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[2009] WASC 256
Supreme Court of WA
2009-09-11
Mr J, Beech J
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : HIGHTIME INVESTMENTS PTY LTD -v- LUNGAN [2009] WASC 256
BETWEEN : HIGHTIME INVESTMENTS PTY LTD (ACN 085 990 656)
Practice and procedure - Application for particular discovery - Whether documents sought relate to a matter in question - Exercise of court's discretion
Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55
Westraint Resources Pty Ltd v BHP Iron Ore Pty Ltd [No. 4] [2009] WASC 17
Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2005] WASC 60
(These reasons are an edited version of the reasons delivered extemporaneously on 3 September 2009.)
1 By chamber summons filed 6 August 2009 the defendant (Mr Lungan) applies for an order for particular discovery pursuant to O 26 r 6 of the Rules of the Supreme Court 1971 (WA).
2 I adopt the principles stated by Master Newnes in Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2005] WASC 60 as follows:
In determining whether to make an order for further discovery, the Court must have reasonable grounds for being fairly certain that there are other relevant documents which ought to have been discovered: Beecham Group Pty Ltd v Bristol Myers Co [1979] VicRp 27; [1979] VR 273. The Court must be able to infer from the nature of the document in question that it is relevant; it will not speculate as to its relevance. Relevance may either appear from the nature of the document or its contents, and if the latter then there must be a prima facie case as to the contents before an order for further discovery will be made: Astra-National Productions Ltd v Neo-Art Productions Ltd [1928] WN 218 at 219. Where an application is made in respect of a document referred to in a document already discovered (the relevance of the latter being conceded by its discovery) it is generally reasonable to assume, in the absence of a contrary indication in the document discovered, that the document referred to is relevant: see Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co [1882] 11 QBD 55; Kent Coal Concessions Ltd v Duguid [1910] 1 KB 904 at 915 and the discussion in PDM Australia Pty Ltd v Kellogg Overseas Corporation & Ors, unreported; SCt of WA; Library No 6646; 26 March 1987 at [5-14].
In determining whether a document relates to a matter in question, and, therefore, whether it ought to have been discovered, the test is that set out in Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (supra) as follows:
'It seems to me that every document relates to matters in question in the action which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may - not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in words "either directly or indirectly" because it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance its own case or to damage the case of its adversary, if it is a document which may fairly lead to a chain of inquiry, which may have either of those two consequences.'
The matters in issue are to be determined by reference to the pleadings: Mulley v Manifold [1959] HCA 23; (1959) 103 CLR 341 per Menzies J at 345. But regard must also be had to the conduct and admissions of the parties and the nature of the action: Schlam v WA Trustee Executor & Agency Co Ltd [1964] WAR 178 at 186.
It is also important to bear in mind that there is not a strict entitlement to an order for discovery, including an order for further discovery: Kent Coal Concessions Ltd v Duguid (supra) at 910. Moreover, amendments to the Rules in more recent times, including the introduction of O 1 r 4B and O 26 r 7, emphasise the need to have regard to the timely and cost effective disposal of the action in the exercise of the discretion to order discovery [3] - [6].
3 In the 'exercise of its discretion to grant discovery, or discovery of particular documents, the court should have regard, amongst other things, to the likely relevance and importance, in relation to the issues in the proceeding, of the documents and the likely time, cost and inconvenience of searching for and disclosing the documents': Westraint Resources Pty Ltd v BHP Iron Ore Pty Ltd [No. 4] [2009] WASC 17 [13].
4 Paragraphs 5 to 22 of Mr Lungan's outline of submissions set out facts said to underpin the parties' cases. With limited exceptions, the plaintiff (Hightime) accepts in its submissions that that outline provides a reasonable overview of the background facts. However, it is not clear that that outline is derived from the pleadings. The matters in issue are to be determined by reference to the pleadings: Youlden Enterprises [5].
5 Hightime claims damages and other relief on the grounds that Mr Lungan breached his fiduciary and other duties as an alternate director or director of Hightime. In par 4 of its statement of claim Hightime pleads that:
(a) Mr Lungan was engaged by Hightime to act as Hightime's agent in acquiring gold mining tenements in a part of Ghana referred to as the Ashanti Belt in the Salman Project Area; and
(b) the ultimate objective of acquiring the tenements would be for those tenements to warrant a company listing on the Alternative Investment Market in London.
Hightime's case focuses primarily on Mr Lungan's conduct in relation to tenements referred to as the Dadwen Tenure. There is also reference in par 21 of the statement of claim to interests in other tenements, referred to as the Temco Interest and the Satemkon Interest.
6 In his defence, Mr Lungan says in substance that he was performing work in Ghana for the third party to these proceedings, Adamus Resources Ltd, not for Hightime (par 5), and that business opportunities created by or available as a consequence of his work in Ghana were created for and on behalf of Adamus, and were opportunities available to Adamus rather than to Hightime (par 6.1). The defence pleads that:
(a) the Dadwen Tenure was contiguous with Adamus' Salman Project Area (par 6.1D(a) and par 11.2);
(b) the Dadwen Tenure had an enhanced value as a consequence of its proximity to the Salman Project Area (par 6.2B); and
(c) Messrs Gardner, Bojanjac and Halliday directed Mr Lungan to negotiate to acquire the interest in the Dadwen Tenure with a view to the exploitation of the Dadwen Tenure in conjunction with the Salman Project Area (par 6.2A).
7 Mr Lungan pleads that the direction given by Mr Gardner and by directors of Adamus to acquire an interest in the Dadwen Tenure in the name of and for the benefit of Hightime, rather than Adamus, was a breach of fiduciary duty owed to Adamus.
8 In par 6.9 Mr Lungan pleads that from October 2002 to April 2003 he acted as Adamus' country manager in Ghana and owed duties to Adamus in respect of that role.
9 Mr Lungan applies for an order that Hightime file an affidavit stating whether the documents in the categories referred to in sch 1, including but not limited to the documents enumerated in sch 2, are or have been at any time in its possession, custody or power and if not then in its possession, custody or power when it parted with the documents and what has become of them.
10 The categories set out in sch 1 in its final form, after amendments at the hearing, are as follows:
1.1 the acquisition of the Dadwen Tenure;
1.2 the acquisition of interests in other mining tenements within the Southern Ashanti Belt contiguous with Adamus Salman Project Area;
1.3 the exploitation by the listing of a company on the Alternative Investment Market in London or by sale to Adamus or otherwise, of the parcel of exploration tenements comprising Adamus Salman Project Area, and the contiguous gold mining tenements acquired or to be acquired within the Southern Ashanti Belt, in the name of the Defendant;
1.4 the conduct of Adamus' affairs in Ghana and their knowledge of his activities in that regard; and
11 Schedule 2 lists 122 documents. Each of the documents listed in sch 2 has been discovered by Mr Lungan. Consequently, the object of Mr Lungan's application is not to obtain new documents. Rather it is to require Hightime to state, by an officer on oath, whether the documents are or were in its possession and, if no longer in its possession, when it parted with them and what has become of them.
12 I would summarise the main issues that arise on this application as follows:
(1) Do the documents in the categories set out in sch 1 relate to matters in question?
(2) Are there reasonable grounds for being fairly certain that the documents listed in sch 2 are or were in the possession, custody and control of Hightime?
(3) To the extent that affirmative answers are given to questions 1 and 2, should the court's discretion be exercised in favour of an order for further discovery?
However, for reasons I will explain, I do not propose to resolve the second issue at this stage. I turn to the first issue.
13 Hightime submits that some of the categories in sch 1, or some parts of those categories, are too wide in that they relate to tenements that are not part of the pleaded case of any party.
14 Hightime accepts that categories 1.1 and 3 relate to matters in question. Hightime also accepts that part of category 2, namely the part that relates to the Dadwen Tenure, relates to matters in question.
15 In substance, there is a principle point of departure between the parties on the scope of the matters in question. Hightime contends that the action relates to the Dadwen Tenure and not to other tenements, although it accepts that the action relates to the two other interests referred to in par 21 of the statement of claim. Mr Lungan submits that the matters in question are not so confined. For the reasons that follow, I accept Mr Lungan's submission. I begin with category 1.2.
16 In par 4 of the statement of claim Hightime pleads that Mr Lungan was engaged by it to acquire gold mining tenements within the Southern Ashanti Belt in the Salman Project Area. The tenements referred to in category 1.2 are a subset of the tenements within the Southern Ashanti Project. Hightime rightly concedes that the instructions given by it and Adamus to Mr Lungan about the acquisition of the Dadwen Tenure relate to a matter in question. That topic is directly relevant to the issues in the action. One of those issues is whether tenements were being acquired for Hightime, as Hightime contends, or were being acquired for Adamus, as is contended by Mr Lungan. On Hightime's case, the acquisition of the Dadwen Tenure was part of a wider plan. The wider plan was the acquisition of tenements in the Southern Ashanti Belt. That being so, the instructions given by Adamus and Hightime to Mr Lungan about the wider plan are in my view directly relevant to the issues in the action.
17 For corresponding reasons, I am satisfied that categories 1.4 and 2 relate to matters in question. As to category 1.4, I also refer to par 6.9 of the defence.
18 I am also satisfied that category 1.3 relates to matters in issue in the action: see pars 4 and 20 - 23 of the statement of claim.
19 Consequently, I am satisfied that all the categories in sch 1 relate to matters in question. That brings me to the second issue.
20 The second issue is whether there are reasonable grounds to be fairly certain that the documents in sch 2 are, or more relevantly were, in the possession of Hightime. This was not a point on which Hightime took issue in its written submissions. However, it is a matter on which I am required to be satisfied in order to make an order under O 26 r 6 of the Rules of the Supreme Court 1971.
21 Many of the documents in sch 2 are such that the court can be comfortably satisfied that there are reasonable grounds to be fairly certain that the documents were in the possession, custody or power of Hightime. Examples of documents in this class may be found in communications by email or facsimile between Mr Lungan and Mr Gardner, and also memoranda written by Mr Lungan addressed to Mr Gardner. However, sch 2 contains other documents.
22 When I raised this point in the course of oral argument, counsel for Mr Lungan stated that the contents of the documents would assist in making good Mr Lungan's proposition that there were reasonable grounds to be fairly certain that all of the documents in sch 2 were in the possession of Hightime. In circumstances where Hightime had not raised any issue on this point, rather than engage in detailed analysis of a large number of documents in court, the parties agreed that it was a preferable course for them to confer on this point, assuming I was otherwise satisfied that an order for further and better discovery should be made.
24 It was the third issue which was the central focus of Hightime's submissions in opposition to Mr Lungan's application. Hightime emphasised the evidence of Mr Gardner. Mr Gardner, the sole director of Hightime, has sworn an affidavit in opposition to this application. The affidavit deposes that:
(a) Hightime's business records were held at different times at Mr Gardner's home and at Hightime's business premises;
(b) Since 2004 Mr Gardner has moved house three times and Hightime has moved business premises once;
(c) In 2004 and 2005 Mr Gardner searched Hightime's business premises, in particular its filing cabinets, for documents relevant to this matter;
(d) Mr Gardner also searched cardboard boxes containing copies of documents held by Hightime which were at Mr Gardner's house;
(e) In November 2005 Mr Gardner swore an affidavit of discovery;
(f) In April or May 2009 Mr Gardner searched Hightime's filing cabinets and his house for documents relevant to this matter, including documents which Mr Lungan had requested;
(g) From those searches he found 34 documents which were the subject of informal supplementary discovery;
(h) The April and May 2009 searches took approximately 15 to 20 hours;
(i) In June 2009, by his solicitors, Mr Lungan requested further and better discovery of 313 documents from Hightime which was comprised of 274 documents previously discovered by Mr Lungan and 39 documents previously discovered by Adamus;
(j) In about June 2009 Mr Gardner considered copies of Mr Lungan's informal list of supplementary discovered documents, and prepared a summary of responses said to have been drafted by his solicitors in relation to each of the documents listed;
(k) The responses (set out in annexure RG1 to Mr Gardner's affidavit) included 'irrelevant', 'never seen', 'have not seen before', 'not provided with a copy', 'never seen and irrelevant' and 'have had a copy but no longer possess it';
(I interpose that Mr Gardner's responses relate to most but not all of the documents the subject of this application. Schedule 2 is not limited to the documents in Mr Lungan's informal list of supplementary discovered documents dated 31 March 2009. It also includes some documents discovered on 29 May 2007.)
(l) Mr Gardner spent about 10 to 15 hours considering the documents in Mr Lungan's supplementary discovery;
(m) Mr Gardner estimates he would require approximately 10 to 15 hours to read each of the documents listed in Mr Lungan's application, formulating an instruction to his solicitors regarding each document, and in attempting to determine why Hightime no longer held each of those documents; and
(n) Mr Gardner estimates his solicitor's fees could be in the region of $3,000 to $6,000, being 10 to 15 hours' work, in relation to the consideration of each of these documents.
25 Subject to one matter, Mr Gardner's affidavit deals in a reasonably comprehensive way with the searches conducted in order to ascertain whether Hightime has possession of the documents the subject of this application. The affidavit is to the effect that Hightime does not now possess any of these documents, subject to one qualification. The qualification relates to emails, or to any documents stored or created electronically. In his affidavit Mr Gardner does not say anything about any investigations he has conducted or caused to be conducted searching any computers for emails or other electronically stored material.
26 The primary thrust of Mr Lungan's application is that he wants Hightime, by Mr Gardner, to state on oath whether it had the specified documents in its possession and, if so, what has become of them. Mr Lungan says that he is entitled, through the processes of discovery, to know now whether Hightime does or does not admit the receipt of these various documents. Mr Lungan says he should not have to wait until Mr Gardner is in the witness box to find that out.
27 It is true, as Hightime submits, that an affidavit of discovery will not say when, how, and in what circumstances the document came into the possession of Hightime. Nonetheless, it is not difficult to see the potential forensic benefit for Mr Lungan in knowing in advance which of certain documents Hightime admits receiving and which it does not.
28 A proper affidavit of discovery from Hightime will inform Mr Lungan which documents, including emails and facsimiles, are admitted by Hightime as having been received, and which are not. Among other things, that knowledge will enable Mr Lungan to make an informed decision whether to pursue other means of proving the sending in receipt of emails and facsimiles.
29 The extent of any potential benefit of the kind relied on by Mr Lungan depends upon the degree to which the document in question bears upon the issues in the case. A document that satisfies the Peruvian Guano test (Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55), because it may lead to a chain of inquiry, is thereby discoverable. However, evidence of receipt by Hightime of a document which had only that degree of relevance would not, to my mind, be of any significant forensic benefit to Mr Lungan. By contrast, evidence of receipt of a document that relates directly to a pleaded issue would or might give rise to a substantial benefit of the kind I have referred to.
30 In par 10 of Mr Lungan's responsive submissions dated 2 September 2009, statements are made about the contents of some of the documents in sch 2. Those documents are not in evidence before me.
31 Counsel for Mr Lungan indicated in oral argument that he would make good what was said in the responsive submissions by referring to the contents of the documents, unless it were not necessary to do so. In my opinion, it is not necessary to do so because, as I explained in dealing with the first issue, the subject matter of the categories of documents means that the documents are or may well be of direct relevance to the issues in the action.
32 Counsel for Hightime submits that any admission in an affidavit of discovery will be based only Mr Gardner's recollection and will not be of any significant evidentiary value, or of any significant assistance in cross examination. I do not accept that that is necessarily so.
33 Mr Gardner's evidence about the steps he has taken thus far might be thought to reveal a less than comprehensive investigation in relation to the question of whether the documents were once, but are not now, in Hightime's possession. As I have said, there is no evidence of investigation of computers in relation to emails or other electronic documents. There is no evidence of any inquiries that Mr Gardner has made with any other person.
34 In Mr Gardner's document in response to Mr Lungan's supplementary discovery, there is a rough and ready one line response in relation to each of the documents that he considered. That responsive document does not cover all documents the subject of this application. Moreover, a substantial number of the documents have a response of 'irrelevant'. That response says nothing about whether the document was ever received. If anything, a response in those terms might suggest that the document was received in that other documents are met with the response 'never seen' and 'irrelevant'. Consequently, the contents of Mr Gardner's responsive document do not detract from or remove the utility of a proper affidavit of discovery.
35 Mr Gardner provides what must be viewed as a very rough estimate of 10 to 15 hours as the time the process will take. Weighing the interests of justice and the cost effective disposal of the action, I do not think that the likely time that the exercise will require outweighs the potential benefit to Mr Lungan in Hightime being ordered to give further and better discovery. Moreover, it should not be thought that an order for discovery will necessarily require Mr Gardner to undertake an exercise which would otherwise not need to be done. To some degree at least, an order for discovery is likely to affect when rather than whether Mr Gardner must apply his mind to the question of whether these documents, or many of them, were received by Hightime. That will be so to the extent that Mr Lungan adduces the documents in evidence or puts them to Mr Gardner in cross-examination.
36 For those reasons, I am satisfied that the discretion to order further and better discovery should be exercised in favour of the making of an order in relation to the categories of documents in sch 1.
37 The parties should confer in relation to what specific documents should be the subject of an order for further and better discovery. The process of conferral will need to take account of two matters. The first is whether in respect of a given document it can be said that there are reasonable grounds to be fairly certain that the document was in the possession of Hightime. The second is whether the refining and confining of the categories set out in sch 1 affects whether any document in sch 2 should remain in sch 2.
38 I will adjourn the matter to a fixed date in anticipation that it can be vacated by consent if, as might be hoped, the parties agree as to the documents to be discovered.
Compagnie Financiere et Commerciale du Pacifique
Peruvian Guano Co
(1959) 103 CLR 341