Department of Natural Resources, Mines and Water v Surfers Paradise Beach Resort Pty Ltd [2006] QLC 15 (2006) 27 QLCR 42

LAND COURT OF QUEENSLAND CITATION: Department of Natural Resources, Mines and Water v Surfers Paradise Beach Resort Pty Ltd [2006] QLC 15 PARTIES: Chief Executive, Department of Natural Resources, Mines and Water (applicant/respondent) v. Surfers Paradise Beach Resort Pty Ltd (respondent/appellant) FILE NOS.: AV2005/0187 and AV2005/1572 DIVISION: Land Court of Queensland PROCEEDING: An application for an order that the proceedings be stayed until the respondent complies with its disclosure obligations DELIVERED ON: 30 March 2006 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER Mrs CAC MacDonald ORDER: The application is refused. CATCHWORDS: Practice and procedure – disclosure – Land Court Rules and Uniform Civil Procedure Rules – application for a stay of proceedings until respondent complies with its disclosure obligations – rules 211, 223, 225. APPEARANCES: Mr W Isdale of Crown Law for the applicant Mr B Cronin for the respondent SOLICITORS Legal Counsel, Legal Services, Department of Natural Resources, Mines and Water McInnes Wilson Lawyers for the respondent -- 1 of 11 -- 2 [1] This is an application by the Chief Executive, Department of Natural Resources, Mines and Water (the applicant) for orders that – 1. These appeals be stayed until such time as Surfers Paradise Beach Resort Pty Ltd [the respondent] complies with its obligations of disclosure in relation to the three numbered matters set out in the applicant's letter of 8 February 2006, a copy of which is attached, along with copies of the applicant's letter of 20 February 2006 and the respondent's replies of 24 and 27 February 2006. 2. The applicant have the costs of this application. 3. Such further or other order as may be required. Background [2] Surfers Paradise Beach Resort Pty Ltd, which is the owner of two properties at Surfers Paradise, has appealed against the determination by the Chief Executive, Department of Natural Resources, Mines and Water of the unimproved values of those properties as at 1 October 2003, under the provisions of the Valuation of Land Act 1944. [3] On 20 December 2005 I ordered, with the consent of the parties, that "The parties are to make disclosure by list to one another by 4.00 pm on 30 January 2006". [4] It appears, from the copies of the correspondence attached to the application, that the respondent disclosed a number of documents, by list, to the applicant on 30 January 2006. [5] By letter dated 8 February 2006, a copy of which was attached to the application, the applicant's legal representative wrote to the solicitors for the respondent saying that his client was of the view that the respondent was likely to have material not so far disclosed and requesting that he be informed as soon as possible of the existence of any such documents by way of a supplementary disclosure. The type of documents sought were – 1. A joint venture agreement between an entity or entities in the Sunland group of companies and Surfers Paradise Beach Resort Pty Ltd concerning the subject property known as Q1. 2. Valuations of the property the subject of these appeals and associated with the joint venture agreement referred to above. 3. Valuations of the subject property associated with the Q1 funding package as detailed in the Australian Stock Exchange news release of 11 July 2003. [6] On 27 February 2006 the solicitor for the respondent replied saying that "Our client is of the view that it has complied with its disclosure obligations". [7] The applicant subsequently filed this application. At the hearing of the application, evidence was given by Mr Philip Smith a property valuer employed by the applicant department. Mr Smith was responsible for the valuation of 1 October 2003. -- 2 of 11 -- 3 Disclosure Sought [8] As outlined above, disclosure was sought in respect of three categories of document. Joint venture agreement [9] The document sought is a joint venture agreement between an entity or entities in the Sunland Group and Surfers Paradise Beach Resort Pty Ltd concerning the subject property known as Q1. Q1 is the name of the building which has been constructed on one or both of the subject sites and which is referred to in some of the material before the Court as the 'World's Tallest Residential Tower'. [10] A number of documents were tendered on behalf of the applicant which refer to a joint venture agreement and Mr Smith gave evidence relating to those documents. I will deal with these documents in the order in which they were dealt with at the hearing of the application. 1. Notes to Financial Statement for the year ended 30 June 2004 (Document 1). Mr Smith said that this was an extract from the Financial Statement of the Sunland Group. Paragraph 32 is headed "Interests in joint venture applications" and in part states - "In August 2000, a controlled entity Camryville Pty Limited entered into a joint venture agreement with Q1 JV Proprietary Limited, a wholly owned subsidiary of Surfers Paradise Beach Resort Pty Limited for the development of Q1 – World's Tallest Residential Tower project. Each of the joint venture parties are entitled to 50% of the joint venture." 2. A copy of a notification, apparently from Sunland Group Limited, to the Australian Stock Exchange on 22 August 2000 (Document 2). Relevantly, the notification states: "We wish to advise that Camryville Pty Ltd a wholly owned subsidiary of Sunland Group Limited and Surfers Paradise Beach Resort Pty Ltd have entered into a joint venture agreement to develop a 63 level condominium tower on land owned by Surfers Paradise Beach Resort Pty Ltd situated in Surfers Paradise. … Camryville Pty Ltd will be responsible for project management, construction and marketing. The joint venture partners will share profits equally. …" 3. A notification to the Australian Stock Exchange, apparently from Sunland Group Limited, dated 21 November 2001 advising that Sunland's tallest tower project had been approved by the planning committee of the Gold Coast City Council (Document 3). The notification also said – -- 3 of 11 -- 4 "The $500 million as yet unnamed building is a joint venture development with the Brisbane based Anderson family." 4. Director's Report for the year ended 30 June 2004 (Document 4). Mr Smith said that he had extracted this material from the Annual Report of Sunland Group Limited. Under the heading "World's Tallest Residential Tower", was the statement – "A joint venture between Sunland Group Limited and Anderson family. An 80 storey residential tower in the heart of Surfers Paradise. …" 5. An extract from the Sunland Divisional Report (part of the Sunland Annual Report) for the year ended 30 June 2004 (Document 5) – "Q1 Observation Deck While Sunland has acquired the management rights for Q1, the Q1 Observation Deck and Q1 Store will operate as a joint venture upon opening in August 2005. The income derived from these operations will also supplement the management rights business from 2006 onwards." 6. A further extract from the same report (Document 6) - "Upon completion, Q1 – which is a joint venture development with the Brisbane based Anderson family, will be recognised as a landmark destination …" [11] The applicant also relied on Documents A and B below as evidence of the existence of a relevant joint venture agreement. Valuations associated with the joint venture agreement [12] No additional documents were tendered by the applicant in relation to this category. Valuations associated with the Q1 funding package [13] Two documents were relied on by the applicant in respect of this category – Document A. A letter to the Australian Stock Exchange dated 11 July 2003, saying in part – "Re: Q1 Funding Package Sunland Group Limited and Surfers Paradise Beach Resort Pty Ltd is pleased to announce that it has reached a milestone, with the funding package of $310 million now in place. … The funding was arranged by National Australia Bank, with other lending participants being ANZ, Westpac, OCBC Bank, and James Fielding. This project is a joint venture between Sunland Group Limited and Surfers Paradise Beach Resort Pty Ltd …" Document B. A letter to the Australian Stock Exchange dated 21 October 2005. -- 4 of 11 -- 5 This letter reported on the progress of the sale of apartments in the Q1 building and said, in part – "Sunland Group Limited is pleased to announce that the first tranche of settlements on Q1 has enabled the joint venture (Sunland and Surfers Paradise Beach Resort - SPBR) to retire its total construction and development debt of $307M to its banking syndicate, comprising National Australia Bank, Westpac, ANZ, OCBC Bank and James Fielding Funds Management. …" Relevant legislation [14] The application was brought pursuant to Rules 211, 223 and 225 of the Uniform Civil Procedure Rules 1999 (the Uniform Rules). Rule 13 of the Land Court Rules 2000 provides that chapter 7 of the Uniform Rules applies, with necessary changes, to the disclosure of documents in relation to a proceeding in this Court. [15] Rule 211 of the Uniform Rules provides, in part – " Duty of disclosure (1) 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. (2) The duty of disclosure continues until the proceeding is decided. …" [16] Rule 223 provides, so far as is relevant - "Court orders relating to disclosure (1) The court may order a party to a proceeding to disclose to another party a document or class of documents by – (a) delivery to the other party in accordance with this part a copy of the document, or of each document in the class; or (b) producing for the inspection of the other party in accordance with this part the document, or each document in the class. (2) The court may order a party to a proceeding (the first party) to file and serve on another party an affidavit stating – (a) that a specified document or class of documents does not exist or has never existed; or (b) the circumstances in which a specified document or class of documents ceased to exist or passed out of the possession or control of the first party. (3) The court may order that delivery, production or inspection of a document or class of documents for disclosure – (a) be provided (b) not be provided; or -- 5 of 11 -- 6 (c) be deferred. (4) An order mentioned in subrule (1) or (2) may be made only if - (a) there are special circumstances and the interests of justice require it; or (b) it appears there is an objective likelihood - (i) the duty to disclose has not been complied with; or (ii) a specific document or class of documents exists or existed and has passed out of the possession or control of a party. …" [17] Rule 225 provides – "225 Consequences of nondisclosure (1) If a party does not disclose a document under this part, the party – (a) must not tender the document, or adduce evidence of its contents, at the trial without the court's leave; and (b) is liable to contempt for not disclosing the document; and (c) may be ordered to pay the costs or a part of the costs of the proceeding. (2) If a document is not disclosed to a party under this part, the party may apply on notice to the court for – (a) an order staying or dismissing all or part of the proceeding; (b) a judgment or other order against the party required to disclose the document; or (c) an order that the document be disclosed in the way and within the time stated in the order. (3) The court may, in an order under subrule (2)(c), specify consequences for failing to comply with the order." Counsels' submissions [18] Ground 3 of the Notice of Appeal against the Chief Executive's valuation was that "The assessment of Unimproved Value does not have sufficient regard to the development potential of the land and the conditions surrounding such development". Counsel for the applicant submitted that the effect of Ground 3 was to put in issue the development potential of the land and the conditions surrounding such development. The documents identified in the application were relevant to that issue. [19] Counsel for the applicant also submitted that the letter from the respondent's solicitors dated 27 February 2006 stating that "Our client was of the view that it has complied with its disclosure obligations" did not disclose whether it was said that such documents do not exist, or that they were not relevant to the proceedings or that they were subject to a claim of privilege. [20] Counsel for the respondent submitted that a list of documents is conclusive as to its contents unless one of the established exceptions applies (British Association of Glass -- 6 of 11 -- 7 Bottle Manufacturers v Nettlefold [1912] AC709 at 714; Mulley v Manifold (1959) 103 CLR 341 at 343). [21] Counsel also submitted that the test for determining whether there is a duty to disclose a document is that set out in r.211. In particular, the document must be directly relevant to a matter in issue in the proceedings. It was submitted that it is not sufficient to justify an order for disclosure to hold the opinion that it is reasonable to suppose that a document contains information that may be relevant, or that it may lead to a train of enquiry which may advance the applicant's case or damage the case of the adversary (Mercantile Mutual Custodians Pty Ltd v Village/Nine Network Restaurants and Bars Pty Ltd [2001] 1 QdR 276 at 282). Conclusions [22] The duty to disclose documents arises under r.211(1) and is a continuing obligation until the proceeding is decided (r.211(2)). The duty is to disclose those documents that are in the possession or under the control of a party (r.211(1)(a)) and that are directly relevant to a matter in issue in the proceeding (r.211(1)(c)). There are serious consequences if a document is not disclosed, as set out in r.225. For example, a party who does not disclose a document is liable to contempt and may be ordered to pay the costs of the proceeding (r.225(1)(b) and (c)). Moreover, the solicitor having the conduct of a proceeding is required, at the trial of a matter, to give to the Court a signed document certifying that the duty of disclosure has been explained fully to the party (r.226). [23] Counsel for the applicant said that the difficulty faced by the applicant was that he did not know whether the respondent was saying that the documents sought did not exist, or that they were not relevant, or that privilege was claimed. Counsel for the applicant also referred to the respondent's statements (at T13, 14) that the documents concerning the development were very sensitive and would not be disclosed unless there was an order from the Court, and that an affidavit would be prepared to focus precisely on what documents if any exist and why they should not be disclosed. Counsel for the applicant pointed out that this had not been done so that the applicant still did not know what the respondent's position was. [24] These submissions suggest that there is an obligation on the respondent to say that the requested documents do not exist, or that they are not relevant, or that privilege is claimed. However, the respondent has delivered a list of documents. A list of documents is conclusive and there must be something more than mere suspicion to justify granting relief to a party complaining of incomplete disclosure (Mercantile Mutual Custodians at 283). As Pincus JA pointed out in that case (at 282), the obligation is to disclose -- 7 of 11 -- 8 documents that are directly relevant to matters in issue. In cases such as this where the respondent has delivered a list of documents, it must be established that the respondent has failed to comply with its duty of disclosure. The relevant test for establishing a breach of that duty is that set out in r.223(4)(b). [25] The applicant has not sought an order for disclosure under r.223, but has sought an order, pursuant to r.225(2)(a) that the proceedings be stayed until the respondent complies with its disclosure obligations. That rule provides that such an order can only be made if a document is not disclosed under Chapter 7, Part 1 of the Uniform Rules. [26] Rule 225(2)(a) is to be contrasted with r.223 which deals with court orders relating to disclosure. Inter alia, r.223 sets out the circumstances in which a court may order a party to disclose a document or to file an affidavit as to the existence of a document or the circumstances in which it ceased to exist or passed out of the possession or control of a party. Relevantly, such orders can only be made if there is an objective likelihood either that the duty to disclose has not been complied with or a document exists or existed and has passed out of the possession or control of the party (r.225(4)(b)). [27] The matters to be proved under each section differ somewhat. The effect of s.225(2)(a) is that if a stay is to be ordered a court must be satisfied that a document has not been disclosed. Under r.223(4)(b)(i) a court must be satisfied that there is an objective likelihood that the duty to disclose has not been complied with. [28] It seems to me that in this matter before I could be satisfied under r.225(2)(a) that a document has not been disclosed, I must at least be satisfied that there is an objective likelihood that the duty to disclose has not been complied with (cf r.223(4)(b)). I consider that this means that I must be satisfied that there is an objective likelihood that a document or documents of the type identified by the applicant are in the possession or under the control of the respondent and that they are directly relevant to a matter in issue in the proceedings. [29] I turn now to consider each of the categories identified by the applicant. Joint venture agreement [30] It appears from the material tendered by the appellant (Exhibit 2), to be likely that there was a joint venture agreement relating to the development of the residential tower on the subject land. The identity of the parties to that agreement is less clear. [31] Document 1 describes the parties as Camryville Pty Ltd (a controlled entity) and Q1 JV Proprietary Limited, a wholly owned subsidiary of Surfers Paradise Beach Resort Pty Ltd. Document 2 says that "Camryville Pty Ltd a wholly owned subsidiary of Sunland Group Limited and Surfers Paradise Beach Resort Pty Ltd have entered into a joint venture -- 8 of 11 -- 9 agreement …". It was suggested by Counsel for the respondent that this document did not clearly identify the parties to the agreement. I note that the sentence uses the plural form of the verb "have", indicating that the intention was to describe at least two parties to the joint venture agreement. In the context of the sentence those parties must be Camryville and Surfers Paradise Beach Resort Pty Ltd. On its proper construction, therefore, I consider that the sentence means that Camryville Pty Ltd is a wholly owned subsidiary of Sunland Group Limited, and that the joint venture agreement is between Camryville Pty Ltd and Surfers Paradise Beach Resort Pty Ltd. Document 3 describes one of the parties as the Brisbane based Anderson family. Document 4 described the parties as Sunland Group Limited and Anderson family. While Document 5 refers to a joint venture agreement, that agreement appears to relate to the operation of the Q1 Observation Deck and Q1 Store, not the development of the building. Document 6 says that the joint venture development is with the Brisbane based Anderson family. Documents A and B refer to a joint venture between Sunland Group Ltd and Surfers Paradise Beach Resort Pty Ltd. [32] Three of the documents describe the respondent, Surfers Paradise Beach Resort Pty Ltd, as a party to a joint venture agreement. Either Q1 JV Pty Ltd or the Anderson family is said to be one of the parties in the other relevant documents. Q1 JV Pty Ltd is described as a wholly owned subsidiary of the respondent. Mr Smith said that he believed that there was a connection between the Anderson family and the respondent but he was unable to say what that connection was. Leaving aside the question of relevance for the moment, and assuming that the respondent is not a party to the agreement and that Q1 JV and/or members of the Anderson family are, I consider that the existence of unspecified connections between those entities and the respondent is not sufficient to lead me to conclude that any relevant documents that may be held by those bodies could be considered to be in the possession or under the control of the respondent. [33] In any event, even if I were to accept that the respondent is a party to a joint venture agreement relating to the development of the Q1 building on the subject land, I am not satisfied that there is an objective likelihood that the respondent has not complied with its duty of disclosure because I am not satisfied that that agreement would be directly relevant to a matter in issue in these proceedings. The subject matter of the appeal is the unimproved value of the respondent's land as determined by the Chief Executive, Department of Natural Resources, Mines and Water as at 1 October 2003. There are no pleadings in the proceedings. The matters that have been identified as being in issue to date are set out in the grounds of appeal as expanded by the respondent's answers to the -- 9 of 11 -- 10 applicant's request for further and better particulars of the grounds of appeal. The applicant submitted that the documents identified in the application were relevant to matters identified in Ground 3 of the Notice of Appeal. [34] Mr Smith said that in his opinion the joint venture agreement would contain information as to the financial inputs of each of the parties to the joint venture scheme. In particular, he said, the agreement would identify an apportionment of value between the respondent, which owns the land, and the Sunland Group, or a company associated with it, which was responsible for the development, marketing and construction of the project. He also considered that valuations associated with the setting up of the joint venture would be directly relevant to the unimproved value of the land, including a valuation or valuations of the subject properties. [35] Mr Smith is a registered valuer who gave evidence as an expert valuer. However, as he admitted, his expertise does not extend to joint venture agreements and their contents. He said that he has only seen one or two such agreements and none dealing with a project of this magnitude. In those circumstances, I do not consider that Mr Smith's evidence can be relied on to establish that any joint venture agreement that may be in the possession or under the control of the respondent is objectively likely to be directly relevant to the matters in issue in these proceedings. Valuations associated with the joint venture agreements [36] For the same reasons, I am not satisfied that there is an objective likelihood that there are in existence and in the possession or under the control of the respondent valuations associated with the joint venture agreement that would be relevant to the unimproved value of the subject lands as at 1 October 2003. Valuations associated with the Q1 funding package [37] Documents A and B indicate that Sunland Group Limited and the respondent arranged a funding package of $310 million to fund the construction and development of the Q1 building. The existence of that arrangement was notified to the Australian Stock Exchange on 11 July 2003. Mr Smith's evidence was that he considered that to obtain funding of that magnitude feasibility studies would have been undertaken and valuers would have carried out valuations to cover the banks' lending interests. As part of that process, the land component would have been valued. [38] Counsel for the respondent resisted disclosure of any such documents on two grounds –  It is not known who commissioned any such valuations. It is likely that they would have been commissioned by the members of the banking syndicate and therefore the valuations would not be in the possession or under the control of the respondent. -- 10 of 11 -- 11  It has not been established that any such valuations would be relevant to the matters in issue in these proceedings. Valuations made for mortgage or other unknown purposes were not necessarily relevant to determining the unimproved value of the subject lands under the Valuation of Land Act 1944 (Department of Natural Resources and Mines v QNI Limited (2002) QLAC 72). [39] The evidence as to the likelihood that a valuation of the subject land was made for the purpose of the funding package was that given by Mr Smith. Mr Smith said that as part of the valuation process he undertakes for land of this type, he takes into consideration a hypothetical development or project feasibility analysis. Such an approach includes, as one component, a valuation of the land. He considered that a similar process would have been undertaken to put in place the funding package. Mr Smith also said that he had attended a seminar where a representative of a local firm of valuers had announced that they had been able to get a certain level of value on the subject property at a certain time which Mr Smith considered meant that the valuers had a link with the funding package. [40] Although Mr Smith has the relevant expertise to support his opinion as to various valuation methodologies that could be adopted in relation to valuing the subject land, he does not know what processes were associated with this funding package. I do not consider that it has been established that any valuation undertaken in connection with the funding package would be likely to be directly relevant to a matter in issue in these proceedings. A valuation of the subject land for mortgage or other purposes is not necessarily relevant to a determination of the unimproved value of the subject lands as at the relevant date or, more specifically, the development potential of the land and the conditions surrounding such development. Further, there is no persuasive evidence that any such valuation is likely to be in the possession or under the control of the respondent. It may have been commissioned by the financiers. If such a valuation is in the possession or under the control of the respondent and is directly relevant to a matter in issue in the proceedings, it would of course be subject to the duty to disclose. [41] My conclusion is that it has not been established that there is an objective likelihood that the respondent has not complied with its duty of disclosure. The application for an order for a stay of the proceedings is therefore refused. ORDER The application is refused. CAC MacDONALD MEMBER OF THE LAND COURT -- 11 of 11 --