Auspine Ltd v H S Lawrence & Sons Pty Ltd

Subparagraphs 84A.3 and 84A.4 then set out the allegations that crystallise Auspine's cause of action. They plead:

"84A.3 There were changes in the circumstances of Cowells' Business material to the sale of the Shares in the period between the due diligence and the Share Sale Agreement ("the Material Changes"). 84A.4 The Material Changes are contained in the documents described in paragraphs 68, 69, 70, 71 and 72 hereof and are as described in paragraphs 74 and 75 hereof."

There then follows a plea that both respondents were under an obligation, but failed, to disclose to Auspine the material changes, and that, as a consequence, Auspine has suffered loss. Both respondents have denied liability.

5 Proceedings in this matter commenced as along ago as 27 March 1997 when Auspine filed its Application in this Court. Since then the progress of the matter has been held up because of interlocutory issues and the apparent inability of the litigants to identify and agree upon the issues that are in dispute. On 12 November 1997, the Court ordered that each party was to file and serve its verified list of documents by 30 January 1998. Now, in the last quarter of 1999 the parties are still in dispute about the adequacy of Auspine's discovery. 6 A directions hearing was held on 3 February 1998 (by which date the parties should have made discovery). However, no mention was made of that subject; the time taken at that hearing was devoted to fixing a date to hear argument on the respondents' notice of motion in which an order was sought that the applicant's amended statement of claim be struck out. The matter was subsequently before the Court, either on argument on the above motion or on directions hearings, on 3 March (when the notice of motion was argued), on 31 March (when judgment was delivered), and on 5 May on a directions hearing. There does not appear to be any substantive discussion on the subject of discovery by any party in the associate's reports of listing for those dates. 7 On 24 August 1998, Auspine filed a notice of discovery, requiring discovery of documents by the respondents with verification within fourteen days. Although Auspine had not at that date given discovery, it did file its verified list of documents on 9 September and, coincidentally, the respondents filed their verified list on the same date. 8 A directions hearing was held on 30 October 1998. Seven weeks or so had elapsed since the filing of Auspine's verified list of documents, yet no specific complaint of any inadequacies was raised on behalf of the respondents on that occasion. A passing reference was made to the subject; the transcript reveals that counsel - purportedly counsel for Auspine - said: "We don't see there being much merit in placing any time limitation in relation to any application for further and better discovery; … there may be documents that come to light at some stage during the course of the preparation of this case which may necessitate an application and we don't feel that parties should be hamstrung by any direction requiring them to put on an application within a certain specified period of time."

In fact, it might have been counsel for the respondents who made that statement for the transcript records that it was counsel for Auspine who said in response "we don't cavil with that, your honour". In any event, it seems safe to infer that both counsel were intimating that future work might generate more discoverable documents. The further inference is that neither side was then complaining about the adequacy of the other side's discovery. Support for such a conclusion can be found in the affidavit of 12 October 1999 of Norman Lucas who has stated:

"From 23 December 1998 onwards the Respondents have asserted and continue to assert that the Applicant has failed to give full and proper discovery in these proceedings." 9 Mr Lucas is a solicitor in the employ of Messrs Clayton Utz, the solicitors for the respondents. Subject to the supervision of a Mr Klimt, the solicitor on record for the respondents, he has responsibility for the daily carriage of this matter. This passage in his affidavit indicates that over three months had passed since Auspine gave discovery before the respondents raised any complaints about its adequacy. 10 Auspine's list of discovered documents was very extensive - it extends over 150 pages and lists many thousands of documents. Even so, having regard to the fact that discovery was long overdue, one would have thought that by 30 October 1998 seven weeks would have been sufficient time within which to digest some (if not all) of the information that Auspine had supplied in its discovery. One would have thought that the respondents might have been in a position to signal doubts about the adequacy of the discovery on that date, even though they may not have completed their inquiries. Instead, the directions hearing was devoted to fashioning a time-table for the parties to file and serve their witness statements and experts' reports. Having regard to that timetable, the next direction hearing was listed for 16 February 1999. 11 The parties filed supplementary lists of documents. Auspine did this on 8 January 1999 and also on 10 March 1999; the respondents did so on 15 February. Auspine's two supplementary lists added a further 300 documents to its list of discovered documents. 12 On 16 February 1999, the respondents raised in Court questions about the adequacy of Auspine's discovery. They also sought extensions of time within which to comply with earlier orders for the filing of their witness statements and experts' reports. It was my understanding, at that stage, that Auspine had filed and served most (if not all) of its statements and reports but the respondents had only filed one or two witness statements.

13 On 18 March 1999, the respondents filed a notice of motion in which they sought an order that Auspine file and serve "an affidavit in compliance with Federal Court Rules, Order 15 rule 8 in respect of the following documents." There then followed a list of thirty documents (or group of documents). However, on 6 May 1999, an amended notice of motion was filed whereby the documents that were sought were reduced from thirty to twenty-four. Order 15 rule 8 is the provision in the Rules of Court that deals with the subject of particular discovery. It provides as follows: "Where, at any stage of the proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any matter in question in the proceeding may be or may have been in the possession, custody or power of a party, the Court may order that party: (a) to file any affidavit stating whether that document or any document of that class is or has been in his possession, custody or power and, if it has been but is not then in his possession, custody or power, when he parted with it and what has become of it; and (b) to serve the affidavit on any other party." 14 The respondents' original notice of motion had been supported by the affidavit dated 18 March 1999 of Mr Lucas ("the March affidavit"). Mr Lucas exhibited to his affidavit copies of correspondence between the solicitors for the parties showing that the respondents' request for particular discovery was activated, in part, by the contents of the witness statements and expert's report that had been earlier filed by Auspine. In particular, the letter from Messrs Clayton Utz dated 2 February 1999, seeking discovery of twenty-two documents (or group of documents) was the precursor to its subsequent notice of motion: eight more documents were added when the notice of motion was prepared. 15 Messrs Phillips Fox, the then solicitors for Auspine, responded to Messrs Clayton Utz's letter of 2 February by letter dated 16 February, saying that of the twenty-two requests, nine had already been discovered, seven would be discovered within fourteen days, and instructions were needed in respect of five. The last of the twenty-two documents was, in fact, a group of twelve different documents. As to these, Messrs Phillips Fox said that: "The documents sought in paragraph 22 have either been discovered or are not in my client's custody, power or control. I am yet to receive instructions in relation to paragraphs 22(g), (h) and (i)".

By letter dated 3 March 1999, Messrs Phillips Fox wrote Messrs Clayton Utz addressing only those documents in respect of which they had said in their letter of 16 February that they were taking instructions. Their answers can be summarised in this fashion. As to three of the requests they said that "the only document relevant to this request will be discovered as document no 288 of the applicant's forthcoming supplementary list of documents". As to an identified set of minutes they wrote that they "were destroyed in the course of moving offices at Auspine Building Centres in or about September 1998" and, as to the balance of the documents that were sought by the respondents, the solicitors for Auspine wrote:

"No documents of the nature sought exist." 16 As I have earlier noted, Auspine's second supplementary list of documents was filed on 10 March 1999 and on the same day, a copy was posted to the respondents' solicitors. The respondents were not satisfied. Their solicitors wrote on 17 March 1999: "Our clients do not accept your client's assertions that certain documents do not exist or that your client has properly complied with its obligations on discovery."

In addition the respondents' solicitors enlarged the scope of the documents in respect of which particular discovery was sought by writing:

"In addition to the categories of documents set out in our letter of 2 February 1999, your client has also not given discovery of the following:- ……".

There then followed a list of nine further documents or group of documents. Messrs Clayton Utz concluded their letter by writing:

"In light of the inadequacy of your client's discovery, our clients put you on notice that they will not be able to serve their expert evidence and certain further lay evidence until after their motion concerning further and better discovery has been determined and our clients have had an opportunity to inspect all such further documents." 17 Messrs Clayton Utz did not then, and have not since, explained why they need further and better discovery and inspection before they can file and serve their experts' reports and certain of their lay witnesses statements. The respondents' delay in filing and serving their witness statements and experts' reports is another source of contention between the parties, with Auspine complaining that the dispute over the adequacy of its discovery does not excuse the respondents from complying with the Court's orders. 18 The respondents' amended notice of motion seeking orders for particular discovery was supported by a second affidavit ("the May affidavit") from Mr Norman Lucas sworn on 5 May 1999. Mr Lucas explained that his May affidavit was supplementary to his earlier March affidavit. In that earlier affidavit Mr Lucas had exhibited copies of the extensive correspondence that had passed between solicitors from 22 December 1998 to 17 March 1999; that correspondence has been ongoing since. His May affidavit deposed that the respondents have obtained copies of each of the documents that had been referred to in the applicant's original list, its supplementary list and its further supplementary list and that he has "inspected the Applicant's Discovery". In par 6 of his May affidavit, Mr Lucas said: "The primary purpose of my inspection of the Applicant's Discovery was to ascertain whether or not I could identify within the Applicant's Discovery any documents which might fall within the categories of documents set out in the Motion." 19 Mr Lucas then addressed each of the twenty-four categories of documents or group of documents that had been set out in the notice of motion for particular discovery. The procedure that he adopted was in three steps: first, he listed the category and, if appropriate, identified where the solicitors for the respondents had specifically requested discovery or production of the documents in that category by referring to the correspondence that he had annexed to his March affidavit. Secondly, he referred to a source which allegedly pointed to the existence of a document. In some cases it was because mention of a document was said to have been made in a witness statement that had been filed on Auspine's behalf; in other cases it was allegedly because discovered documents had, in turn, referred to other documents that had not been discovered. Another source was statements that had allegedly been made by potential witnesses for the respondents. The final step was to assert in some (but not all cases) an argument that, if accepted, favoured a finding that a particular document would have existed and would or may be relevant to an issue in the trial. 20 I list hereunder the first two of the twenty-four documents so as to give an indication of the nature of the problems. The first of twenty-four documents was described in the amended notice of motion in these terms: "The "preliminary analysis report" prepared by Mr McGlone referred to in paragraph 69 of his Outline of Statement dated 17 December 1998 including all working papers, notes and drafts." 21 Mr McGlone holds a position in Auspine that he describes as "Strategic Planner". He is an intended witness in the trial and, in that capacity, his witness statement has been prepared and filed on Auspine's behalf. In paragraph 69 of his statement, the following passage appears: "After receiving the Information Memorandum I prepared a preliminary analysis report consolidating Auspine and Cowells' profit and balance sheet forecasts which I had prepared so as to measure the impact on key ratios."

In their letter of 16 February 1999, Messrs Phillips Fox had replied to a demand for discovery of this report by saying:

"All documents in relation to this category have been discovered."

That was not a helpful reply. The applicant's original list of documents concluded with the document numbered 2649. But there were more than 2649 documents listed because in several places there were subparagraphs in the numbering system. Auspine's supplementary and further supplementary lists of documents accounted in all, for a further 300 documents and a fourth list that was later filed on 16 June 1999 with Mr McGlone's affidavit of 11 June accounted for another forty-four documents. If, as Auspine claimed, the report had been discovered, it would have been a simple and cost-efficient exercise for Auspine to identify it by its number in one or other of the lists. That is to be preferred to having the requesting party, at great cost, expending much time in laboriously cross checking those thousands of entries whilst a search is made for the report. In these days, when the Court is attempting to contain the costs of litigation, it looks to legal practitioners to adopt a practical, common sense approach to matters such as these. The days of deliberate and unjustified lack of cooperation can no longer be afforded.

22 I return to Mr Lucas' May affidavit. In answer to Auspine's claim that the Report had been discovered, Mr Lucas deposed in these terms: "Upon my inspection of the Applicant's Discovery I did not locate any such preliminary analysis report or working paper, note or draft compiled in the preparation of such a report." 23 The second group of documents that is sought by the respondents have been described in the papers as: "All handwritten notes and documents recording or evidencing the conversations that took place between employees of Auspine and employees and/or agents of Cowells during the meetings on 21 and 22 March 1995." 24 In par 104 of his witness statement, Mr McGlone has said: "Following completion of the inspection of Cowells documents on 22 March 1995. (sic) I was responsible for compiling a due diligence report and the other members of the due diligence team forwarded their notes taken during due diligence to me. After due diligence Adrian de Bruin, Michael Stratman and I were mainly responsible for assessing the acquisition of Cowells."

Mr de Bruin is the Managing Director of Auspine and Mr Stratman is the company's chief financial officer and company secretary.

25 Mr Lucas has stated in his affidavit that: "… the only document that I have identified which might fall within this category is Document 279 from the Original List … I did not locate in the Applicant's discovery any other handwritten note or document evidencing or recording the conversations that took place between the employees of Auspine and the employees or agents of Cowells during the meetings on 21 and 22 March." 26 Auspine's answer to this request was, once again, to say that all documents have been discovered, but without making any attempt to identify where they had been discovered. I repeat my earlier remarks - that was not a helpful reply; the Court has come to expect a degree of cooperation between solicitors so that cases can be prepared for trial with expedition and without incurring unnecessary costs. That can be achieved in many areas without any suggestion that a client's rights might be compromised. This is one such area.

27 The respondents' amended notice of motion for particular discovery was called on for mention on 6 May 1999. On that date the Court ordered that: "To the extent to which a party maintains that no documents of the type sought by an opponent exist, that party shall cause one or more senior executive officers to depose on oath or affirmation within 14 days of this date that due search and inquiry has been made and that documents sought by way of further and better discovery do not exist. If such documents no longer exist because they have been destroyed the party shall cause the deponent to depose [to] the approximate date of destruction with full and detailed particulars of [the] circumstances relating to the destruction." 28 As Auspine failed to file the requisite affidavit within the designated period of fourteen days, an order was made on 31 May extending the time within which to attend to that filing to 4 June. The hearing of the respondents' amended notice of motion for particular discovery was then listed for argument on 16 June and two days were set aside for the hearing. That hearing had to be vacated, however, because of Auspine's failure to file an appropriate affidavit that would comply with the Court's order of 6 May. 29 On 16 June 1999, Auspine filed a further affidavit, ("the June affidavit") of Mr McGlone; that affidavit, dated 11 June, was said to have been prepared in compliance with the Court's order of 6 May. In it, Mr McGlone set out, at length, the steps that had been taken by Auspine to comply with the Court's order and to ensure that full and complete discovery had been given. In the first place, he said that he had originally caused a "comprehensive review and search for documents" to be undertaken when initially attending to the discovery exercise. However, as a result of the order of the Court of 6 May 1999, he deposed that he "caused the review and search described in paragraph 6 hereof to be repeated …". He added: "I have now caused to be undertaken all due search and inquiries of the officers, employees and agents of Auspine as to whether any of the documents referred to in [Mr Lucas'] affidavit and the respondents' amended Notice of Motion exist or do not exist."

Mr McGlone then explained that between 24 May 1999 and 9 June 1999 he had had discussions or communications with thirteen named persons as part of his due search and inquiries, adding that the result of those searches and inquiries was as follows:

"9.1 there are some documents in the possession custody or power of the Applicant not previously discovered within the document categories. Those additional documents have now been discovered by the Applicant in Auspine's Further Amended Supplementary List of Documents filed today. Annexed hereto and marked "MAG1" is a true copy of the applicant's Further Amended Supplementary List of Documents dated 11 June 1999; and 9.2 apart from privileged documents and the documents enumerated in the Applicant's lists of documents dated 8 September 1998, 8 January 1999, 9 March 1999 ("the previous lists of documents") and 11 June 1999 (collectively and including the previous lists of documents "the lists of documents") no further documents, material to the matters in issue in this suit referred to in the Respondent's Amended Notice of Motion or otherwise are or have been in the possession power or control of the Applicant."

Mr McGlone then addressed each of the twenty-four documents (or group of documents) that were listed in the respondents' amended notice of motion, setting out the results of those inquiries in relation to each of the twenty-four documents.

30 I set out hereunder his answers in respect of the first two categories, that is the preliminary analysis report and the notes of the meetings on 21 and 22 March 1995. As to the report, he said: "11.1 All these documents have been discovered in the lists of documents. 11.2 No document exists in electronic form. 11.3 preliminary analysis report" was destroyed in or about March and April 1995 as it was superseded by later drafts which became the April Due Diligence Report."

This answer marginally improves the position over that which had earlier been stated in Messrs Phillips Fox's letter of 16 February 1999 - but only marginally. The reader is still left to wonder where, in the huge volume of entries, he or she might find the relevant documents that are referred to in par 11.1 of Mr McGlone's affidavit.

31 The request for the notes of the meeting met with less success. The enquirer was told in Mr McGlone's June affidavit that "all these documents have been discovered in the lists of documents and no further documents in this category exist." In all, a like answer was given in respect of eight of the twenty-four categories of documents.

32 Following on the filing of Mr McGlone's June affidavit, the respondents issued a notice of motion on 12 July 1999 seeking an order pursuant to O 15 r 11(1) that the applicant produce for the respondents' inspection the eight documents that were identified by Mr Lucas in his accompanying affidavit. Mr Lucas deposed that he had read Mr McGlone's June affidavit, that he had reviewed Auspine's original list and supplementary lists of documents and that, based on those reviews, he had been unable to "locate any document discovered by the applicant in any of its lists of documents which fell within categories 1(a), 1(b), 1(c), 1(d), 1(j)(i), 1(j)(vi), 1(r) or 1(x)". They were eight of the categories that had been identified by the respondents in their amended notice of motion of 5 May 1999 and, in respect of each of them, Mr McGlone had deposed in his June affidavit that they had already been discovered. 33 Before issuing that notice of motion, the respondents had sought, unsuccessfully, the same information by letter dated 17 June 1999 and by serving notices to produce. A reply from Messrs Phillips Fox, which was dated 23 June 1999, shows that they misconceived the nature of the respondents' request. By asking for production of documents, the respondents were effectively asking that Auspine identify, by reference to document number in the relevant lists of documents, those documents which Auspine said that it had already discovered. The reply did not address this issue, it said: "The point of the affidavit sworn by Michael McGlone on 11 June 1999 is irresistibly plain, that is that there are no more documents in those categories as indicated to be discovered. This is not a matter in which your client in a defacto way can impose on my clients an order for discovery by issue or topic, indeed issues or topics which your client has unilaterally selected." 34 Order 15 rule 11(1) provides as follows: "11. (1) Where: (a) it appears from a list of documents filed by a party under this Order that any document is in his possession, custody or power; (b) a pleading or affidavit filed by a party refers to any document; or (c) it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that any document relating to any matter in question in the proceeding is in the possession, custody or power of a party; the Court may, subject to any question of privilege which may arise, order the party: (d) to produce the document for inspection by any other party at a time and place specified in the order; or (e) to file and serve on any other party a copy of the whole or any part of the document, with or without an affidavit verifying the copy made by a person who has examined the document and the copy."

35 Acting on the principle that attack is the best means of defence, Auspine issued a notice of motion on 11 August 1999, seeking summary judgment against both Lawrence and Email on the ground that they had failed to comply with the order of the Court concerning the filing and serving of their witness statements and experts' report. Mr Lancione, the solicitor for Auspine, in his supporting affidavit dated 11 August 1999, deposed that by orders made on 30 October 1998, Auspine was to serve outlines of its witness statements and its experts' reports by 15 December 1998 while the respondents were to attend to the same tasks by 8 February 1999. Mr Lancione complained that at the date of the swearing of his affidavit, 11 August 1999, the respondents had not yet confirmed that all their outlines of witness statements had been filed and served; he also complained that no experts' report had been filed and served by the respondents. 36 On 16 June 1999, the Court directed the respondents to file and serve a statement of the facts, issues and contentions that were asserted by the respondents in support of the orders that they sought. They did not do so. Instead their solicitors wrote the Court on 14 July saying: "We are not in a position to properly comply with the directions O'Loughlin J made on 16 June 1999 until the applicant has complied with the notices served on it under Federal Court Rule O 15 r 10(1)."

That is not an appropriate course of action. If a party seeks to be excused from compliance with an order or direction of the Court, the correct procedure is to approach the Court either on liberty to apply or by way of motion. If necessary, an affidavit should be filed explaining the relevant circumstances. As it was, I only knew that the respondents were claiming that they needed to examine certain documents but they had failed to explain how the contents of those documents would or might affect the preparation of their statement of facts, issues and contentions. However, and despite the contents of their letter of 14 July, the respondents' solicitors wrote the Court on 6 August 1999 enclosing their clients' written submissions on the application for particular discovery. They said in their letter:

"As is apparent from the submissions, it is our clients' position that they cannot proceed with the hearing of their Application for Particular Discovery until the Notice of Motion concerning the notices to produce has been determined by the Court. In those circumstances, our clients will be seeking leave of the Court to reserve the right to put on supplementary submissions after their Notice of Motion concerning notices to produce has been determined."

Notwithstanding this assertion, their submissions failed, in my opinion, to connect the documents that are the subject of the notices to produce with sufficient particularity to justify withholding consideration of the application for particular discovery.

37 On Friday 13 August 1999, there was a further directions hearing in this matter. The three notices of motion that have so far been identified were called on for mention - that is, the respondents' amended notice of motion dated 5 May 1999 seeking orders for particular discovery, the respondents' notice of motion dated 9 July 1999 seeking production of the eight nominated documents and Auspine's notice of motion dated 11 August 1999 seeking summary judgment. That directions hearing was conducted by telephone; Mr Ross-Smith, counsel for Auspine, was in Adelaide, Mr Martin, counsel for the respondents, was in Sydney and I was in Darwin. I advised counsel that, because of my commitments in Darwin, I would receive written arguments on the three outstanding notices of motion and decide the matters on the papers. I did however express my concerns about the adequacy of the contents of Mr McGlone's June affidavit; it was on this occasion that I directed Auspine to cause a further affidavit to be filed and served addressing in more detail the adequacies of Auspine's discovery. 38 I then directed the respondents to file and serve the memorandum that was the subject of the earlier order of 16 June. 39 At the directions hearing on 13 August 1999, the timetable that was set down was as follows: Auspine was to file Mr McGlone's further affidavit by 2 September; the respondents were to file their statement of facts, issues and contentions by 23 September (or a statement that confirmed that their preliminary submission did not require amendment). The moving party on each of the three notices of motion was to file their or its submissions by 23 September and the responding party was to file its or their answering submissions by 7 October; finally any submissions in reply were to be filed by 14 October. 40 Mr Martin, counsel for the respondents, expressed his strong opposition to these procedures. In the first place, he wanted argument to proceed on the respondents' application for production of documents so that those documents could be examined before the respondents proceeded on their application for particular discovery. Secondly, he said that his clients would be seeking leave to cross-examine Mr McGlone on his affidavits in relation to the application for particular discovery. Thirdly, he said that his clients wished to issue subpoenas for the "production of documents in relation to the motion for particular discovery". I responded to Mr Martin telling him that I would not depart from the orders that I had made with respect to the timetable that I have identified in the immediately preceding paragraph. I also ruled that I would not permit cross-examination of Mr McGlone. 41 However, as I have said, I was of the opinion that Mr McGlone's June affidavit had not gone far enough in recording the result of his inquiries. The obligation that rests on a litigant to give discovery requires that it make proper inquiries and efforts to identify and disclose all relevant documents that it has or had in its possession, custody of power: O 15. The Court is empowered to order that discovery be limited but no such order has been made in these proceedings. The obligation to make complete discovery extends to making reasonable inquiries from any person in whose possession the documents now are or may have been. That obligation extends to, but is not limited to, the servants and agents of the discovering party: Re McGorm; ex parte The Cooperative Building Society of South Australia (1989) 20 FCR 387 at 389-390 per von Doussa J. 42 A further affidavit dated 6 September 1999 was filed by Mr McGlone. In it, he deposed in the following terms: "As a result of my enquiries I say that I have satisfied myself that all proper and reasonable enquiries and searches have been made by me or by officers of the applicant acting under my instructions for discoverable material of the kind sought by the respondents' and more particularly referred to in sub paragraph 1(a) (b) (c) (d) (i) (j) (i) (ii) (v) (vi) (k) (l) (n) (o) (p) (q) (r) (v)(w) (x) of the respondents' amended notice of motion filed herein on 6 May 1999 and as a result of such enquiries and searches the applicant does not have any further discoverable material of that kind." 43 In his June affidavit, Mr McGlone had discovered further documents in purported satisfaction of the requests that had been made by the respondents in pars 1(e), 1(f), 1(g), 1(h), 1(j)(iii), 1(j)(iv), 1(j)(viii), 1(m), 1(s), 1(t), 1(u) of their amended notice of motion dated 5 May 1999. The respondents have, as I understand it, accepted Auspine's discovery with respect to those categories as they have not pursued those matters any further.

Particular discovery - the disputed categories of documents

44 I turn then to consider the unresolved claims. 45 In the analysis of the documents that follows, it is to be borne in mind that I have proceeded upon the premise that all categories of documents (if they ever did exist) would be discoverable. Auspine has never advanced a submission that the documents sought do not relate to any issue in question in the proceedings and are not, as a consequence, therefore discoverable.

Category 1(a) The "preliminary analysis report" prepared by Mr McGlone referred to in paragraph 69 of his Outline of Statement dated 17 December 1998 including all working papers, notes and drafts.

46 The respondents pursue their application for an order that Auspine cause an affidavit to be filed stating whether that document is or has been in its possession, custody or power; they do so notwithstanding that Mr McGlone in his June affidavit has stated that the report "was destroyed in or about March and April 1995 as it was superseded by later drafts which became the April Due Diligence Report". But, as the respondents point out, they sought not merely production of the preliminary analysis report, but also "all working papers, notes and drafts" relating to it. Mr McGlone's affidavit did not address those last mentioned documents other than to say "all these documents have been discovered in the lists of documents". Those documents are now the subject of the respondents' second notice of motion in which they seek their production. Having regard to the extensive nature of the applicant's lists of documents, I think that the respondents' request is reasonable. The affidavits that have been filed on behalf of the respondents indicate that reasonable efforts have been made by their solicitors to track down these documents; they have searched Auspine's lists; they have corresponded with Auspine's solicitors, asking them to identify where the documents may be found. I am not satisfied that Auspine has advanced any acceptable explanation for its failure to disclose this information. There will be an order that Auspine file and serve, within twenty-eight days of this date, a verified list of, and serve a copy of, all working papers, notes and drafts relating to the preliminary analysis report, such list (where appropriate), to identify where such working papers, notes and drafts are recorded in Auspine's lists of documents. If any such working papers, notes or drafts have been lost or destroyed the affidavit is to explain the loss or destruction with full and detailed particularity. However, I do not see any necessity to pursue the subject of the preliminary analysis report any further. That subject has been adequately explained by Mr McGlone.

Category 1(b) all handwritten notes and documents recording or evidencing the conversations that took place between employees of Auspine and the employees and/or agents of Cowells during the meetings on 21 and 22 March 1995

47 It is clear, from the contents of par 104 of the statement that has been filed in Mr McGlone's name, that various participants in these meetings made notes and that representatives of Auspine forwarded their notes to Mr McGlone; he said in his statement: "I was responsible for compiling a due diligence report and the other members of the due diligence team forwarded their notes taken during due diligence to me." 48 In my opinion the respondents are quite reasonable in seeking production and inspection of those notes. The respondents have been unable to identify them in Auspine's lists of discovered documents and Auspine has done no more than say "all these documents have been discovered in the lists of documents". I do not believe that it would be imposing a hardship on Auspine to order them to produce copies of these notes for inspection and to identify where they appear in Auspine's lists. There will be an order accordingly in terms consistent with the order made in respect of the documents in Category 1(a).

Category 1(c) all drafts of the Due Diligence Report date April 1995 ("the April Due Diligence Report")

49 As I understand it, the respondents accept that the April due diligence report has been discovered but they do not accept Mr McGlone's assertion in his affidavit of 2 September 1999 that there is no further discoverable material in this category. While I understand the respondents' contention that it is likely that, in the course of the preparation of the due diligence report, there would have been drafts prepared, the respondents do not seem to be prepared to accept Mr McGlone's deposition that drafts were destroyed. Mr McGlone has deposed on oath in these terms: "It is my practice and the practice of the officers, employees and agents of Auspine to destroy drafts that have been superseded by an amended version of the document."

So far, no material has been put before the Court that would warrant the Court going behind Mr McGlone's sworn statement. He has made his statement on oath; in the absence of some compelling reason to the contrary, his oath is to be accepted.

Category 1(d) all handwritten notes and documents recording or evidencing the conversations that took place between the employees of Auspine and Mr Colin Lamond and Mr Steve Matthews during the meeting at Auspine's premises at Tarpeena of 3 May 1995

Category 1(i) all correspondence, memoranda, file notes, reports and documents to and from the South Australian Centre for Manufacturing relating to any study or review of the operations of Auspine Timbers Sales and Auspine Building Centres in or about July/August 1995

50 Mr McGlone has stated on oath that the documents in both categories have been discovered. I am uncertain of the position with respect to the documents in Category l(i) in the sense that what was sought were numerous documents and what Mr McGlone said in his June affidavit was limited to one document: "The document has been discovered in MAG1" 51 The exhibit to his June affidavit, MAG1, lists numerous additional discovered documents and alongside each such document there is a reference to the category description so that the reader can relate the discovered document to that which had been sought by the respondents. Category 1(i) is not mentioned nor do any of the discovered documents refer to the South Australian Centre for Manufacturing. Although I do not understand the respondents to have pursued this category, I think, out of an abundance of caution, it should not be overlooked. For the reasons that I have already given, copies of all documents in both categories should be produced for inspection and their whereabouts in Auspine's lists should be identified. There will be orders accordingly in terms consistent with the order made in respect of the documents in Category 1(a).

Category 1(j) The following documents referred to in, or annexed to, the documents listed below:

(ii) doc 656.20 "Your letter dated 18 November 1994"

52 The respondents rely on Auspine's documents 22 and 1676 as pointing to the existence of further documents. The expression "main issues to discuss attached" in Doc 22 lends support to that proposition. In Doc 1676 there is a reference to "memo 09/05/95". Mr McGlone has stated on oath that these documents have been discovered. For the reasons that I have already given, copies should be produced for inspection and their whereabouts in Auspine's lists should be identified. There will be orders accordingly in terms consistent with the order made in respect of the documents in Category 1(a). 53 Document 656.20 in Auspine's discovered list of documents refers to a letter from Cameron McDonald of Brown and Dureau dated 18 November 1994. The respondents have been unable to locate that letter. Mr McGlone's initial reply was to say: "… my inquiries show that all of Alan Donnell's files are unable to be located or they have been destroyed in or about December 1996." 54 Mr Donnell was formerly employed by Cowells as its Production Manager from 1988 to 1995 but was made redundant when Auspine took over Cowells. Although the respondents are correct in complaining that this answer does not make it clear that the letter of 18 November formed part of Mr Donnell's file, that was probably the intended inference. However, I do not consider that the position has been concluded by Mr McGlone's affidavit of 2 September 1999 where he states that there are no further discoverable documents in this category. Mr McGlone (or some other appropriate senior officer of Auspine) could have approached Cameron McDonald asking for a further copy of his letter of 18 November 1994. That should be done and the results of the inquiry are to be verified on oath. 55 The respondents' rely on document 1389 as pointing to the existence of a further document; it expressly refers to the "new Price Book" for the "New Year" (1997). The respondents complain that this new Price Book has not been discovered by the applicant. Mr McGlone in his June affidavit said that he and his fellow officers at Auspine "were not aware that the description "new Price Book" applied to the timber products price list. He went on to state that he has subsequently "caused to be made further inquiries in relation to this document at which time the timber products list was discovered." According to Mr McGlone that list has now been discovered in Auspine's Further Amended Supplementary List of Documents which is exhibit MAG1 to his June affidavit. This document has been examined by the respondents but they are not satisfied with it; they complain that one page only of a price list that was effective on 6 January 1997 has been discovered "but the remaining pages have not". There are entries on documents to which the respondents have referred that indicate that the Price List may have had more than one page; there is, for example, a reference to a price book and a notation "Page 10". But Mr McGlone has deposed that there are no further discovered documents in this category and, at this stage, I think that his statement on oath must be regarded as concluding the matter.

Category 1(k) all stock books recording or evidencing the timber ordered by or supplied by Cowells and/or Auspine Building Centres from 1 January 1994 to 31 December 1995

56 The respondents' belief that such stock books exist is based on information supplied to them by Mr Donnell. According to Mr Lucas in his May affidavit, Mr Donnell told him that he maintained a stock book "in a red folder made up of A4 sheets and that the stock book recorded the length and sizes of what was in stock and what was on order". According to the respondents, these stock books have not been discovered. In response, Mr McGlone has deposed: "In relation to the documents referred to in this category, my enquiries show that all of Alan Donell's files are unable to be located or they have been destroyed in or about December 1996."

That statement appears in his June affidavit. In his later affidavit of 2 September, he addresses this issue of discovery once more but nevertheless, deposes that there is no further discoverable material. Once again, I feel that, at this stage, Mr McGlone's statement on oath should be accepted.

Category 1(l) All documents entitled "Direct Marketing Component" (including documents by any similar name or abbreviation), computer print outs, hard drive disks or floppy disks recording or evidencing any item added to the actual cost of production of each timber product sold or supplied by Timbersales during the period from 1 January 1994 to 30 December 1998 57 Mr McGlone addressed this subject in the following manner in his June affidavit. "In relation to the documents referred to in this category, my enquiries show that 28.1 the direct marketing component system referred to in the document was discontinued from June 1997; 28.2 the documents relevant to this category are unable to be located or have been destroyed in the period June 1997 to January 1998; and 28.3 the Applicant has discovered a document which is the report for August 1995 containing the direct marketing component information. This is the only document of its type and is discovered in "MAG1". 58 As the respondents pointed out in counsel's written submissions dated 6 August 1999, the respondents rely on a statement attributed to Mr Chris Wray, the former South Australian State Manager for Auspine Timbersales, who says that he was provided with a document entitled "Direct Marketing Component" which contained the mark-ups placed by Timbersales on the actual cost of each timber product. In addition to seeking particular discovery of that document, the respondents also seek particular discovery of all computer printouts, hard drive disks or floppy disks recording or evidencing any item that had been added to the actual cost of timber products sold or supplied by Timbersales during the period from 1 January 1994 to 30 December 1998. It is alleged that these classes of document have not been discovered by the Applicant. 59 I agree with the respondents that Mr McGlone's answer was inadequate. It was limited in its content to the "Direct Marketing Component" and made no reference to computer printouts, hard drive disks or floppy disks. There will be an order that Auspine file and serve a verified list of, and serve a copy of, all computer print outs and particulars of all hard drive disks and floppy disks recording or evidencing any item added to the actual cost of production of each timber product sold or supplied by Timbersales during the period from 1 January 1994 to 30 December 1998. Auspine is also to cause an affidavit to be filed and served explaining the loss or destruction of the documents relating to the Direct Marketing component with full and detailed particularity. 60 The respondents have complained that Auspine has not caused inquiries to be made of Mr Wray about these documents. As to that complaint, Mr McGlone has stated in his October affidavit that Mr Wray was one of several people that he contacted by telephone on 14 October. Admittedly, Mr McGlone did not state in his affidavit that he expressly addressed the subject of the documents in this category with Mr Wray; but, having regard to the history of this matter, including the relentless pursuit of the respondents for particular discovery, it is, in my opinion, a fair inference to draw that Mr Wray was not able to give any assistance to Mr McGlone. It should be remembered that there has not been any allegation of mala fides on the part of Auspine, nor does there appear to be evidence that could point in this direction. Rather, the battle lines have been drawn on the more conventional ground that two lawyers can have widely disparate views on the same subject. I am not inclined to direct Auspine to make further inquiries of Mr Wray. Category 1(n) all documents entitled: (i) "Monthly Sales Reports - May 1995 - David Taylor"; (ii) "Monthly Sales Reports - May 1995 - Bert Saccone"; (iii) "Monthly Sales Reports - May 1995 - Ian Williams"; (iv) "Monthly Sales Reports - May 1995 - Roger Marshall". 61 This category of documents has generated the most heat in the debate between the parties. The respondents rely on statements of the former employees of Auspine Timbersales, Mr Chris Wray and Mr David Taylor in support of their claim that such monthly Sales Reports exist. Mr Taylor was a sales representative for Timbersales; he serviced Cowells who, in earlier days, was one of Auspine's larger customers. Mr Wray and Mr Taylor both say that monthly sales reports were prepared by the sales representatives at the end of each month and the respondents' point to the fact that the sales reports for April and June 1995 have been discovered by the Applicant. Neither Mr Wray nor Mr Taylor is aware of any reason that would explain why these reports were not prepared for May 1995. 62 In response to these claims, the Applicant discovered a computer print out recording the sales made by Mr David Taylor and Mr Bert Saccone for May 1995, but the respondents claim that this response is inadequate. They say that the applicant has failed to make the inquiries it should have in order to discharge properly its discovery obligations. They say that the applicant has failed to address the question of whether the sales reports existed for May 1995 and, if so, whether they may be or may have been in its possession, custody or power. 63 When counsel for the respondents made his oral submissions in this matter on 13 October 1999 he submitted that there are grounds for arguing that it would have been an appropriate avenue of inquiry for Mr McGlone to inquire of Messrs Taylor, Saccone, Marshall and Williams, as the authors of the monthly sales reports, whether they each prepared a report for the month of May 1995 and, if so, whether they still possess a copy of their respective reports for that month. He further submitted that it would have been appropriate for Mr McGlone to inquire of the four salesmen (assuming that one or more of them had prepared such a report) what they did with their reports, to whom did they submit them and when, and whether they know what happened to their reports. Perhaps it would have been appropriate for Mr McGlone to have made or to have caused to be made inquiries of Mr Kennedy. He was the executive officer who, in the ordinary course of business, would have received the reports of the salesmen, using them to compile his monthly composite report. 64 Auspine took heed of these complaints for during the course of the hearing it caused a further affidavit to be filed by Mr McGlone. It was dated 15 October 1999 and in it Mr McGlone said that, on 14 October, he contacted each of the four salesmen and Messrs Wray and Kennedy by telephone. He said that he was informed by each person that he no longer had in his custody power of possession any of the relevant documents. 65 Far from satisfying the respondents, this affidavit only served to inflame them. Rather than accepting it as an assurance that the issue should be regarded as closed, it was submitted that the fact that Mr McGlone made these inquiries was tantamount to an admission that his earlier inquiries had been inadequate. The respondents submit that the initial failure of Mr McGlone to make inquiries of Messrs Taylor, Saccone, Williams, Marshall, Wray and Kennedy has established Auspine's failure to make proper and required investigations in the discovery process. If it be accepted that the respondents' submission is correct - if it be accepted that Auspine failed in its discovery obligations by not making inquiries of these six gentlemen - and I need not decide that issue, the fact remains that the failure has now been rectified: the inquiries have been made and the results of the inquiries have been disclosed on oath. On this particular issue, no further orders or directions are warranted. The claimed inadequacy has now been remedied. 66 I note in passing that Mr Taylor who has sworn an affidavit in support of the respondents' case, falls short of asserting positively that he did prepare a report for the month of May 1995. He could only say: "I am not aware of any circumstances in which I would not have prepared my monthly sales report for the month of May 1995." 67 Counsel for the respondents submitted that in defending the claims that have been brought against them by Auspine, the respondents have raised (inter alia) a defence to the effect that Auspine, by virtue of the extent of its trading activities with the Cowells Group prior to the settlement date, was well aware of any material changes that had occurred to Cowells in the period immediately prior to the settlement date. Cowells was, so the respondents claim, one of Auspine's biggest customers - the monthly sales reports that were prepared by Auspine's sales representatives will show the extent of the purchases made by Cowells month by month. In making that submission, counsel did not refer to any specific provision in the respondents' joint defence. My perusal of that pleading suggests that it may be par 28(g) of the amended defence that counsel had in mind. That contains the assertion whereby the respondents say that: "… the Applicant was aware of the financial circumstances of the Cowells' Business … immediately prior to its acquisition of that business."

No particulars are contained in the amended defence however and it is difficult to gain any value from such a bald assertion.

68 Annexure NL40 to Mr Lucas' May affidavit contains the monthly sales reports for the month of April 1995 of the four Auspine salespersons, Messrs David Taylor, Bert Saccone, Ian Williams and Roger Marshall. There then followed in the same annexure, NL40, the four monthly sales reports from those salespersons for the month of June 1995. (Mr Marshall's report states, in fact, that it was for the month of May, but a reading of the report suggests that this is an error and that it is the report for June). Each report included details of each salespersons' top twenty customers. The name "Cowells Building Supplies", which I take to be the Cowells Group, appears as a customer in Mr Taylor's reports for the months of April and June. However, counsel did not point to any reference to the Cowells Group in any of the reports of the other three salespersons. At this stage, a tentative inference might be drawn, for the purpose of these proceedings only, that Mr Taylor, alone among Auspine's sales staff, was the designated sales representative for purchases that were made by Cowells. The adoption of such an inference (if it be correct), would make it difficult to understand the relevance, to the issues in this trial, of Messrs Saccone's, William's and Marshall's sales reports for the month of May 1995. 69 By letter dated 6 April 1999 (Annexure NL41 to Mr Lucas' May affidavit) Messrs Clayton Utz requested copies of the four sales reports for the month of May 1995. The response from Messrs Phillips Fox dated 7 April 1999 (Annexure NL42) was in these terms: "I am instructed that no documents of that kind for May 1995 were created."

Counsel for the respondents noted this statement and complained that it was not confirmed on oath by Mr McGlone, either in his affidavit of 11 June or in his affidavit of 2 September 1999.

70 Auspine's discovered document No 307 was tendered by counsel for the respondents. It is entitled "Auspine Limited … Sales Analysis by Salesperson …". As no evidence was called to explain the document, I can only infer from a perusal of its contents that it records some (perhaps all) sales made in the month of May 1995 through a system called "House Accounts" and some (perhaps all) sales made in that month by David Taylor and Bert Saccone. It is not apparent to me why Doc 307 does not contain details of the sales made by Ian Williams and Roger Marshall. However, as it could be that they were not responsible for sales to Cowells, the absence of their sales figures might not therefore be a matter for concern. The matter of greater interest is that Doc 307 does not record Mr Taylor as having made any sales in the month of May to Cowells or the Cowells Group or to any entity of any name which included the word "Cowells". When I put that to counsel for the respondents he replied that it might be that the entries in the name of "Auspine Building Supplies" were the sales that were made in that month to the Cowells Group; his theory, if I understand it correctly, is that by the time Doc 307 was prepared, the settlement of the purchase of the Cowells Group had occurred and the name of the purchasing entity had been changed internally from Cowells (or Cowells Building Supplies) to Auspine Building Supplies. There are two comments that should be made about this theory. In the first place, there is no evidence to support it. What evidence there is on the subject so far, suggests that only Mr Taylor sold merchandise to Cowells and Doc 307 suggests that in the month of May 1995 he sold no merchandise to that group. The second comment is that if Mr Martin's theory is correct, then Doc 307 reveals details of the sales made by Auspine to Cowells in the month of May 1995. And although Mr Taylor's personal report for that month is missing, its absence is not a cause for the acute embarrassment that was suggested by Mr Martin because the most important subject matter - the "dollar volume" of sales, cross-referenced to date, invoice numbers, invoice cost and net profit - is available to the respondents from a perusal of Doc 307. 71 The quality of some of the documents is poor: it is very difficult to read some of the figures. Although it is quite clear that Mr Taylor's sales to Cowells Building Supplies for the month of June was $190,711.31, I cannot say with confidence what were the values of his sales in the preceding two months. Adding the legible figures in Doc 307 and making allowances for illegible ones, it seems as if sales for May were about $111,200. Sales for April might have been $59,843.47 (it is the first digit only that is difficult to read). It is, however, clear that April sales were not in the "six figures" - they were less $100,000 and, hence, less than the May figures (if it be assumed that Mr Taylor's sales to Auspine Building Centres were in fact sales to the Cowells group"). The information that has been extracted from the materials therefore tests the validity of the submission that the failure of Auspine to discover the May 1995 monthly reports of Messrs Taylor, Seccone, Williams and Marshall is of importance to the respondents and is a cause for delaying the preparation of some of their witness statements. 72 It is strange that there were monthly reports for April and for June but none for May 1995. However, persuasive as the respondents' submissions are, they have to be weighed against Mr McGlone's September affidavit and his further affidavit of 15 October 1999. He must be regarded as being alert to the aberration that the salesmen's reports for the month of May are missing. Yet he has sworn his oath that inquiries have been made and that "as a result of such inquiries and searches the applicant does not have any further discoverable material…" There must come a time, no matter the frustration of a party, when the discovery process must be brought to an end. 73 I am not prepared to make the orders sought by the respondents in respect of this category.

Category 1(0) all documents containing any analysis of purchases made by Cowells from Timbersales South Australia for any part of the period from February 1994 to March 1995.

74 The respondents rely on a statement attributed to Mr Chris Wray who says that he prepared such an analysis for the period from February 1994 to March 1995. 75 In response to these claims, the applicant discovered a computer print out recording sales by product type from 1 February 1994 to 31 March 1995. The respondents' claim that this response is inadequate; they say that the applicant has failed to make the inquiries it should have made in order to discharge properly its discovery obligations. They say that the applicant has failed to address the question of whether this analysis existed and, if so, whether it may be or may have been in its possession, custody or power. 76 I repeat the observations that I made when considering the issues that related to Category 1(n). The Court is entitled to assume that Auspine is aware of its discovery obligations. The respondents have identified a category of documents and the applicant claims that its discovery in its last supplementary list accommodates the respondents' demands. The respondents may have justifiably expected more but absent evidentiary material that might justify further inquiries, the respondents' disappointment can not justify a continuance of the matter. I decline to make the orders sought by the respondents in respect of this category.

Category 1(p) all letters (including any drafts) forwarded by Timbersales, South Australia, to its merchant customers in 1995 explaining Timbersales, South Australia's position in relation to the takeover of Cowells by Auspine;

77 The respondents rely on a statement attributed to Mr David Taylor who says that, after the acquisition of Cowells by Auspine, he prepared letters addressed to a number of merchant customers explaining the position of Timbersales in relation to the acquisition. Mr Taylor says that these letters were typed up and were either sent out or handed to customers. 78 In response to these claims, the applicant says that no documents exist in this class and that the information relating to Cowells' purchase was provided to Timbersales customers verbally. This advice is an apparent contradiction to the statement attributed to Mr Taylor. The respondents submit that the applicant has failed to make the inquiries it should have in order to discharge properly its discovery obligations. However, this assertion is met by a statement on oath by Mr McGlone in his affidavit of 2 September 1999 in which he states that there is no further discoverable material. 79 The respondents' claims with respect to Mr Taylor are to be found in Mr Lucas' May affidavit. At this stage of the proceedings, I feel that I should proceed upon the premise that Mr Lucas' affidavit and its contents would have been placed before Mr McGlone and that he would have been aware of its contents before he swore his affidavit. The respondents should therefore accept that if Mr Taylor wrote those letters, a proper search has failed to locate them. Contentious issues based on allegations and denials cannot be entertained within the discovery process. With some exceptions the verification by the discovering party must be accepted. I do not consider that those exceptions, which are discussed earlier in these reasons in par 92ff, exist in this case.

Category 1(q) all notices or documents placed on the noticeboard at the premises of Cowells evidencing or recording the trading performance or sales of Cowells during the period from 1 January 1994 to 30 June 1995;

80 The respondents' rely on a statement attributed to Mr Allen Donnell who says that at the end of each month a document entitled "Performance Indicator" was pinned up to the Cowells' notice board. It is claimed that these documents contained graphs of sales against budget and the actual sales that had been achieved by Cowells. 81 In response to this claim, Mr McGlone, in par 33 of his June affidavit, deposes that these documents were destroyed within one month of their production. The respondents submit that the applicant has failed to make the inquiries it should have made in order to discharge properly its discovery obligations. They do not identify what those further inquiries could be in light of the assertion by Mr McGlone that the documents have been destroyed. Having regard to what Mr McGlone has said in his June affidavit, coupled with his reaffirmation in his affidavit of 2 September 1999 that there are no further discoverable documents, I fail to see what else the respondents could reasonably expect. I decline to make the orders sought in respect of this category.

Category 1(r) all handwritten notes made by David Ford recording or evidencing the information provided to him by John Kolaczkos in the kitchen of the Cowells premises on 27 May 1995;

82 The respondents rely on statements attributed to Mr Kolaczkos and Mr Donnell who both say they observed Mr Ford making notes at this meeting on 27 May 1995. The respondents say that this class of document has not been discovered by the applicant, but Mr McGlone, in his June affidavit, says that all of David Ford's files have been discovered. The applicant, however, has failed to produce these documents for inspection in compliance with the respondents' notice to produce dated 28 June 1999 and it has failed to identify them in its lists of documents. This class of document is now the subject of the respondents' notice of motion for an order for production. 83 In my opinion, it would be appropriate to require Auspine to produce copies of these notes for inspection and to identify where they appear in Auspine's lists. There will be an order accordingly in terms consistent with the order made in respect of the documents in Category 1(a).

Category 1(v) all computer print outs, hard drive disks, floppy disks and documents evidencing or recording the cancellation, alteration or amendment of any order made by Cowells on Timbersales during the period from 1 January 1995 to 30 June 1995;

Category 1(w) all order books, computer print outs, hard drive disks, floppy disks or document evidencing or recording the orders for timber placed by Cowells with Timbersales during the period 1 January 1995 to 30 June 1995;

84 The respondents rely on statements attributed to Mr Allen Donnell, Mr David Taylor and Mr Chris Wray. The respondents' claim is that Mr Donnell says that he maintained an order book and that any cancellation, amendment or alteration by Cowells of an order with Timbersales was noted by him on the faxed version of the order form which had been sent to Timbersales; as for Mr Taylor and Mr Wray, the respondents say that they will give evidence that after Timbersales had received any cancellation or amendment to an order, the cancellation or amendment would be entered into Auspine's computer database. It appears that Mr Taylor will also say that faxed orders from Cowells were stored at Timbersales in archive boxes on a regular basis. 85 Auspine's response to these demands is found in par 38 of Mr McGlone's June affidavit. In that paragraph he states: "Category 1(v) 38. In relation to the documents referred to in this category, my enquiries show that all of Alan Donnell's files are unable to be located or they have been destroyed in or about December 1996." 86 It could be that Mr McGlone has misconceived the nature of the documents that are being sought by the respondents in these two categories; they are not seeking Mr Donnell's files - nor are they necessarily seeking the contents of his files. What the respondents seek include hard drive disks and floppy disks - material that is hardly likely to be contained within Mr Donnell's files. In my opinion there are grounds for orders for particular discovery and production of the material referred to in these categories and there will be orders accordingly in terms consistent with the order made in respect of the document in Category 1(a). If I have misunderstood the position and Mr McGlone's affidavit of 2 September 1999 was intended to encompass every aspect of these two categories, a short confirming affidavit will suffice.

Category 1(x) all handwritten notes, typed notes and documents of Glenn Wheatland recording or evidencing any conversation that had taken place between employees of Auspine and Glen Wheatland at meetings on 5 April 1995 and 10 April 1995.

87 The respondents rely on statements attributed to Mr Glenn Wheatland who says that, in accordance with his usual practice, he made handwritten notes at the meetings with Auspine's employees on 5 and 10 April 1995 which he placed in a manila folder entitled "Due Diligence". 88 In response to these claims, Mr McGlone has deposed in his June affidavit in these terms: "Category 1(x) 39. In relation to the documents referred to in this category, my enquiries show that all of Glen Wheatland's files have been discovered in the previous lists of documents." 89 In my opinion, it would be appropriate to require Auspine to produce copies of these notes for inspection and to identify where they appear in Auspine's lists. There will be an order accordingly in terms consistent with the order made in respect of the documents in Category 1(a).

90 Although I have not specifically addressed the contents of the respondents' notice of motion for an order for production of documents, I have, in the course of stating my reasons on the subject of particular discovery, made orders, where I consider it appropriate, for the production by Auspine of certain documents. In the course of making those orders, I consider that I have given sufficient attention to the respondents' claims for orders for production; I do not think that it is necessary to give any further consideration to this notice of motion. 91 The respondents have argued that the fact that Auspine has failed to produce the eight identified documents in response to the respondents' notice to produce "is sufficient evidence by itself to establish that the Applicant has failed to discover these documents …". At this stage, such an argument cannot be accepted in view of Auspine's stand (which has been verified on oath) that they have been discovered. At this stage, I am not in a position to reject these verified statements that have been made in the name of Auspine; I can only proceed upon the premise that I should accept Auspine's assertions and then order them to supply copies of the documents and identify where, in their lists, the documents have been discovered. Cross-examination on the Affidavit of Discovery 92 The respondents' solicitors, Messrs Clayton Utz wrote the Court by letter dated 15 September 1999. They said, in part, that their clients' concerns that had earlier been stated about the inadequacies of Auspine's discovery had "not been allayed by the affidavit sworn by Michael Anthony McGlone on 2 September 1999 …". Messrs Clayton Utz went on to write: "… we ask that the respondents be given an opportunity to put submissions to his Honour as to why leave ought to be granted to permit cross-examination by the respondents of Mr McGlone."

That request was made notwithstanding the ruling that had been made on 13 August 1999 that cross-examination would not be permitted. Be that as it may, the parties were advised of an available date, 13 October 1999 when consideration could be given to this further application. However, it was not until the matter was called on for hearing on 13 October that counsel for the respondents sought leave to file in Court the requisite notice of motion. No explanation was offered for the lateness in filing the Notice and unfortunately, it lead to some confusion as counsel for Auspine claimed that he was not then prepared to argue the subject matter of the notice of motion. Fortunately, the parties were able to agree that the notice be filed and that counsel for the respondents, as the moving parties, led the evidence upon which he relied. Counsel for Auspine was able to identify the affidavit material upon which he would rely; Mr Martin then made his submissions on behalf of the respondents and the matter was thereafter adjourned for two days when Mr Ross Smith made his submissions on behalf of Auspine on 15 October.

93 The first of the orders sought by the respondents in their most recent notice of motion was as follows: "1. Leave be granted to the Respondents to cross-examine Mr Michael Anthony McGlone on his affidavits sworn on 11 June 1999 and 2 September 1999, such cross-examination to be limited to the enquiries and searches undertaken or not undertaken by the Applicant for the documents sought by the Respondents in their Amended Notice of Motion dated 5 May 1999." 94 However, the respondents also sought a further order that: "2. The Respondents' Notion of Motion dated 9 July 1999 be heard separately and before the hearing of the Respondents' Amended Notice of Motion dated 5 May 1999." 95 The notice of motion dated 9 July had sought production of documents whilst that of 5 May 1999 had sought particular discovery. I informed counsel for the respondents that such an order had not been foreshadowed when Messrs Clayton Utz had sought the listing of the matter and that, in any event, the order sought, if made, would contradict the earlier orders that had been made by the Court on 13 August 1999. That was the date when I had stated that I would not grant leave to the respondents to cross-examine Mr McGlone; it was also the date when I ordered Auspine to file and serve a further affidavit by Mr McGlone about the extent of the inquiries that had been made by Auspine. And finally, it was the date when I directed that written submissions be filed in respect of all outstanding notices of motion. The respondents were obviously unhappy with my orders of 13 August; that being the case, they were at liberty to apply for leave to appeal. But it achieves nought to merely repeat an application for an order that has already been refused without offering any reason in support of the application. I informed counsel that I was not prepared to vary my orders of 13 August and, hence, that I would not hear submissions in respect of the second order that was sought in the notice of motion. Counsel for the respondent was directed to limit his submissions to the issue of cross-examination on Mr McGlone. 96 As a matter of general principle, cross-examination of a deponent to an affidavit in interlocutory proceedings is an issue that falls within the discretionary power of the judge. For example, Poole J, with whom Murray CJ and Parsons J agreed, said in Re John O'Brien, Ex parte Allchurch (1923) SASR 411 at 421: "The discretion is, of course, one to be judicially exercised. There may be cases, for example, where in order to do justice, the status quo should be preserved and the allowance of cross-examination would defeat that object, while in other cases it would be improper to act upon affidavits without it." 97 A convenient starting point in a consideration of the issue of cross-examination of a deponent to an affidavit of discovery is the decision of Menzies J in Mulley v Manifold (1959) 103 CLR 341. At 343 his Honour said: "So far as O 32, r. 13 is concerned, it cannot be shown by a contentious affidavit that the discovery made is insufficient. Before 1912, it was thought that the insufficiency had to appear from the pleadings, the affidavit of documents itself or the documents therein referred to. However, in British Association of Glass Bottle Manufacturers Ltd v Nettlefold (1912) 1 KB 369; (1912) AC 709, it was established that the insufficiency might appear not only from the documents but also from any other source that constituted an admission of the existence of a discoverable document. Furthermore, it is not necessary to infer the existence of a particular document; it is sufficient if it appears that a party has excluded documents under a misconception of the case. Beyond this, the affidavit of discovery is conclusive." 98 As is clear from a reading of his Honour's reasons, two propositions emerged quite strongly. In the first place contentious affidavit material does not extend the discovery process and, secondly, with some exceptions, the normal rule is that the affidavit of discovery is conclusive. 99 Mr Martin based his submissions in support of his application for leave to cross-examine Mr McGlone on the circumstances surrounding two only of the many categories of documents in respect of which the respondents had sought orders for particular discovery; they were categories 1(n) and 1(v) - the monthly reports of the four salespersons and the electronic alterations to Cowells' orders on Timbersales in the first half of 1995. Mr Martin was at pains to emphasise that the respondents were only seeking leave to cross-examine Mr McGlone on the contents of his affidavit of 2 September so that they could satisfy themselves that all proper and reasonable inquiries had, in fact, been made by Mr McGlone; the respondents were not seeking leave to cross-examine Mr McGlone generally on the subject of further and better discovery. Mr Martin submitted that this was an important distinction because, as he claimed, the conclusiveness of an affidavit of discovery did not apply to an application for particular discovery. In fact, he submitted that Mr McGlone's affidavit of 2 September should not be regarded as an affidavit of discovery at all: it should be treated as an affidavit that had been filed in opposition to an application for particular discovery. In my opinion this is a distinction without a difference. The subject matter of the dispute between the parties is the adequacy of the applicant's discovery. The respondent wishes to question that adequacy. To achieve their objective they must convince the Court that there are reasons why the Court should not treat the applicant's verified lists as conclusive. 100 Giles J considered the question of cross-examining a deponent to an affidavit of discovery in Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359. Although that case was one concerning questions of legal professional privilege, I consider that his Honour's remarks are relevant to the subject of discovery at large. Thus his Honour said at p 366: "The affidavit of discovery is generally conclusive not only in relation to the amplitude of discovery but also in relation to any claim to protection from inspection of a discovered document, including a claim to legal professional privilege, and in particular cross-examination of the maker of the affidavit will not be permitted. No relevant exception to this position has been introduced by rules of court." 101 In recent times, this Court has shown a willingness to question affidavits of discovery, particularly where there are claims of legal professional privilege. As Lockhart J said in National Crime Authority v S (1991) 29 FCR 203 at 211: "Courts should not be slow to permit cross-examination of the deponent of such an affidavit …"

In the sentence immediately before, his Honour had said:

"Although an affidavit in this form is usually sufficient and uncontroversial, the potential for abuse is obvious." 102 Gummow J, sitting as a judge of this Court in Hartogen Energy Ltd v The Australian Gas Light Company (1992) 36 FCR 557, endorsed the remarks of Lockhart J, all of which, points, in my opinion, to some degree of relaxation in the old rule that an affidavit of discovery is usually taken to be conclusive; but I do not see it as anything more than a relaxation to some degree. 103 I acknowledge that there are cases where it has been held to be appropriate to permit a party to cross-examine a deponent about the adequacy of the deponent's discovery. Olympic Airway SA v Spiros Alysandratos and Consolidated Travel (Victoria) Pty Ltd (unreported: Supreme Court of Victoria; Harper J: 26 May 1997) is a useful example of the circumstances where cross-examination on an affidavit of discovery was allowed. The plaintiff had purchased an interest in a group of companies. The second defendant was a member of the group and the first defendant was the principal shareholder of the second defendant. The plaintiff sued the defendants alleging (inter alia) fraud. In particular, the plaintiffs alleged that, in purchasing the interest in the group, it had relied on certain representations that had been made by or on behalf of the respondents; these representations were said to include forecasts of profitability of the group that were included in a report prepared on behalf of the defendants by a firm of accountants. The report listed several documents upon which the accountants relied in the preparation of their report, none of which had been discovered by the defendants. Particular discovery was sought by the plaintiff of the documents that the accountants referred to in their report. The first defendant swore an affidavit in which he denied that these documents had ever been in the second defendants' possession. On appeal from an order of a Master, that the first defendant appear for cross-examination on his affidavit, Harper J said: "There remains the question whether the first defendant should be cross-examined on his affidavit. On the one hand, I must have regard to the general policy, the beneficial effect of which has been tested by time, that affidavits of discovery are conclusive. The fact that cross-examination on such an affidavit has rarely if ever been allowed is doubtless a reflection of that policy. On the other hand, this case is unusual in that here there is cogent evidence to suggest the existence of documents which one would expect, if they do or did exist, were generated by one or other of the defendants. The evidence that the documents either never existed or, if they do or did exist were never in the possession of the defendants, is (it seems to me) much less cogent. If the documents do exist but are not discovered then (given their relevance to this proceeding) an injustice might be done to the plaintiff. The only procedure available to ensure that injustice is not done, and to ensure that the processes of the Court are not abused, is cross-examination."

In my opinion, there were ample grounds for his Honour concluding, as he did, that the deponent should be made available for cross-examination. His Honour was well aware of the general rule that an affidavit of documents is generally conclusive. But the situation that faced the Court called out for intervention. It would be obvious to all but the most ill-informed that the accountants would have relied on some (if not all) material that had been supplied to them by one or other of the defendants; in any event, there was the further obligation on the part of the defendants to seek out from their agents (and that would have included the accountants) all discoverable documents in the possession, custody or control of the latter.

104 Drummond J allowed cross-examination in Australian Securities Commission v Zarro (No 2) (1992) 34 FCR 427. That was a case where there has been a claim that certain documents were protected from disclosure on the ground of public interest immunity. His Honour said at 431 that he had taken what he described at "this exceptional course" "…because of concerns at what had emerged with respect to the way the Commission had gone about claiming immunity and because of concerns at the reliability of Mr Adams' final claim to immunity for certain of the documents, in view of the change of ground, and in view of the contents of all three affidavits". 105 I confess to having had misgivings about Auspine's refusal to cooperate with the respondents by identifying where, in the verified lists of documents, the respondents might find documents that Auspine maintained that it had discovered. But on reflection, and as I consider that this litigation has been conducted to date by both sides with a determination to make the task of the other party as difficult as possible, I have concluded that Auspine's conduct is but an example of a deliberate decision not to offer aid or assistance to an opponent. I do not infer from this conduct that there has been a deliberate obstruction of the discovery process. 106 It must be acknowledged that there were areas that were identified by the respondents that pointed to insufficiency in the discovery process. The first category that was sought - the preliminary analysis report - is an example of that insufficiency; it was a document that was referred to in Mr McGlone's witness statement and, according to the respondents, was a document that had not been discovered. In subsequent affidavits, Auspine has claimed to have answered that allegation. In addition, it is now the subject of an order to produce certain other related documents that are in contention between the parties. Assuming that Auspine will comply with the order of the Court and produce those documents, that should hopefully be the end of the matter. 107 In his October 1999 affidavit, Mr McGlone identified the six persons whom he had contacted on 14 October. They were the four salesmen, Messrs Taylor, Saccone, Marshall and Williams together with Mr Wray and Mr Kennedy. In his written submissions in reply, counsel for the respondents did not restrict himself to the conventional matters of law; he ranged extensively into factual issues, complaining that Auspine should have, but failed to, make inquiries of a Mr Donnell and a Mr Woodhead and complaining that the inquiries that were made of Messrs Wray and Taylor were inadequate. This departure from normal procedure was understandable to a limited extent because it was appropriate for the respondents to address the contents of Mr McGlone's affidavit. But the respondents exceeded all reasonable bounds, even filing three additional affidavits of Messrs Lamond, Wheatland and Kolaczkos without leave and without explanation. 108 The principle that an affidavit of discovery should, in most cases, be regarded as conclusive, has become less rigid in its application in recent times, but it has not been abolished. There are times when a Court will feel justified in having the subject of discovery pursued in greater detail. The defects in Olympic Airways afford a good example of an appropriate case for further investigations. The cases on legal professional privilege are another example. But the facts in this case have not excited my interest. The respondents have shown a predilection to pursue a state of perfection. Presumably the length of their pocket permits such a course of action; but it is a course of action that is taking up valuable court time when, in my assessment of the matter, the parties could be more gainfully employed in preparing their cases for trial. 109 I have pointed to obvious deficiencies in Auspine's conduct, and, where appropriate, I have made orders that are designed to correct those deficiencies. But enough is enough. The respondents have, in my opinion, behaved unreasonably in some respects in their pursuit of the discovery issue.

110 It remains to consider Auspine's notice of motion for summary judgment. Serious allegations have been made about the conduct of the respondents but there is no evidence to support them. The Court is asked to draw inferences which could only be readily drawn if there was evidence of bad faith on the part of the respondents. For example, counsel for Auspine claims that the respondents' notice of motion of 9 July 1999 operates as an abuse of process. That statement, without supporting evidence, cannot stand up to examination. 111 The respondents identified eight documents and asked that the applicant produce them. The applicant replied that they have been discovered, but decline to say where, in some several thousands of entries, they may be found. The respondents then responded by serving notices to produce - and when that exercise did not evoke any response, they filed a notice of motion seeking production of the documents. So expressed, it could hardly be said that the conduct of the respondents constituted an abuse of the process of the Court. Proceedings constitute an abuse of process where the purpose of bringing them is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they were not designed or for some collateral advantage beyond what the law offers. The onus of satisfying the Court that there is an abuse of process lies upon the party alleging it and that onus is a heavy one. Auspine has not, in my opinion, discharged its heavy onus of establishing on the evidence that the purpose of the respondents in bringing the notice of motion dated 9 July 1999 was to obtain some advantage for which the motion was not designed or some collateral advantage beyond what the law offers. 112 The respondents' failure to date has been a failure to comply with a procedural direction; such a failure would not, except in abnormal circumstances, normally result in a judgment against the respondents. There are other courses of action available and they should be explored first. They could range from costs orders to orders restricting the respondents to the evidence that they may adduce to the subject matters of proofs that have been lodged by a certain date. The conduct of the respondents in this case does not warrant at this stage such drastic action as a default judgment: cf Lenijamar Pty Ltd AGC (Advances) Ltd (1990) 27 FCR 388. Case management has become an important tool but it must be kept within bounds; a litigant is not to be shut out except as a matter of last resort. In the State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 154 Dawson, Gaudron and McHugh said: "Case management is not an end in itself. It is an important and useful aid for ensuring the proper and efficient disposal of litigation. But it ought always to be borne in mind, even in changing times, that the ultimate aim of the Court is the attainment of justice and no principle of case management can be allowed to supplant that aim." 113 On the other hand, the respondents have not shown themselves as being amenable to complying with the orders of the Court. In particular they have not attempted to justify their actions in failing to file all witness statements and experts' reports. It is not sufficient to say that they cannot file and serve these statements until the discovery exercise is completed. Mr Lucas, in his affidavit of 12 October 1999 addressed the subject. But he merely stated conclusions without proffering reasons. In pars 77 and 78 of his affidavit he said: "77. Until the Applicant has given full and proper discovery of the particular categories of documents sought by the Respondents in their Amended Notice of Motion dated 5 May 1999, the Respondents will not be in a position to complete the outlines of evidence of Allen Donnell, David Taylor and Christopher Wray. Each of these proposed witnesses needs to inspect a number of documents the subject of the Respondents' application for particular discovery before they can complete their outlines. 78. The Respondents have retained Arthur Andersen, Chartered Accountants, to prepare an expert's report in this matter. Arthur Andersen are not in a position to finalise their report until they have had access to a number of documents the subject of the Respondents' application for particular discovery." 114 I do not consider that these bland assertions justify any further delay. At the same time I do not believe that the respondents' conduct can justify the inference that Auspine would wish to draw. In his written submissions in reply, counsel for Auspine wrote: The irrepressible impression of intentional delay remains upon the respondents' concealment of their reasons as to how and why their witness outlines and expert reports cannot be completed. They do not even volunteer draft outlines or expert reports to demonstrate such prejudice. They do not list the topics which cannot be dealt with. Until late in the day they refused to even reveal the names of the witnesses and expert. The respondents rely on the hearsay evidence of the solicitor, and never the first-hand evidence of the witnesses or the expert."

The respondents must realise that they are to comply with the orders and directions of the Court. They have had every opportunity to explain why it is that they cannot file their witness statements and experts' reports; they have failed to do so. By adopting such a supine position, they must face the inevitable consequences. The risk of punitive consequences is building up against them.

115 There will be an order that the respondents file and serve all witness statements and experts' reports by 31 January 2000. In addition, a senior executive officer of the respondents is to file, by that date, a certificate certifying that all intended witness statements and experts' reports have been filed. The period of time that I have given to the respondents is very liberal but it takes into consideration the Christmas break and the traditional summer vacation. This should, however, be more than sufficient time to allow the respondents to comply with the orders of the Court. In the expectation that the respondents will comply with the orders I propose to stand Auspine's notice of motion over with liberty for the matter to be brought on for further consideration on seven day's notice at any time after 31 January 2000.

116 The respondents have been partially successful in their approach to the Court. Orders have been made in their favour in terms of the notice of motion seeking production of documents. On the other hand, their application for particular discovery met with only limited success and they failed in their application for leave to cross-examine Mr McGlone. Auspine's application for summary judgment could not be said to have been unjustified but, at the same time, in view of the history of this particular matter, it could not be said that it had much chance of success at this particular stage. 117 It would only incur the parties in further costs if I made appropriate costs orders on each of the four notices of motion; arguments would arise about dissecting costings to different subjects. In my opinion, a broadbrush approach is appropriate in this case. In respect of each of the four notices of motion the order of the Court is that each party pays its own costs of and incidental to the proceedings and the orders this day made. If further costs are incurred on Auspine's notice of motion after today, those costs can be addressed at a later stage. As the respondents were the principal moving parties, I direct them to bring in short minutes of order in terms consistent with these reasons within twenty-eight days. There will be liberty to speak to the minutes. I certify that the preceding one hundred and seventeen (117) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Loughlin .

Solicitor for the Applicant: Messrs Purcell Lancione

Date of Hearing: 13 and 15 October 1999