Pincus JA in Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants & Bars Pty Ltd1, the use of the words "directly relevant" was a deliberate narrowing of the obligation to disclose. At pages 282-283 his Honour said: "[7]… It is not enough, to justify an order for disclosure, to hold the opinion that 'it is reasonable to suppose [that the document] contains information which may - not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary'. Nor, if a document sought is not directly relevant to an allegation is issue, does it matter whether or not it 'is a document which may fairly lead [the party requiring discovery] to a train of inquiry, which may have either of these two consequences' …. [8] No doubt this deliberate narrowing of the obligation to provide disclosure makes it all the more important that practitioners and their clients earnestly fulfil their obligations under the rules relating to the topic; but drawing attention, as Mr Wilson does, to a chance that a particular category of undisclosed documents may help one side's case will not necessarily provide a basis for an order for further disclosure." [11] In Robson v REB Engineering Pty Ltd2 Demack J expressed the view that a document which was "directly relevant" for the purposes of Rule 211 would be one which tended to prove or disprove an allegation in issue in the proceedings. [12] In a proceeding such as this it also needs to be kept in mind that relief of the type sought may be granted when there is an objective likelihood that the duty to disclose has not been complied with. There must be more than a mere suspicion to justify granting relief to a party complaining of incomplete disclosure.3 The Documents [13] During his submissions Mr Lyons QC quite properly in my view, made some concessions concerning certain documents sought to be disclosed. These documents could be categorised as follows: i. Due Diligence Documents It initially seemed to be suggested by the appellant's solicitors that due diligence studies and/or reports prepared in association with the purchase of Waterfront Place and the 1 [2001] 1 QdR 276 2 [1997] 2 QdR 102 3 R223(4)(b)(i); Pincus JA in Mercantile Mutual at 283 L20, L35-40. -- 5 of 10 -- 6 Eagle Street Pier properties were not going to be disclosed because they were subject to legal professional privilege. Mr Lyons QC acknowledged that these documents should be formally disclosed subject to a claim for privilege. ii. City Rower's Dispute Documents Mr Lyons QC also acknowledged that any reports or other documents dealing with the status of a dispute with the tenant "City Rowers", existing at the time of the purchase of the properties ought be disclosed, if in the possession or control of the appellants. iii. The Adjoining Owners Deed It was conceded that it was likely that the adjoining (or adjacent) owners deed identified existed and was in the possession of one or both of the appellants and, accordingly it ought be disclosed. [14] I turn now to the more contentious documents which the Department says ought be disclosed. [15] In respect of the documents identified in the Departments letter of 5 May 2006, it is clear that a number of the documents sought have, since that letter, been disclosed. These documents, which are identified in the appellants list of documents dated 29 May 2006, include: (i) document 29 – Contract of sale of Eagle Street Pier (also document 35). (ii) document 31 – Sales analysis Waterfront Place. (iii) document 32 – draft valuation report by CB Richard Ellis. (iv) document 34 – 2004 valuation by CB Richard Ellis.. (v) document 36 – Waterfront Place contract of sale. [16] Document 29 included certain depreciation schedules also sought to be disclosed. The Department says that parts of these schedules provided to it are illegible and wants the originals disclosed. In a letter from the appellants' solicitors dated 12 July 2006, it is said that the copies provided are the true copies of the documents in the appellants' possession or control and, if more legible copies can be located, the Department will be so advised. In these circumstances I do not intend to make an order requiring the disclosure of the originals of these documents. [17] The Department also seeks disclosure of a class or category of documents variously described as "board minutes" or "board papers". On balance I am not convinced that these documents are likely to be "directly relevant" to the matters raised in the Notices of Appeal as further particularised as issues in these appeals. [18] One further matter concerning the Departments letter of 5 May 2006 needs to be addressed, namely the reference to the alleged obligation of Stockland Development (Qld Holdings) to disclose specified documents concerning not only the sale of the subject -- 6 of 10 -- 7 land but also "any other sales of comparable properties in which it may have been involved." [19] In my view this is far too wide a description. Purchase details of properties which might be of a comparable nature but in other capital cities or too remote in time are not likely to generate documentation which could be said to be "directly relevant" to these appeals. [20] The appellants, in Table 1 of their further and better particulars of their grounds of appeal have identified the sales evidence upon which they intend to rely. Only one of those sales, as far as I am aware, involves one of the appellants. The Department has not revealed the sales evidence upon which it intends to rely and I was not told of any sale, not included in Table 1, involving the appellants which the Department considers comparable or otherwise relevant to these appeals. In the circumstances, I do not intend to make the orders sought by the Department concerning such transactions. [21] Turning now to the documents in the Departments letter of 30 June 2006, reference is made to a number of documents which have not yet been dealt with. [22] In respect of disclosed document 29 reference is made to clauses 7.4(m) and 7.5(e) of that document. It is then asserted that if certain documents are "material" or are in the possession of the appellants they should be disclosed. It was not at the end of the day clear to me how the said "service contracts" and the reports and other documents sought concerning plant and equipment were directly relevant to the matters in issue in these appeals. Having regard to the matters addressed in paragraphs [9] to [12] above I do not consider that there is any sound basis for ordering disclosure of the documents referred to in paragraphs 13 and 14 of the respondent's correspondence of 30 June 2006. [23] In respect of disclosed document 34, the CB Richard Ellis 2004 valuation report, it refers at page 55, section 8 to a "preliminary residential scheme" proposed for the Eagle Street Pier land. Appendix 1 to that report, being the letter of instructions from Stockland Trust Management Limited,4 refers to a "… Development Study commissioned by the owner which discusses …" [24] The letter from the appellants solicitors dated 12 July 2006 seems to suggest that it did not intend to disclose documents dealing the redevelopment potential of Eagle Street Pier land. The bases for this being that first, the highest and best use of the land – being for residential development – was readily apparent as at the relevant date and, second, that the land had not been the subject of any "in depth" redevelopment studies. During argument Mr Lyons QC also referred to there being no such "in depth" studies being carried out and that, on his instructions, no document comprising a preliminary 4 Exhibit "JOR 3" to the affidavit of Mr O'Rourke sworn 11 July 2006. -- 7 of 10 -- 8 residential scheme existed. However, as acknowledged by Mr Lyons QC, it was not possible to be definitive about this as investigations were still continuing in the Sydney offices of the appellants. In this context I note that the letter of instructions dated 3 June 2004 to CB Richard Ellis seems to have originated from the Sydney office of Stockland Trust Management Limited. [25] I acknowledge that a reference to a document by someone does not establish the existence of such a document. However, in this case the language used in the documents referred to me by Mr Fraser QC is quite clear and definitive. The letter of instructions refers to a study said to have been "commissioned" and which "discusses" possible impacts of certain development. Page 55, part 8.2 of document 34 refers to a proposed residential scheme involving "relatively narrow tower designs…" This language is to be contrasted with the somewhat equivocal language used on behalf of the appellants. [26] On balance I consider it likely that a document (or documents) exists described as either a "preliminary residential scheme" or a "development study" and that it is in the possession or control of the appellants. [27] However, that is not the end of the debate concerning this document or documents. As I understand it, it is also contended on behalf of the appellants that such documents would not be required to be disclosed, as there is no relevant contest or issue between the parties. That is, as there is no dispute as to what the highest and best use of this land is, any such preliminary plans or concepts could not be said to be directly relevant. [28] While I have some sympathy for this argument it seems to me that the potential impact of any residential development on the Eagle Street Pier site was a matter of significant importance not only to the appellants but also to the author of the 2004 valuation report. In fact in part 8.2 the author of that report says that "based" on his understanding of the residential proposal the impact on the Waterfront Place development would be minimal. [29] The shape of the Eagle Street Pier site is an important and restrictive characteristic of the land. It seems tolerably clear to me that special design considerations would have to be taken into account in developing the land. That is so, as I understand it, not only because of the shape of the land but also because of the proximity of the Waterfront Place development. [30] Taking all these matters into account, I am of the view that the preliminary scheme or development study considered by the author of the 2004 valuation should be disclosed. [31] Turning to the remaining documents, they are said to be documents referred to in the disclosed draft valuation report (document 32). The relevance of the estimate to replace "VAVs and controllers" was not explained. In fact, I do not recall being told what the -- 8 of 10 -- 9 "VAVs" and "controllers" were. I do not propose to make orders requiring disclosure of this document. [32] The documents containing details of outstanding tenant incentives, the tenancy schedule and other documents dealing with outgoings, which were referred to in document 32 are also sought. [33] As mentioned above, the relevant date for these appeals is 1 October 2002. The draft valuation that has been disclosed is dated 1 December 2003, a date not too far removed from the relevant date. In reaching his conclusions there could be little doubt that the tenancy details and the outgoings of the type identified would have been important if not vital to the considerations of the author of that document. In circumstances where the parent document is considered to be directly relevant, I find it difficult to accept that documents relied on which contain information important to the conclusions reached are not also directly relevant and therefore disclosable. I would add that, having regard to these issues raised in the Notices of Appeal and the appellants further and better particulars of the grounds of appeal, I consider these documents to be directly relevant in any event, that is even if they had not been directly referred to in the already disclosed draft valuation. [34] Having regard to the matters addressed above I intend to make orders requiring the appellants to disclose to the respondent the following documents and classes of documents within twenty one days of the date of the final orders: 1. (a) the due diligence reports concerned with the purchase of the properties known as Waterfront Place and the Eagle Street Pier Complex. (b) reports or other records which identify the status of the tenancy dispute known as the "City Rowers" dispute as at the date of purchase of the Eagle Street Pier complex by the appellant/appellants. (c) the document or documents referred to by the parties as the "adjoining owners" deed or "adjacent owners" deed. (d) the following documents provided for or on behalf of the appellants to CB Richard Ellis for the purposes of the draft valuation and advisory report dated 1 December 2003. (i) records of outstanding rent incentives. (ii) tenancy schedules. (iii) budgets and/or estimations of outgoings for the year 2003. (iv) records or other documents identifying the actual outgoings for the year 2002. -- 9 of 10 -- 10 (e) the "Development Study" referred to in paragraph (viii) at page 2 of the letter of instructions of Stockland Trust Management Limited dated 3 June 2004. (f) the "preliminary residential schemes" referred to in paragraph 8.2 of the draft valuation and advisory report dated 1 December 2003 (document 32). 2. That, in respect of the documents or classes of documents identified in subparagraphs 1(d), 1(e) and 1(f), if the appellants assert that no such document or class of documents exist they are to file and serve an affidavit in accordance with Rule 223(2) of the Uniform Civil Procedure Rules. [35] I will hear the parties as to the final form of the orders and as to costs in respect of the disclosure application and the application for further and better particulars. R S JONES MEMBER OF THE LAND COURT -- 10 of 10 --