Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd

REASONS FOR JUDGMENT 1 This judgment is to be read with the judgment delivered in this matter on the same day: Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (No 4) [2013] FCA 1044 It deals with the application of the second respondent (Heathgate) for further discovery, which was heard and determined at the same time as the application of the applicant (Alliance) for further discovery addressed in that judgment. 2 As indicated in that judgment, I have dealt with the Heathgate application in a separate judgment. I adopt the substantive content of that judgment set out under the headings "Background", "Pleadings" and "Principles" and I will also use the abbreviations used in that judgment without repeating or redefining them. 3 On 6 August 2013, pursuant to Order 5 of the orders made on 24 July 2013, Heathgate by its solicitors notified Alliance of additional categories of further discovery sought by Heathgate from Alliance following from the SSC. There is now only one such category in dispute. 4 Heathgate now seeks an order for discovery of the remaining category of documents in contention. They are documents referring to or recording Alliance's ability or willingness to do equity or make substantial restitution in respect of the expenditure by Quasar or Heathgate on EL 2874 since 30 August 2002, or to make any just allowances on account of their services and expenditure to date (as referred to in subpara 185(a) of the H-Def). At one point, Heathgate by letter of 19 September 2013 also sought further discovery of a category of documents from Alliance relating to the circumstances in which, and the time at which, Alliance became suspicious that Quasar had not disclosed to Alliance information concerning the prospectivity of the Paralana Plains area: see para 88(c) of the reply of Alliance to the H-Def. Heathgate asserted that, in any event, Alliance could not succeed in its claim because the discretionary relief which it sought should be refused on grounds of laches or election or waiver or acquiescence or affirmation. Issues between Heathgate and Alliance on that category, and including whether that part of the Alliance reply had been properly particularised, have now been resolved between the parties and it is no longer necessary to address them. 5 In my view, the disposition of the Heathgate application is quite straightforward. 6 The H-Def pleads at para 185(a) that Alliance is not entitled to the relief sought because it has not offered to, and is not in a position to, do equity or make substantial restitution in respect of the expenditure by Quasar or Heathgate on EL 2874 since 30 August 2002 (the date of commencement of the JV), or to make any just allowance on account of their services and expenditure to date. Alliance accepts in its reply that it has not offered to make any allowances on account of, or to make substantial restitution in respect of, the expenditure or such services provided by Quasar or Heathgate. Its reply does not specifically address whether Alliance is willing or able to make such allowances or to make substantial restitution as claimed in the event that the Court accepts Alliance's case in a general way. 7 The basis of Alliance's opposition to the application is set out in the affidavit of Mr Stents of 13 September 2013. He confirms that there is no agreement, arrangement or understanding concerning Alliance's ability to do equity or to make substantial restitution in respect of the expenditure by Quasar or Heathgate on EL 2874. He adds that the means by which any restitution is to be paid by Alliance on the final determination of this proceeding in Alliance's favour (beyond financial records maintained in the ordinary course of Alliance's business) is also not the subject of specific documentation and depends upon the Court making an order requiring it to make such restitution. 8 In my view, the documents sought by Heathgate are directly relevant to the issues raised by the pleadings, namely whether Alliance is entitled to the equitable relief it seeks. Given the state of the pleadings, that is a matter which Alliance would probably in its evidence address. That is, whether it can "pay the price" (the expression used by Heathgate in its written submissions) for the discretionary relief which Alliance seeks is a matter in issue, and which the Court will have to address in the event of the Court otherwise accepting Alliance's case. 9 The discovery sought is targeted and narrow. There is nothing to suggest that it would be burdensome. It will facilitate the just resolution of the proceedings in an expeditious way, as it will enable that issue, which obviously Heathgate and Quasar wish to raise, to be addressed by evidence in the course of the proceedings rather than by a subsequent hearing. 10 I accept that, as Mr Stents says, there are no documents of Alliance specifically addressing the matters referred to above. However, that does not mean that it has no records as to its capacity to do so. They should not be ordered to be provided other than in a specific way. In my view, its financial records for the last few years would clearly not be difficult to procure and, on the basis of Mr Stents' affidavit, would be the best evidence of its capacity "to pay the price" for the relief which it seeks. That is, of course, not to foreclose before trial Alliance assembling further evidence on the topic. However, at present, I think that is an appropriate burden of disclosure to impose upon Alliance. 11 I accept, as counsel for Alliance said in submissions, that the Court may grant the relief sought by Alliance conditional upon Alliance complying with certain conditions which would require the appropriate adjustment in equity for the expenditure which Quasar and Heathgate have incurred in the exploration or development of EL 2874. The Court might do so by allowing a period of time for Alliance to meet those conditions. In a matter such as this, where the pleadings raise the issue as to whether that "price" may involve accounting for a very considerable expenditure by Quasar and Heathgate (perhaps extending into other areas of the Paralana Plains), it is at least arguable that the Court would not simply grant the equitable relief sought (assuming findings otherwise are made to support it) conditional upon Alliance meeting certain conditions, without having some basis for confidence that those conditions might be met in a timely manner. That is a matter for argument. I observe that there is no order that the hearing of this matter should be staged so that the issue as to the appropriate relief, depending on the findings otherwise made on the principal issues should be heard separately and after the hearing and determination of those issues. 12 Accordingly, in my view, Alliance should be ordered to provide verified discovery of its audited financial statements for the financial years ended 30 June 2012 and 30 June 2013 (and if the financial statements for the year ended 30 June 2013 are not yet audited, management accounts for the year ended 30 June 2013) and in addition its management accounts as they become available for the period 1 July 2013 to 30 September 2013. That is not a burdensome task so I will allow 14 days for its compliance. As discovery is an ongoing obligation, I observe that the quarterly management accounts for each succeeding quarterly period should also be discovered as they come into existence. 13 As noted, Alliance has agreed after the submissions on the application of Heathgate to provide to Heathgate discovery of documents in reply relating to when it acquired a suspicion or information to support its assertion that Quasar and Heathgate did not convey to it information which they ought to have conveyed to it in the period leading up to the JVEA, and to provide particulars of those paragraphs of its reply. Consequently, no further orders are sought in that regard. 14 As Alliance opposed the making of the orders which I now propose to make, I also order that Alliance pay to Heathgate its costs of the application. I note that Quasar appeared in support of Heathgate's application, but did not make its own application for that discovery. In my view, it is appropriate to make no order in favour of Quasar on this application. So that there is no concern about the entitlement of Quasar to provide Alliance with the documents to be discovered, I record my view that in the circumstances of this case it would be appropriate to do so. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.