Rio Tinto Ltd v Commissioner of Taxation

"The originals of documents relating to the planning of or decision‑making in relation to a transaction entered into by Argyle and CIC between 1 February 1996 and 12 May 1997 (AEST) including but not limited to: a. All documents recording or evidencing meetings, discussions, comments, analysis or advice concerning arrangements pursuant to which Argyle could 'purchase' additional franking credits, or obtain the benefit of additional credits to its franking account, in the 1996, 1997 or 1998 years. b. All documents recording or evidencing oral or written communications between Frank Drenth and Christopher Lenon in relation to securities lending arrangements in respect of Rio Tinto and Hamersley Iron between 1 February 1996 and 9 May 1997. c. All documents recording or evidencing oral or written communications between Christopher Robert Howard Bull, and Barry Lionel Cusack between 1 May 1997 and 31 May 1997 in relation to acquisition of franking credits including dividend assignment transactions. d. All documents recording or evidencing oral or written communications between members of the Executive Committee ('ExCo') (as referred to in the affidavit of Christopher Robert Howard Bull in paragraphs 29 et seq.), between 1 February 1996 and 31 May 1997 in relation to acquisition of franking credits by Argyle. e. All documents recording or evidencing legal advice obtained by Argyle in relation to any proposed transactions to acquire franking credits by Argyle (for purposes of discovery at this stage, a list of such documents with their dates will be acceptable). f. All documents recording or evidencing communications between Charles Gibbons and any of Christopher Robert Howard Bull, Frank Drenth, Beryl Kerr and Christopher Lenon between 1 January 1996 and 31 May 1997 in relation to the any proposed transaction to acquire franking credits by Argyle or the franking account of Argyle." 3 On the same day as the consent order was filed Rio Tinto filed a list of documents in the Rio Tinto applications (the List). The letter under cover of which the List was sent to the Commissioner was headed "Rio Tinto Limited & Ors v The Commissioner …. Federal Court Proceedings Nos V548‑556 of 2003". The List enumerated the documents "the Rio Tinto Companies have in their possession, custody or power". It was verified by Stephen John Consedine, Rio Tinto's company secretary, who affirmed that he was authorised to make the affidavit on its behalf and on behalf of Hamersley and Argyle. 4 On 1 July 2005 the Commissioner filed a notice of motion seeking orders: "1. That on or before 29 July 2005 the applicants complete discovery by filing and serving a list verified by affidavit of those documents coming within classes 2‑5 of the respondent's notice of motion dated 18 February 2005. 2. That the applicants' verified affidavit of documents indicate, in relation to each document listed, which of the classes stated in the respondent's notice of motion dated 18 February 2005 the document comes within."

At directions hearings on 7 July and 5 August 2005 counsel for the Commissioner handed the Court a document detailing numerous complaints about the applicants' discovery. Some have been resolved. The outstanding ones are the matters now before the Court.

THE ISSUES Discovery by Hamersley and Argyle 5 The Commissioner complains that the List does not satisfy Hamersley's and Argyle's obligations to give discovery. First it is said that there has been no discovery by those companies, and that the matter recorded at [3] cannot constitute satisfaction of their obligations. Parties are competent to agree upon the ambit of discovery to be provided. That is what was done in this case. In lieu of each applicant making discovery, it was agreed that one verified list of documents would be provided. The Court endorsed the agreement by the consent order of 1 June 2005. Pursuant to the order a single verified list was filed in the Rio Tinto proceedings on behalf of all applicants. The List stated that pursuant to the order of 5 September 2003 it was to be taken to be filed in all proceedings. It listed the documents in the possession, custody or power of "the Rio Tinto Companies", defined therein as Rio Tinto, Argyle, Hamersley and Rio Tinto plc (a British company). Putting other complaints aside, the Commissioner has obtained what he sought in the notice of motion filed on 18 February 2005 and by the consent order, namely a list of documents made by the applicants. 6 It was submitted for the Commissioner that discovery that ignores the identity of the particular applicant which had possession, custody or power of a particular document does not comply with Order 15 rule 6(2). That provides: "A list of documents shall enumerate the documents which are or have been in the possession, custody or power of the party making the list."

The Commissioner may be correct in his claim that the rule contemplates that each of several applicants will make a separate list. But, as I have said, the parties are competent to make their own arrangements as to the extent of discovery and the manner in which it will be provided. Certainly Order 15 rule 6 does not impose a straitjacket on the Court which, in relation to discovery, can tailor its orders to the circumstances of the particular case. See Practice Note No 14 par 1(b) and ACCC v Advanced Medical Institute Pty Ltd [2005] FCA 366 at [21] (Advanced Medical). Where, as in the present case, the parties come to what appears to have been a sensible arrangement as to discovery by Rio Tinto and its wholly owned subsidiaries, the Court endorses that arrangement, and the applicants have relevantly complied with the order and carried out their part of the agreement, the Court would have to be provided with strong reason to set aside the agreement over the protest of the complying party, so as to require the discovery process to begin afresh in strict compliance with Order 15 rule 6. No such reason exists.

7 A related complaint is that Mr Consedine is not an officer of either Hamersley or Argyle and is not competent to make the verifying affidavit on their behalf. Order 15 rule 9 of the Rules provides, so far as presently material: "(1) Subject to subrule (2), an affidavit verifying a list of documents of a party or an affidavit to be filed by a party pursuant to an order under rule 8 may be made as follows: (a) by the party; … (c) where the party is a corporation or organisation by a member or officer of the corporation or organisation; … (2) Where the party is a person to whom any of paragraphs (1) (c), (d) and (e) applies and the affidavit is to be filed and served pursuant to an order, the Court may: (a) specify by name or otherwise the person to make the affidavit; or (b) specify by description or otherwise the persons from whom the party may choose the person to make the affidavit. (3) Subject to subrule (2), where the party is a person to whom any of paragraphs (1) (c), (d) and (e) applies, the party shall choose a person to make the affidavit who is qualified under the relevant paragraph and has knowledge of the facts." 8 The word "officer" is not defined by the Rules. In Microsoft Corporation v CX Computer Pty Ltd (2002) 187 ALR 362 Lindgren J adopted for rule 9 purposes the definition of "officer of a corporation" in the Corporations Act 2001. There is no evidence that Mr Consedine is a director or secretary of Hamersley or Argyle or that he fits any of the other descriptions in that definition. 9 The Commissioner relied on the observations of Mansfield J in Brookfield v Yevad Products Pty Ltd [2002] FCA 1376 at [21] about the heavy responsibility of providing a reliable list of documents. In that case the applicant sought an order setting aside a judgment against him on the ground that part of the discovery given by the successful party was flawed because the person who provided, and deposed to the accuracy and completeness of, supplementary lists of documents, did not have the authority of the discovering company. That person had been the State manager of the company, but had ceased to hold that office before he subsequently verified the supplementary lists. Mansfield J held that Order 15 rule 9 had not been satisfied, but declined to make the orders sought. His Honour said at [20]‑[22]: "It does not necessarily follow that the applicant is entitled to the orders sought. The consequence that might follow from a finding that a list of documents has not been verified in accordance with the O 15 r 9 of the Rules should, in my view, be considered in the context of the Rule and its purpose. The purpose of verification of a list of documents by affidavit is to ensure that the Court receives from the discovery party a reliable list of the documents in its possession custody or power. … The applicant submitted that it was a necessary consequence of non‑compliance with O 15 r 9 of the Rules that the discovery given was in fact inadequate or otherwise flawed, that is Yevad/Davey did not discover all the documents that it should have discovered. He was unable to point to any authority to support such a conclusion, and the respondent submitted that there are no such authorities. In my view, the only proven consequence of the respondent's failure to comply with the O 15 r 9 was that the various supplementary lists of documents did not have the force of an oath of the party required to make discovery. However, I do not consider that that conclusion … in any sense leads to a further conclusion that the discovery by Yevad/Davey was fraudulent or incomplete." 10 His Honour went on to say at [24] that even though Order 15 rule 9 had not been complied with, he did not think that, in the circumstance of the case, the orders sought should be made: "On the evidence, I am satisfied that Yevad/Davey through Fahy sought to comply with its obligation to give discovery, at least in the sense of seeking to comply with O 15 of the Rules. Both it and its solicitors approached the performance of that obligation on the understanding that Wilsdon was an appropriate person to give instructions about the existence of discoverable documents, and to verify the lists of documents. Yevad/Davey could not hide behind the fact that Wilsdon was not, or may not have been, its officer in giving the discovery. It has not sought to do so in the past. It has accepted that it is accountable for any deficiencies in the discovery it provided, but has to date successfully resisted the claims of the applicant that the principal judgment and the costs order should be set aside due to any deficiencies in its discovery. Fahy's affidavit clearly indicates that it will maintain that stance. Hence, the purpose of verification in that regard has been fulfilled." 11 His Honour then adverted to other considerations showing that, in effect, Wilsdon continued to manage the same business with the same records as he managed prior to his departure from office, but under another corporate master. Thus, said his Honour "The purpose of O 15 r 9 of imposing upon a responsible person the duty of ensuring compliance with the discovery obligations of Yevad/Davey was in that way also in substance fulfilled in the circumstances." 12 Mr Consedine is the company secretary of Rio Tinto, and says he is authorised by its wholly owned subsidiaries to make the affidavit on their behalf. There is no suggestion that that is not true. Having regard to the order of 5 September 2003, the parties' agreement as to discovery, the court's order of 1 June 2005, the applicants' compliance (in presently relevant respects) with the order, and that neither Hamersley nor Argyle has sought to disavow the authorisation given to Mr Consedine to verify the List on their behalf, I do not propose to order that the List be verified by officers of Hamersley and Argyle as well as by the secretary of their holding company. If necessary, I would excuse under Order 1 rule 8 any non‑compliance with Order 15 rule 9.

What class does a document come within 13 The respondent's 18 February 2005 notice of motion sought provision of a list of documents complying with certain requirements, one of which was that the list be divided into sections, each listing the documents falling within each class. The Commissioner complains that the List fails to identify within which of classes 2 to 5 each document falls. By the consent order the applicants were to provide a list "of those documents which are discoverable under classes 2‑5". In the List the applicants state that they do not admit either that the Commissioner's classes of documents (classes 2‑5) are relevant to the proceedings by reference to the issues in dispute as defined by the parties' Statements of Facts, Issues and Contentions or that each document falls within each of the classes, save that each falls within at least one of them. 14 The consent order does not expressly require the applicants to allocate each document to a class identified by the Commissioner. However, what is recorded at [13] shows that the applicants have gone through a process of determining what documents fall within the various classes. See in particular the words "each falls within at least one of them". In those circumstances it is appropriate that the applicants allocate the documents to one or more of the classes. This course is preferable to the alternative of imposing on the Commissioner, whose documents they are not, the task of allocating them, which will involve greater delay and expense. The applicants' concerns about relevance are protected by the statement in the List that they do not admit that the Commissioner's classes are relevant to the proceedings, and that relevance is to be determined by reference to their respective Statements of Facts, Issues and Contentions.

Masking for irrelevance 15 The applicants have sealed parts of the documents, namely those listed in Sections C and D of Schedule 1 Part 1 of the List, on the ground of "irrelevance and that the sealed portions of these documents contain subject matter which at the very least do not fall within any of the classes of documents annexed to the affidavit sworn by Edwina McLachlan on 18 February 2005 and in most cases do not relate in any way to the transactions which are the subject of these Proceedings". The Commissioner contends that this sealing of parts of documents is inappropriate. 16 The applicants rely for the sealing on the long accepted practice referred to in GE Capital Corporate Finance Group Ltd v Bankers Trust Co [1995] 1 WLR 172 (GE Capital). There at 174 Hoffmann LJ said it has "long been the practice that a party is entitled to seal up or cover up parts of a document which he claims to be irrelevant". His Lordship quoted with approval the following passage from Bray's Digest of the Law of Discovery 2nd ed (1910) pp 55‑56: "Generally speaking, any part of a document may be sealed up or otherwise concealed under the same conditions as a whole document may be withheld from production; the party's oath for this purpose is as valid in the one case as in the other. The practice is either to schedule to the affidavit of documents those parts only which are relevant, or to schedule the whole document and to seal up those parts which are sworn to be irrelevant." 17 Dillon LJ said at 177: "The history over the last 100 years of the practice of sealing up or covering over parts of documents which are disclosed on discovery on the ground that those parts are irrelevant is strongly against the other party having any automatic right to see the whole of the document in order to determine for himself whether the parts covered up are indeed irrelevant to the issues in the action. Indeed the established practice of sealing up or covering over parts of documents would hardly have developed if the other party could immediately break the seal or tear away the cover to see the contents himself."

18 GE Capital was applied by Lockhart J in Optus Communications Pty Ltd v Telstra Corporation Ltd [1995] FCA 254 (Optus): "Certain of the masked portions of document K7139 and K2224 are, however, conceded by Telstra to be not the subject of legal professional privilege; but Telstra contends that they are immune from disclosure to Optus because the masked portions are irrelevant. I accept the submission of counsel for Telstra that the masked portions in question are irrelevant. It is well established that it is permissible to mask irrelevant material in documents that are otherwise discoverable: Curlex; and G E Capital Corporate Finance Group Limited v Bankers Trust Co (1995) 1 WLR 172. Generally, masking on the ground of irrelevance is permissible only where that ground is deposed to in an affidavit from the party or the appropriate officer of a party if it is a corporation: see Curlex and G E Capital Corporate Finance Group Limited. But it is for the Court in the exercise of its discretion, to decide in a particular case whether this ground has been established." See also Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd [1998] FCA 299 (Wimmera). 19 In Gray v Associated Book Publishers (Aust) Pty Ltd [2002] FCA 1045 at [9] Branson J said: "The rules of the Federal Court provide no basis for 'a claim of irrelevance' in respect of a portion of a document that falls within the terms of an order for discovery. However, it is clear that the power of the Court to order that a discovered document be produced for inspection by another party is a discretionary power (see O 15 r 11)."

At [14] her Honour spoke of "an established practice whereby inspection is provided of discovered documents with parts of the documents masked". In this connection she referred to GE Capital and Optus amongst other cases, and continued:

"Where there is a valid claim for privilege in respect of the portion of the document withheld from inspection, this practice is based on a positive right to withhold from inspection that part of the document. However, there is no such positive right in respect of portions of documents sought to be withheld from inspection on the grounds of confidentiality or irrelevance …." 20 Branson J then approved, as applicable to cases in this Court where categories of documents are required to be discovered and thereafter made available for inspection, the following observations of McLelland CJ in Eq in Telstra Corporation v Australis Media Holdings (10 February 1997, Supreme Court of New South Wales, unreported) (Telstra): "Under the new discovery rules, Pt 23 of the Supreme Court Rules, … classes of documents required to be discovered may be, and were in the present case, specified not by reference to relevance to a fact or facts in issue, but by description of the nature of the documents, rendering it unnecessary to consider questions of relevance to an issue, as such. If in such cases the party giving discovery desires to withhold, by [masking] or otherwise, production of part of a discoverable document on the ground that that part does not contribute to the satisfaction of any of the criteria by reference to which the class of documents is described, then it may be that a case can be made for giving effect to that desire, but in my view, unless there is some relevant qualification in the order for discovery, the order requires that the whole document be produced unless there is an agreement to the contrary by the party to which discovery is being made, or unless relief from the requirement, for example by [masking] certain portions is obtained from the Court."

After noting that the respondents had not obtained agreement to the masking or relief from the Court, Branson J examined the documents and concluded that the applicant should be shown complete copies of them.

21 In ACCC v McMahon Services Pty Ltd [2004] FCA 353 Selway J followed Gray, and said at [12]‑[13]: "It may be that there is a practice in England that parts of a document can be masked simply because those parts of the document are not thought to be relevant: see GE Capital …. However, in this Court the Rules and the practice would seem to be quite clear that what must be discovered and produced (save for any question of privilege) is the whole of the document if any part of it is discoverable. Indeed, the fact that part of the document is relevant may well mean that all of it is relevant if only to provide the context for that part of it which is directly relevant. There remains a discretion not to order that the masked part of the documents be produced: see, in the somewhat different context of Order 15A, Sony Music [Entertainment (Australia) Ltd v University of Tasmania (2003) 57 IPR 77] at 89‑92."

His Honour then examined the documents, and concluded that they should be produced in their entirety.

22 To a similar effect are Candacal Pty Ltd v Industry Research & Development Board [2005] FCA 649 at [52]‑[63], Garnet International Resources Pty Ltd v Barton International Inc [2005] FCA 93 at [7]‑[17] and Westfield Management Ltd v Brisbane Airport Corporation Ltd [2004] FCA 611 at [12], [22]‑[24]. 23 The applicants submit that Gray and the cases that have followed it were wrongly decided for two reasons. The first is that in Gray the Court was not referred to Optus or Wimmera. That is not so. Branson J referred to GE Capital, Optus and several other cases in support of "the established practice" of masking parts of documents. It is neither here nor there that Wimmera was not added to the list. The second reason is that Gray wrongly applied Telstra, because that case depended on the new discovery rules of the Supreme Court of New South Wales, whereas in this Court relevance is still the critical means of delineating discovery. The applicants rely on the decision of Lindgren J in Advanced Medical at [21]‑[25]. Telstra turned on the fact that under the new discovery rules classes of documents required to be discovered may be, and were in that case, specified not by reference to a fact or facts in issue, but by description of the nature of the documents. That is what the parties agreed to in the present case. Accordingly Telstra cannot be displaced here on the ground that it turned on the special nature of the new rules. 24 There is now a solid body of recent cases in this Court following Gray in preference to GE Capital and Optus. Those authorities are directed to the particular discovery rules of this Court, and it is appropriate that I defer to them. As I have said, Gray adverted to the practice in England, and did not adopt it. Optus, which was also referred to in Gray, simply followed GE Capital, and there appears from the report to have been no advertence to any different approach. 25 Apart from the desirability of following recent decisions of this Court, in my view they adopt the preferable approach. It is inappropriate for a party unilaterally to determine the relevance of parts of otherwise discoverable documents by masking those parts. The party can make its case for masking to the Court, which if persuaded, can authorise it. 26 In truth there is little difference between the two approaches. In the Gray line of cases, the party asserting the irrelevance of part of a document asks the Court to inspect it to determine the question. There is a discretion to mask in an appropriate case. In the GE Capital cases the party masks what is said to be irrelevant and the other side moves to unmask. In GE Capital and Optus the court examined the document to determine the question. 27 For reasons that need not be set out, the parties were agreed that all I should do was to determine the question of principle involved in the foregoing discussion, and not attempt at this stage to apply the preferred approach to the documents in question.

Reliance on Order 15 rule 2(4) 28 In paragraph 10 of the List the applicants say: "Pursuant to Order 15 rule 2(4) of the Federal Court Rules, the Applicant and the Rio Tinto Subsidiaries are not obliged to, and have not, disclosed documents that they know to be already in the possession, custody or control of the Respondent."

Order 15 rule 2(1) provides that a party required to give discovery must do so within the time specified in "the notice of discovery". Sub‑rule (2) requires discovery to be given by serving a list of documents and an affidavit verifying the list. Sub‑rule (3) lists the classes of documents required to be disclosed. Sub‑rule (4) then provides that

"a document is not required to be disclosed if the party giving discovery reasonably believes that the document is already in the possession, custody or control of the party to whom discovery is given." 29 The Commissioner contends that sub‑rule (4) has no operation to the applicants' discovery because it applies only to discovery on notice under sub‑rule (1). If the sub‑rule does apply, the Commissioner contends that while he may be in possession of copy documents, the sub‑rule does not relieve the applicants of their obligation to discover original documents. I doubt that the Commissioner is in a position to advance the first of these contentions. In his 18 February 2005 notice of motion he requires the applicants' discovery to comply with Order 15 rule 6. However, assuming in favour of the Commissioner that sub‑rule (4) is either inapplicable or, if applicable, is limited to original documents, I would not make an order for discovery of the documents in paragraph 10 of the List. Rule 15 provides: "The Court shall not make an order under this Order for the filing or service of any list of documents or affidavit or other document or for the production of any document unless satisfied that the order is necessary at the time when the order is made."

In Commonwealth v Northern Land Council (1991) 30 FCR 1 at 24‑25 the Full Court said:

"The same criterion of 'necessity' governs orders for the filing or service of lists of documents as governs orders for their production. It is a reflection of the policy of judicial case management that underlines the Federal Court Rules generally. It is a broad criterion which requires consideration of the interest of justice in the particular case as well as its economic and efficient disposition."

The Commissioner has not indicated why he needs discovery of these documents. Indeed his case seems to be that he needs to see the originals of those of which he has copies. That he can do by seeking their production.

Restricted source and non‑source documents 30 In paragraph 4(b) of the List the applicants have adopted the position that they are not required to produce for inspection so‑called "Restricted Source Documents" in accordance with the Commissioner's policy in relation to accountant's advice. The Commissioner claims that the applicants' stance is incorrect, because his administrative concession in respect of accountant's advice was, in its application to the present cases, revoked by his letter of 14 May 2003. However he made no submissions on this topic at the hearing. This issue was the subject of an affidavit by the applicants' solicitor, Mr Schoenberg, sworn on 23 August 2005. The motion was heard on 24 August, and counsel for the Commissioner informed the Court that there had been insufficient time to consider and respond to that affidavit, amongst others also filed shortly before the hearing. In those circumstances, although the issue was not expressly mentioned as one that should be deferred, I will treat it as such.

Verification of the List 31 I have dealt with this issue so far as it concerns Mr Consedine's capacity to verify the List on behalf of Hamersley and Argyle. The Commissioner also took issue with the adequacy of the verification. It was said that Mr Consedine's affidavit is "notable for its brevity and its lack of information as to his state of knowledge or the nature of such enquiries (if any) which he made prior to swearing the affidavit". The Commissioner's written submissions on this issue refer to an affidavit of Mr Consedine sworn on 18 August 2005. It is said that the "manner in which he has sworn his affidavit of 18 August 2005" casts considerable doubt on whether he had any personal knowledge of the matters he purported to verify in his affidavit of 30 May 2005 verifying the List, and whether he has performed any inquiries to satisfy himself of the basis for the assertions in the List he purported to verify. In the course of argument counsel for the Commissioner said the Commissioner had not had adequate opportunity to deal with Mr Consedine's recent affidavit, and I understood that this issue was to be deferred together with the related issue of legal professional privilege.

CONCLUSION 32 The parties should submit minutes to give effect to these reasons. Those minutes and any submissions as to costs should be filed on or before 29 September 2005. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg.

Associate: Dated: 22 September 2005 Counsel for the Applicants: JW de Wijn QC and SH Steward

Solicitor for the Applicants: Allens Arthur Robinson

Counsel for the Respondent: BJ Sullivan SC and RS Hollo

Solicitor for the Respondent: Australian Government Solicitor