Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd [2001] QSC 259

4:'12- ~ \O· State Reporting Bureau Ol,·Z.S-4 ° · ~ .- ( Queensland Government ~ Department of fust!ce .rnl Atiorncy-Gfl,.,ral Transcript of Proceedings Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION HELMAN J No 1688 of 1991 EQUUSCORP PTY LTD and RURAL FINANCE PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) and GLENGALLAN INVESTMENTS PTY LTD REVISED COPIES ISSUED State Reporting Bureau Date}3; · 0 f First Plaintiff Second Plaintiff Defendant And in 1689, 1690, 1691, 1692 of 1991, 9485 of 1998, 5061 of 2000, and 4061 of 2001. BRISBANE .. DATE 18/07/2001 JUDGMENT Floor, The Law Courts, Geo1"9e Street, Brisbane, a. 4000 Telephone: (07) 3247 4360 Fax: (07) 3247 5532 1 -- 1 of 15 -- 18072001 kmk (Helman J) HIS HONOUR: There are sixteen applications before me. First there is a group of six, by the plaintiffs in each of proceedings Nos. 1688, 1689, 1690, 1691, and 1692 of 1991, and in proceeding No. 9485 of 1998. In each the plaintiffs seek orders that the defendant's defence and counterclaim be dismissed and that judgment be entered for the plaintiffs, or alternatively a declaration that any claimed privilege 1 10 from disclosure has been conclusively decided against the 20 defendant and an order that the defendant comply with an order for further and better disclosure I made on 26 September 2000 by providing proper disclosure, including disclosure and production for inspection of documents identified in Part 2 of the list of documents provided by 30 the defendant. Secondly, there is an originating application, No. 4061 of 2001, by the plaintiffs in the six proceedings I have mentioned against Mr David Richard Barry, an associate of the defendants in the six proceedings, for a declaration that he has no valid claim to without-prejudice privilege with respect to the documents the subject of the disclosure orders made on 26 September 2000. (In the originating application proceeding No. 1693 of 1991 is erroneously included and No. 1691 of 1991 is erroneously omitted. The application also refers to an order for disclosure made in proceeding No. 5061 of 2000 on 26 September 2000, but no such order was made.) 2 JUDGMENT 40 . 50 60 -- 2 of 15 -- 18072001 kmk (Helman J) Thirdly, there is an oral application, made on 5 June 2001 by the plaintiffs in the six proceedings, under rule 388 of the Uniform Civil Procedure Rules 1999 that the filed copy 1 of an order I pronounced on 26 September 2000 in proceeding 10 No. 5061 of 2000, begun on 9 June 2000, by the defendants in the six proceedings against Arthur Andersen, a firm of chartered accountants, by way of originating application be amended. The order I pronounced was that an application for an interlocutory injunction be dismissed, but the order as drawn up and filed showed the originating application to have been dismissed. The plaintiffs then seek orders for the production for inspection by them of documents referred to in a writ of non-party discovery issued on 29 June 1999 in a proceeding, No. 3399 of 1991, in the District Court at Brisbane against Mr Kenneth Gordon Schroder, another associate of the defendants. Finally, there are applications by each of the defendants in the six proceedings and Mr Barry, that an affidavit of Ms Susan Forrest sworn on 8 May 2001 and filed in support of the plaintiffs' applications be removed from the file and destroyed on the grounds that it is "scandalous and/or irrelevant and/or oppressive". In the reasons I gave for making the orders of 26 September 2000 I briefly explained the history of the six proceedings and the nature of the applications then before me. I shall not repeat that explanation here. I should mention for completeness, however, that the originating application No. 3 JUDGMENT 20 30 40 . 50 60 -- 3 of 15 -- 18072001 kmk (Helman J) 5061 of 2000 proceeded pursuant to an amended application filed on 7 July 2000, but the amendment is not material to any issue now before me. In each of the six proceedings I made an order that the defendant within fourteen days provide further and better disclosure of certain specified documents "save for David Richard Barry". The reason for the exclusion of Mr Barry's documents was that he was not a party to the six proceedings and so could not be made subject to the order for further and better disclosure. In the context of the brief discussion I had with senior counsel for the plaintiffs, which is recorded at p.18 of the transcript of 26 September 2000, it is clear that what was in contemplation was that there would be some documents in the categories the subject of the order that would relate solely to Mr Barry. The documents the subject of the order were in the possession of Arthur Andersen but were under the control of the defendants. The question of the effect of any joint control of documents on the rights of the plaintiffs in the six proceedings was not raised for consideration last year, but has now been raised, as I shall explain later. There were appeals against the orders I made on 26 September which were dismissed by the Court of Appeal on 30 March this year. Lists of documents, all of which are contained in files still in the possession of Arthur Andersen, were 1 10 20 .. 30 40 . 50 provided on behalf of the defendant in proceeding No. 1688 60 . 4 JUDGMENT -- 4 of 15 -- 18072001 kmk (Helman J) of 1991 (list dated 17 April 2001), and on behalf of the defendants in the other five proceedings (lists dated 18 April 2001). The documents listed were the same in each 1 case. All of the documents are in the joint control of the 10 six defendants and Mr Barry. No issue arises as to the eighty-eight documents in Part 1 of the schedule, but each defendant objects to producing the documents in Part 2 on three grounds. The Part 2 documents were the only ones in issue before me, although the plaintiffs' applications were drawn more widely than that. The first ground of objection is that the documents were not the subject of the order of 26 September 2000. The order excluded Mr Barry's documents, so it was argued that exclusion applied not only to documents in Mr Barry's exclusive control, but also to those in his control jointly with others. Such a result was certainly not contemplated when the order was made, nor do I think the order can be construed in that way. The exclusion, properly understood, applies only to documents under Mr Barry's exclusive control. The second ground is that the documents are protected by without-prejudice privilege. This issue was before me last year but without reference to particular documents. The Part 2 list in each case shows forty-eight documents, forty-seven of which are dated. The earliest date shown is 8 March 1993 and the latest is 4 October 1993. The one 20 30 40 so undated document is a file note of discussions shown as a 6 0 5 JUDGMENT -- 5 of 15 -- 1 18072001 kmk (Helman J) document "between" one dated 12 May 1993 and another dated 20 May 1993 which, in the absence of other evidence, leads me to conclude that it came into existence in May 1993. Although the issue of without-prejudice privilege was raised 10 and determined last year, the defendants are not precluded from raising it again since my decision last year was interlocutory only. There is, however, nothing now before me which leads me to conclude that the forty-eight listed documents are protected by without-prejudice privilege. I see no reason to doubt the correctness of my conclusion, reached in September last year, that the relevant dispute did not arise until early 1994. It follows that there was no merit in the second ground of objection. The third ground of objection arises from Mr Barry's joint control of the documents. The defendants rely on a rule of practice applied in the Court of Chancery to the production for inspection of documents in the possession or power of a party. The rule was that the right to production and inspection of documents did not apply to documents which were not in the sole possession or power of the party to the suit who was called upon to produce them, but were in the party's possession or power jointly with some other person who was not before the court: Kearsley v. Philips (1883) 10 Q.B.D. 465, in which the rule explained in Murray v. Walter (1839) Cr. & Ph. 114; 41 E.R. 433 was applied. Kearsley v. Philips was followed in Coomes & Son v. Hayward (1913) 6 JUDGMENT 20 , 30 40 . 50 60 -- 6 of 15 -- 18072001 kmk (Helman J) 1 K.B. 150, in a case arising on an application for inspection of premises, and in Chantrey Martin v. Martin [1953] 2 Q.B. 286 at pp.291-292. See also Biala Pty Ltd v. 1 Mallina Holdings Ltd [1990] W.A.R 174. The effect of the 10 rule was that while it was necessary to include in an affidavit of documents all documents in which the party had any possession or property jointly with others, or even in which the party had no property at all if they were in the party's corporeal possession, the court would not order such documents to be produced: see the discussion by Maxwell J. in Turner v. Davies [1981] 2 N.S.W.L.R. 324 at p.325. To the rule there was, however, the rider that the court had the power to allow an interrogatory in such cases to be administered by the party seeking inspection, asking the party from whom the inspection was sought what were the contents of the documents the subject of the objection, and requiring copies of them to be exhibited to the answer: see Hadley v. McDougall (1872) 7 Ch.App. 312, and Rattenberry v. Munro (1910) 103 L.T. 560. Under rule 211(1) of the Uniform Civil Procedure Rules, a party to a proceeding in which there are pleadings has a duty to disclose to each other party each document "in the possession or under the control of" the first party which is directly relevant to an allegation in issue in the pleadings. That rule may be contrasted with that applying in England since 1964 and in other Australian jurisdictions, 20 30 40 50 which provides for a duty to discover documents that are or 60 7 JUDGMENT -- 7 of 15 -- 1 18072001 kmk (Helman J) have been in the possession, custody, or power of the party upon whom the duty falls: see the discussion by Zeeman J. in Langford v. Cleary (1993) 2 Tas.R. 1. It is most certainly arguable that there is no material difference in meaning 10 between the expression "in the possession or under the control of ... 11 and the expression "in the possession or power of ... ", and so the rule applied in Kearsley v. Philips survives in Queensland. Against that, it may be argued that the control referred to in the Queensland rule is not necessarily exclusive control: see e.g., in the context of another provision, s.264(1) of the Income Tax Assessment Act 1936 (Cth), the remarks of Mason J. in Federal Commissioner of Taxation v. Australia and New Zealand Banking Group Ltd (1979) 143 C.L.R 499 at pp.533-534. In my view the latter argument is the more persuasive one, particularly as rule 212(1) sets out an apparently exhaustive list of documents to which the duty of disclosure does not apply, and the list does not include documents in the joint possession or control of the party having the duty to disclose documents and one who is not a party to the proceeding: 11 (a) a document in relation to which there is a valid claim to privilege from disclosure; (b) a document relevant only to credit; (c) an additional copy of a document already disclosed, if it is reasonable to suppose the additional copy contains no change, obliteration or other mark or feature likely to affect the outcome of the proceeding." It would follow from that conclusion that the defendants' objection, which is based on an assertion of joint control, 8 JUDGMENT 2 30 40 . 50 60 -- 8 of 15 -- 18072001 kmk (Helman J) cannot be sustained. But if that is not so, the plaintiffs can fall back on the rider to the rule applied in Kearsley v. Philips. They can rely on the discretionary power conferred on the court by rule 223(1) (a) which provides that the court may order a party to a proceeding to disclose to another party a document or class of documents by delivering to the other party in accordance with Part 1 of Chapter 7 of the rules a copy of the document or of each document in the class. In exercising that discretion the court must, I think, consider carefully whether there would be any unfairness to the person not a party to the proceeding if the order were to be made. In this case, Mr Barry has been made a party to an originating application, so that any claim he might have to without-prejudice privilege may be considered. He asserts such a claim, but in general terms - from which I draw the inference that his claim is, in essence, the same as those of the defendants. His claim must, then, on the evidence before me, fail for the same reason as theirs do. Accordingly, I see no proper basis for refusing to exercise the discretion provided for in rule 223(1) (a) in these proceedings. I am not persuaded that the plaintiffs are entitled to the orders that the defendants' defences and counterclaims be dismissed, and that judgments be entered for the plaintiffs. The issues raised by the defendants were legitimate ones calling for proper consideration, so that the drastic step 9 JUDGMENT 1 10 20 30 40 . 50 60 -- 9 of 15 -- 18072001 kmk (Helman J) of bringing the proceedings to an end in the way contended for is not warranted. There is no reason to supplement the orders I propose making under rule 223(1) (a) with the declarations sought against the defendants. I shall invite further submissions on the form of the orders under rule 223(1) (a). I am not persuaded that the declaration sought against Mr Barry should be made. He is a defendant in a discrete proceeding in the District Court, No. 3397 of 1991, in which claims are made against him similar to those made by the plaintiffs in this court in the six proceedings. Bearing in mind that the District Court is seized of the proceeding against Mr Barry, I think it undesirable that I make a declaration of the kind sought. I need go no further, and should go no further, than I have: deciding whether on the evidence before me concerning Mr Barry's claim to without-prejudice privilege there is any reason to withhold the discretionary remedy the plaintiffs are otherwise entitled to. The application by the plaintiffs in the six proceedings in this court against Arthur Andersen arises from an undertaking given on behalf of the latter by its solicitors to the solicitors for the plaintiffs in a letter dated 13 June 2000. The undertaking was to produce documents in the possession of Arthur Andersen for inspection within forty- eight hours of the failure of the plaintiffs to obtain the 10 JUDGMENT 1 10 2~ 30 40 . 50 60 -- 10 of 15 -- 18072001 kmk (Helman J) injunction they sought before me in proceeding No. 5061 of 2000. They did fail, as I have related, but the documents were not produced pending the hearing and determination of 1 the appeal to the Court of Appeal from my order refusing the 10 injunction. The appeal having failed, inspection of the documents was to take place, by agreement between the solicitors for the plaintiffs and the solicitors for Arthur Andersen, on 17 April 2001. Some of the documents were produced for inspection on that day, but others were not because after the agreement was reached but before 17 April, the solicitors for the defendants in the proceedings in this court and Mr Barry notified Arthur Andersen that they asserted a claim to without-prejudice privilege in respect of the documents not produced. On 26 April 2001, the solicitors for Arthur Andersen wrote to the solicitors for the plaintiffs undertaking to produce the disputed documents should the defendants' claim to without-prejudice privilege fail "subject to any further application to restrict Arthur Anderson [sic] from producing the documents". The plaintiffs nonetheless proceeded to make their application against Arthur Andersen for an order that it produce within seven days, for inspection by the plaintiffs, all of the documents referred to in the writ of non-party discovery issued in the District Court proceeding, No. 3399 of 1991, including the documents referred to in a list annexed to the application. The first obstacle facing the plaintiffs is that the originating application has, as matters stand, been 11 JUDGMENT 20 30 40 . 50 60 -- 11 of 15 -- 1 18072001 kmk (Helman J) dismissed, and the original applicants, the defendants in the six proceedings in this court, do not seek an order under rule 388. But any difficulty arising from that circumstance could, no doubt, be overcome by permitting the 10 plaintiffs to begin a fresh proceeding by way of originating application. Of more moment, however, is the difficulty that what the plaintiffs seek is an interlocutory order in this court to apply to a proceeding in the District Court. I can see no justification for permitting such an unorthodox procedure. The writ of non-party discovery was issued, and the undertakings were given, in the District Court proceeding against Mr Schroder, and the District Court is the place to seek any relevant interlocutory relief. For that reason alone, I should refuse the orders sought, but I should add that I see no reason from what is before me to doubt Arthur Andersen's bona fides in giving the undertaking recorded in their solicitors' letter of 26 April 2001. The remaining applications are those of the defendants and Mr Barry concerning Ms Forrest's affidavit. I made a preliminary determination with directions of those applications on 16 May 2001 (see the transcript at p.85 ff.) and I do not propose to deal with them any further. The various applications were fully argued on 5 June 2001 and any further evidence the parties wished to put before me was adduced. 12 JUDGMENT 20 30 40 . 50 60 -- 12 of 15 -- 18072001 kmk (Helman J) 1 HIS HONOUR: The order in proceeding No 5061 of 2000 will be that the applications be dismissed, and I order that the 10 applicants pay to the respondent its costs of and incidental to the applications on the indemnity basis. MR COUPER: If I can formalise it, your Honour, we will not seek to inspect the documents of Arthur Andersen until your Honour has made a formal order in the Supreme Court proceedings. HIS HONOUR: In proceeding No. 1688 of 1991, I order that the defendant deliver to the plaintiffs within fourteen days a copy of each of the documents in Part 2 of the defendant's list of documents dated 17 April 2001. MR COUPER: The plaintiffs will not seek to inspect the Arthur Andersen documents before that fourteen day period nominated has expired, your Honour. 13 JUDGMENT 20 30 40 . 50 60 -- 13 of 15 -- 18072001 kmk (Helman J) HIS HONOUR: In each of proceedings Nos. 1689, 1690, 1691, and 1692 of 1991, and in proceeding No. 9485 of 1998, I order that the defendant deliver to the plaintiffs within fourteen days a copy of each of the documents in Part 2 of the defendant's list of documents dated 18 April 2001. HIS HONOUR: As to the costs as between the plaintiffs and the defendants, it seems to me that the form of Ms Forrest's affidavit was such that it did lengthen the time it took to dispose of the applications to the point where, although I think the plaintiffs should have their costs of the applications, I think they should not have the costs of the first day, that is 16 May, and in fact should pay to the defendants their costs of 16 May. So that is what I propose ordering. HIS HONOUR: In each of proceedings Nos. 1688, 1689, 1690, 1691, and 1692 of 1991, and No. 9485 of 1998, I order that the plaintiffs pay to the defendant the defendant's costs of and incidental to the hearing of the applications on 16 May 2001. The order in proceeding No. 4061 of 2001 will be that the applicants pay to the respondent his costs of and incidental 14 JUDGMENT 1 10 20 30 40 . 50 60 -- 14 of 15 -- 18072001 kmk (Helman J) to the hearing of the applications on 16 May 2001. No further order as to costs. 1 In each of proceedings Nos. 1688, 1689, 1690, 1691, and 10 1692 of 1991, and No. 9485 of 1998, I order that the defendant pay to the plaintiffs their costs of and incidental to the plaintiffs' application, to include their costs of bringing originating application No. 4061 of 2001, but excluding their costs of the hearing on 16 May 2001 and excluding the costs ordered to be paid by them to the respondent to originating application No. 4061 of 2001. 15 JUDGMENT 20 30 40 . 50 60 -- 15 of 15 --