Bond University Ltd v Limgold Pty Ltd, Nista Pty Ltd & Anor [1996] QSC 209

IN THE SUPREME COURT OF QUEENSLAND Writ No. 1824 of 1995 Brisbane Before Mr Justice B. W Ambrose J. [Bond University v. Limgold Pty Ltd & Ors] BETWEEN: BOND UNIVERSITY LIMITED Plaintiff AND: LIMGOLD PTY LTD and NISTA PTY LTD First Defendants AND: THE LONG TERM CREDIT BANK OF JAPAN LIMITED Second Defendant REASONS FOR JUDGMENT - B.W. AMBROSE J. Judgment delivered: 25/10/1996 CATCHWORDS: O. 40 r. 38C RULES OF THE SUPREME COURT - Application to set aside writ of non-party discovery - whether offer to contract relevant for the purpose of valuation where no contract entered into - extent to which tender documents are relevant for the purposes of valuation Counsel: P. Morrison Q.C. for the plaintiff/respondent P. O'Shea for the applicant non-party University of Queensland J. Sheahan for the applicant non-party Griffith University Solicitors: Minter Ellison for the plaintiff/respondent Blake Dawson Waldron for the applicant non-party Griffith University Hearing Date: 11 October 1996 -- 1 of 13 -- IN THE SUPREME COURT OF QUEENSLAND Writ No. 1824 of 1995 Brisbane Before Mr Justice B W Ambrose [Bond University v. Limgold Pty Ltd & Ors] BETWEEN: BOND UNIVERSITY LIMITED Plaintiff AND: LIMGOLD PTY LTD and NISTA PTY LTD First Defendants AND: THE LONG TERM CREDIT BANK OF JAPAN LIMITED Second Defendant REASONS FOR JUDGMENT - B.W. AMBROSE J. Judgment delivered 25/10/1996 These are applications by Griffith University and University of Queensland to set aside writs of third party discovery issued by the plaintiff against them separately on 16 September 1996. The pleadings in the matter are voluminous and complicated. The latest amended statement of claim delivered 27 September 1996 extends over 57 pages and the latest defence and counterclaim placed before me delivered on 12 July 1996 extends over 44 pages. One of the many issues between the plaintiff and the defendants is whether moneys allegedly expended by the plaintiff on Bond University Campus increased the value of that campus. Late in 1995 the second defendant appointed receivers and managers to the assets of the first defendant which included Bond University Campus land and -- 2 of 13 -- 2 improvements. Those receivers and managers offered the campus lands and improvements by sale by public tender. Both applicant third parties submitted tenders for the purchase of the campus land and improvements. Ultimately the tender submitted by University of Queensland was accepted. Needless to say the tender submitted by Griffith University was not accepted. One of the many matters in issue between the plaintiff and the defendants is whether the plaintiff by reason of its alleged expenditure of money in improving Bond University Campus increased the value of that campus at material times. One of the issues which the plaintiff seeks to pursue is whether it has an equitable interest in Bond University Campus to the extent that the value of that campus was increased by virtue of the improvements which it effected to it. The plaintiff has provided the defendants with particulars of moneys allegedly expended on effecting improvements on campus. These particulars indicate the expenditure of something in the vicinity of $11.8 million. The defendants contend in essence that whatever money was spent by the plaintiff in effecting improvements to the campus is not reflected to any significant degree in its value campus at any material time. The plaintiff pleads that the value of the campus was significantly increased by the improvements it effected. Upon this application it was not suggested that the value of the campus at material times could be said to have been increased by precisely the sum of money expended by the plaintiff on improvements. One would think on ordinary valuation principles that to the extent that the market value of the campus to the limited number of purchasers constituting that market was affected in -- 3 of 13 -- 3 any way by reason of the improvements allegedly made by the plaintiff, the measure of that increase may have been by a sum either in excess of the moneys allegedly expended by the plaintiff or by a smaller sum than that expended. Each of the applicants was served with a writ of non-party discovery requiring production of the following documents: "1. All documents (created since 1 August 1993) containing (in whole or in part) any valuation concerning (in whole or in part) the improvements upon the following parcels of land ("the Parcels"): Lot 931 on RP222928 and/or Lot 932 on RP222927 and/or Lot 925 on RP222933. 2. All instructions, working papers, notes, memoranda, correspondence or other documents relating to the valuations referred to in (1). 3. All tenders, invitations, offers or contracts to purchase which relate (in whole or in part) to the said improvements and which were created since 1 August 1993 and which were addressed to Limgold Pty Ltd and/or Nista Pty Ltd and/or The Long Term Credit Bank of Japan, Limited (or any of their servants or agents or receivers or receivers and managers). 4. All notes, memoranda, correspondent or other documents relating to the documents referred to in (3)." Each of the applicants relies upon the same ground or grounds to have the writ of non-party discovery served on it set aside. In addition it is contended on the part of Griffith University that because its tender was not accepted it could not be said that it was party to any sale of Bond University campus and therefore neither its tender nor its documents related to it could be admissible as evidence of value either of the -- 4 of 13 -- 4 campus generally or inferentially as to any characteristic or attribute of the campus. For University of Queensland it is contended that although its tender for Bond University Campus was accepted, the plaintiff still seeks to purchase certain Bond University assets and University of Queensland therefore is concerned to reveal to the plaintiff what might be characterised as commercially confidential information in the circumstances because the plaintiff still seeks to purchase the campus - in spite of the fact that it has been sold to University of Queensland. Among many objections canvassed in support of the application to set aside the writ, it contends that a valuation of all the land including all improvements, may contain a single figure. It is asserted baldly that such a valuation could not relate to a matter in question between the parties to the action "because it is not possible to obtain from such a valuation any assistance on the question as to whether the expenditure by Bond University Limited improved the value of the land." It is contended that the writ if not set aside entirely should be restricted to evidence of valuations and presumably documents relating to them which touch only on the value of the improvements allegedly effected by the plaintiff. It is contended with respect to the documents sought in para. 2 of the schedule that the only documents that should be discovered are those restricted to those parts of any documents which relate only to the valuations (if any) of the improvements effected by the plaintiff. It is objected that the material sought in para. 3 of the schedule could have been obtained on discovery from the defendants and that in the exercise of a proper discretion, that part at least of the writ ought be set aside. Similarly it is objected that para. 4 of the schedule is too wide and should be -- 5 of 13 -- 5 restricted to only those parts of any documents which relate to improvements. The contentions advanced on behalf of University of Queensland were adopted by Griffith University and in particular it is contended that non-party discovery should not issue until "all appropriate steps have been taken inter parties to obtain the documents" and secondly production of the documents remains "necessary to ensure the due conduct of the litigation". It is contended that all invitations and offers must clearly be in the possession of the defendants and that it ought be inferred that the plaintiff has issued the writs against the applicants instead of seeking against the defendants an order for specific disclosure under O. 35 r. 14(1) and that this amounts to an abuse of process. It is further contended that offers of Griffith University and inferentially documents relating to any valuation which supported the offers could be of no weight or utility because the tender by Griffith was not accepted; it is accepted by all concerned that the tender of University of Queensland was accepted. RSC O. 40 r. 38A provides: "38A. A party to a cause may, by writ of non-party discovery, require a person who is not a party to the cause, to produce to the party a document that - (a) relates to the matter in question in the cause; and (b) is in the person's possession or control; and (c) the person could be required to produce at the trial of the matter." RSC O. 30 r. 38D provides: "38D. If, in relation to the production of a document, the respondent - (a) makes a claim of privilege; or (b) otherwise objects to its production; or -- 6 of 13 -- 6 (c) fails to produce it; the applicant for the writ, or the respondent, may apply to a Judge for a determination in relation to the claim or objection or failure to produce the document, and the Judge may make such order as the Judge determines. RSC O. 40 r. 38C provides: 38C. The respondent to the writ may, within 14 days after its service, apply to a Judge to have it set aside or varied and the Judge may make such order as the Judge determines." The first thing to notice is that a document which "relates to the matter in question in the cause" within O. 40 r.38A is not confined to documents of the sort that parties to an action are obliged to disclose to each other. Those documents are ones which are "directly relevant to an allegation in issue in the cause". In my view it would not be correct to construe the words "relates to the matter in question" as meaning "being directly relevant to an allegation in issue". The old non-party inspection rule - RSC O. 35 r. 28 was construed by Douglas J in Carr v. Queensland Newspapers Pty Ltd [1975] Qd R 169, where at p. 173 his Honour applied the test enunciated by Brett LJ The Peruvian Guano Co (1887) 11 QBD 55 at p. 63. His Honour construed the words "relates to the matter in question in the cause" as applying to documents "which it is reasonable to suppose may either directly or indirectly enable the defendant to advance his own case or to damage the case of the defendant". This test was also adopted in Lebon v. Lake Placid Resort Pty Ltd [1995] 1 Qd R 24 at p. 32 by Lee J. There was not and could not be any debate that documents coming within the description of those sort in the writ are in the possession of the applicants. -- 7 of 13 -- 7 Turning then to O. 40 r. 38A(c), the question is what the effect of that constraint is. A non-party is required to produce a document only if he could be required to produce it at the trial of the matter. In my view the constraint contained in O. 40 r. 38A(c) is one directed to sufficiently specifying the documents sought to be produced to avoid the third party having to embark upon a perusal of documents in his possession to determine whether they "relate to" a matter in question in the cause. Very often, if not normally, a third party would not be expected to know what matters are in question in a cause in which that party is not involved. This essentially was the effect given to the old O. 35 r. 28 in William Collin & Sons Pty Ltd v. T & T Mining Corporation Pty Limited [1971] Qd R 427. I refer in particular to the observations of Hoare J at 435F-G where he observed: "It is clear that a party who seeks to have documents in the possession of a third party produced at the trial generally speaking can only enforce such production by a subpoena duces tecem which specifies the documents required. Clearly if the document sought to be inspected pursuant to O. 35 r. 28 were described in such general terms that a subpoena duces tecem should not issue and compliance would not be enforced then very obviously no order would be made under O. 35 r. 28(3)." Similarly, W. B. Campbell J at 441C-D observed: "... it seems to me that the very terms of the rule require that documents to be produced for inspection should be described with a degree of particularity similar to that required to render valid a subpoena duces tecem". With respect to the contention that documents relating to "the added value to Bond University Campus by virtue of improvements allegedly effected to it by Bond University Limited can describe only documents expressly dealing with the cost of those improvements, it seems clear enough that documents which relate to" the issue -- 8 of 13 -- 8 of valuation in dispute between the parties for the purpose of discovery and inspection are not confined to documents which may constitute relevant evidence in the dispute. In Carr v. Queensland Newspapers (supra) at p. 175 Douglas J said: "I do not subscribe to the argument that 'a document ... which he could be required to produce at the trial' in O. 35 r. 28(1) necessarily means admissible documents. It simply means what is said. A person may well be compelled to produce a document at a trial, and the document ultimately may be held to be inadmissible. The matter of relevancy may have to be determined after production." Stated shortly it is my view that the documents required to be produced under O. 40 r. 38A are those which "relate to" a matter in issue between the parties to the action in the widest sense of documents which might put a party on a train of inquiry and are not limited to documents only amounting to or constituting relevant evidence. The constraint that such documents are those which a person "could be required to produce at the trial" simply refer to a sufficient identification or specification of documents of the sort required to compel production on subpoena to be contrasted with those judged by a party to the action to be relevant and who presumably has a more precise knowledge of the issues in the action than does a non-party. The contention that the application for third party discovery is premature because all possible steps have not been taken by the plaintiff against the defendants to obtain at least some of the documents, copies which at least must be in their possession does not in my view find support in the authorities. In Yaramin Pty Ltd v. William Murphy Senior & Ors (unreported 12/2/87) Ryan J referred to observations in William Collin & Sons v. T & T Mining Corporation Pty Ltd (supra) and observed that that case did not suggest that interrogatories had to be delivered between the parties to an action before an order for third party discovery could be made. He expressed -- 9 of 13 -- 9 the view that the real point in that case was that third party procedure ought not be permitted to facilitate one party going on a fishing expedition in the hope of obtaining material to help make out a case. With respect to the contention of Griffith University that valuation material in possession of Griffith University relating to an offer made to purchase Bond University Campus would not be admissible because the offer had not been accepted and therefore would not constitute admissible evidence of a sale and consequently would be admissible - based upon the decision in McDonald v. Federal Commission of Land Tax (1915) 20 CLR 31, it is my view that this contention is based upon the premise that it is only document which may constitute admissible evidence which can be said to "relate to the matter in question". For reasons I have already expressed this is not the test of production under the current rule - just as it was not the test under the old O. 35 r. 28 - vide Carr v. Queensland Newspapers (supra). There is authority for the proposition in any event that some evidentiary use may be made of offers in some circumstances - vide Goold v The Commonwealth (1993) 114 ALR 135. See also Henderson v. Amadio (No. 1) (1995) 62 FCR at 122 B - per Heerey J. In any event the experienced valuer retained by the plaintiff has expressed the view that public institutions of the sort making tenders for Bond University Campus would be quite unlikely to submit tenders for the purchase of that campus without first obtaining professional and/or technical advice in relation to the value of the campus which would include a valuation of capital improvements and a financial analysis illustrating income and expenditure of the campus for some years after it opened. That valuer has expressed the view that it is important to inspect documents of that -- 10 of 13 -- 10 kind to determine the extent to which the plaintiff's expenditure in respect of the campus contributed to the value that bidders were prepared to pay for the campus or alternatively to determine how much rent a person could viably pay to rent that campus. He expressed the view that financial modelling carried out by the third party applicants must have involved an assessment of how each would benefit from past and perhaps continuing presence of the plaintiff. The material suggests that it is quite unlikely that the defendants will have any documents in their possession or control of importance to the plaintiff apart from the tender document with respect to University of Queensland the final contract which it entered into with the successful tenderer. The basic proposition for which the applicants contend that valuation documents relating to the campus generally and not those conferred only to the improvements effected by the plaintiff cannot be relevant to any matter in issue in the action in my view is insupportable. I find it inconceivable that any determination of the value, if any, added to the Bond University Campus by improvements effected by the plaintiff over a period of years at a cost of $11.7 million will not involve a consideration of the value of the University Campus at the time it was offered for sale by the receivers and sold to University of Queensland. It may well be of course that the value of the improved campus at different times will be only one of the matters to be considered and analysed. Another no doubt will be the nature of the improvements and the moneys spent to achieve them. Perhaps the most basic valuation exercise might be to accept the value of the campus in its improved state and then arrive at what that value might be at material times had the improvements not been effected. -- 11 of 13 -- 11 There are quite conventional valuation exercises regularly performed with a view to determining the unimproved value of land by taking its improved value established by comparable sales and then analysing the value of improvements. In my view the contention advanced on behalf of the applicants that documents relating to the improved value of Bond University Campus do not relate to the issue between the plaintiff and the defendants in this action because that is not one of the ultimate facts in dispute is ill-founded. While the improved value may not be an ultimate fact in issue it seems almost inescapable that upon a properly conducted valuation exercise it will certainly be one of the intermediate facts to be established in the course of arriving at what, if any, value those improvements effected by the plaintiff contributed to its ultimate value. In my view upon a proper reading of schedule 1 to the writ of non-party discovery, the applicants would not be required to produce for inspection documents which are wholly unrelated to any valuation in their possession of the Bond University Campus or aspects which are taken into account in arriving at that valuation. To the extent that a single document contains matters quite unrelated to either the valuation or matters upon which the valuation is based, those parts of the documents would of course not require production under the writ. Although I have reservations about qualifying the specific specifications in schedule 1 to the writ, having regard to the concerns expressed by University of Queensland, I would direct that the schedule be amended so that with respect to para. 1 the words "In respect of" inserted at the beginning and at the end add the words "those parts which contain the said valuation or relate thereto". With respect to para. 2, the words "In respect of" should be added at the beginning and at the end the -- 12 of 13 -- 12 words "those parts which relate thereto". With respect to para. 3, the words "In respect of" should be added at the beginning and at the end after the word "improvements" the words "and or parcels those parts which contain the said tenders, invitations, offers, contracts or relate thereto". With respect to para. 4 the words "In respect of" should be added at the beginning and at the end the words "those parts which relate thereto". Subject to the respondent giving a Fielder v. Gillespie to protect the confidentiality of documents produced by the applicants. I decline to set aside either the writ of non-party discovery directed to Griffith University issued on 16 September 1996 or the writ for writ of non-party discovery directed to University of Queensland and issued on 16 September 1996. -- 13 of 13 --