BETWEEN : T O'CONNOR & SONS PTY LTD (ACN 001 664 740)

Practice and procedure - Discovery - Application for further and better discovery - Nature of evidence required to support such an application - Whether an order should be made providing for cross-examination of a person who has sworn an affidavit of discovery - Application dismissed on grounds that the case underlying the application for further and better discovery was speculative - Application for cross-examination and for the issue of a subpoena to a third party dismissed on the same grounds - Turns on own facts

Rules of the Supreme Court, 1971, O 26 r 6, O 36 r 12

1 HASLUCK J: The parties to these proceedings each provided discovery of documents in the usual form, that is to say by filing and serving, a list of documents verified by affidavit. The plaintiff, T O'Connor & Sons Pty Ltd, then raised an issue as to whether the discovery provided by the defendant, Entact Clough Pty Ltd, was sufficient. The plaintiff took out a chamber summons for further and better discovery and supported the same by filing and serving an affidavit sworn by the plaintiff's solicitor, Ronald David Windevere Bellman on 18 September 2001.

2 On 26 November 2001 an order was made for further discovery whereby the defendant was to make and file an affidavit stating whether certain specified documents were or had been in its possession, namely, all notes, memoranda, correspondence and other documents in respect of the defendant's dealing and/or Clough Engineering Ltd's dealings with Indosuez Australia Ltd.

3 The defendant purported to provide further discovery in compliance with the November discovery order by filing and serving the affidavit of Kevin Joseph Luttrell sworn 10 December 2001 which verified a supplementary list of documents. Mr Luttrell is a director of Clough Engineering Pty Ltd and affirmed that he was authorised to swear the affidavit on behalf of the defendant.

4 These events gave rise to some exchanges between the parties. By letter dated 15 February 2002 the plaintiff's solicitor, Mr Bellman, alleged that the defendant had failed to make proper discovery as ordered. His letter reads in part as follows:

"... in particular we refer to the document numbered 44 which you produced as part of that discovery. That document is a fax from Indosuez dated 5 November 1993 and it is a response to a fax from Entact Clough dated 4 November 1993. You have not discovered the Entact Clough fax. That fax of 5 November 1993 makes reference to a loan facility agreement which you have not discovered. That fax also makes reference, on page 4 thereof, to a Step-in Agreement and a Deed of Priority, neither of which have been discovered."

5 By a letter dated 8 March 2002 the defendant's solicitors, Jackson McDonald, replied on behalf of their client. The defendant denied that there had been a failure to make proper discovery. The solicitors went on to say that the fax in question could not be located. They then provided discovery of a Loan Facility Agreement of 17 November 1993, a Step-in Agreement of 10 November 1993 and a Deed of Priority of 17 November 1993.

6 The plaintiff continued to assert that there were in existence further documents which fell within the terms of the November discovery order and which had not been discovered. Accordingly, the plaintiff now seeks an order that the defendant make discovery of the particular documents referred to in the chamber summons before me dated 23 July 2002, that is to say, all notes, memoranda, correspondence and other documents in respect of the defendant's and/or Clough Engineering Ltd's relationship with Indosuez and the Commonwealth of Australia through the Overseas Property Group (known as "OPG") in respect of the project occasioning the dispute between the parties.

7 Further, an order is sought that the plaintiff have leave to cross-examine Kevin Luttrell on his affidavit of discovery sworn 10 December 2001 on a date to be fixed (being the affidavit sworn on behalf of the defendant in response to the November discovery order).

8 The plaintiff also seeks orders that it have leave to issue a writ of subpoena duces tecum addressed to the directors of Indosuez and the Attorney-General of the Commonwealth. It is proposed that the defendant be required to appear on a date to be fixed and to produce the documents referred to in the chamber summons. The plaintiff seeks leave to inspect and copy the documents produced by Indosuez and/or the Commonwealth.

9 Put shortly, the plaintiff contends, having regard to the further documents discovered in response to the November discovery order, that there is evidence to suggest that there was an "underlying arrangement" bearing upon the outcome of the project in question which was entered into or brought about by Clough Engineering, Indosuez, the Commonwealth of Australia (through the OPG) and the defendant.

10 The plaintiff says further that Mr Luttrell failed to disclose any documents relating to the so-called underlying arrangement with the result that the orders sought in this application are necessary. It is said further that the existence and terms of the underlying arrangement are relevant to the plaintiff's claim for misleading and deceptive conduct and to the defendant's obligation (and possible failure) to mitigate its loss.

11 The plaintiff relies principally upon the affidavit of Ronald Bellman sworn 24 July 2002 which adopts the earlier affidavit of Ronald Bellman sworn 18 September 2001. The defendant relies upon the affidavits of Kevin Joseph Luttrell sworn 20 November 2001 and 25 September 2002.

12 In order to understand the issues raised by the plaintiff's application I must begin by turning to the background to the dispute between the parties.

13 It seems that as at 1993 the Commonwealth of Australia was the owner of land situated at Soi Attakarn Prasit, Bangkok, in the Kingdom of Thailand. There were constructed on the site at that time residential townhouses and service facilities housing staff of the Australian Embassy. The remaining staff of the Embassy resided in 43 units leased by the Commonwealth situated at various locations around Bangkok.

14 The Commonwealth wished to accommodate all of its Embassy staff on the Embassy site and to this end decided to engage a contractor to develop, design, document and construct 51 residential apartments on the Embassy site.

15 The Commonwealth regarded the building project as a turnkey arrangement whereby the successful tenderer would not be paid progress payments by the Commonwealth during the construction period and would be responsible itself for the financing of its costs and disbursements incurred in completing the project. It seems that the Commonwealth intended to use rental payments being made on behalf of its Embassy staff (which were funded out of annual budget appropriations) as a means of funding the project.

16 In April 1993 the Commonwealth issued a request for tender which included a draft head contract whereby the head contractor would only be paid upon the practical completion of the project. The form of payment was complex. The entitlement to payment was based on the successful tenderer's costs of construction to which were added financing costs and the client management fee which was an amount of $3,000,000 (AUD) payable to the Commonwealth with respect to the costs which it would incur in assisting in the development of the design. Under the head contract the total of the costs of construction, the financing costs and the client management fee was known as the total project sum.

17 In the tender, the tenderer was to nominate both a works financier and an end of financier. The latter was in turn to nominate the present value which it would put on 12 payments to be made to it, known as the discounted contract sum. The end financier was also required to specify the discounted rate which it used in order to derive the discounted contract sum.

18 The present value of that series of 12 payments (ie the discounted contract sum) was to not only fund the total project sum but it was also to pay for the maintenance and upkeep of both the apartment block on the Embassy site. To that end the head contractor was required to pay to the Commonwealth a site maintenance fee seven days after practical completion. That fee would constitute the principal of a sinking fund from which maintenance and upkeep were to be paid for.

19 The head contract was awarded to Clough Engineering Ltd who in turned assigned the contract to the defendant. Under the relevant tender Indosuez Australia Ltd, sometimes called ISAL, was nominated as both the works financier and as the end financier. The discount rate adopted by Indosuez in deriving a discounted contract sum was 7.7799743 per cent.

20 The prime contract provided, amongst other things, that the contract sum was $27,632,132 (US) and the Commonwealth was to pay the contract sum to Clough Engineering in accordance with the provisions of the Instalment Payment Deed. In the manner contemplated by the tender documents, the Instalment Payment Deed provided that the Commonwealth would pay the contract sum to Clough Engineering by 12 consecutive annual instalment payments.

21 The Instalment Payment Deed also provided, in effect, that if the actual date of practical completion occurred after the date nominated in the prime contract for practical completion, the first instalment payment would be made on the date of actual practical completion, and all instalment payments thereafter would be paid on the anniversary of the date nominated in the prime contract for practical completion. The Commonwealth would satisfy its obligation to pay the balance of the contract sum by issuing promissory notes to Clough Engineering.

22 The effect of Article 3.2 of the Instalment Payment Deed was to increase the present value of all but the first of the 12 payments in the event that the project was delayed.

23 I pause to observe that in the events which happened there was a delay in the project of approximately nine months and, as a result, the present value of the instalment payments, after application of the relevant discount rate, was increased by $946,802 (US). The delay in the project and the consequential effect on the financial arrangements between the parties is the principal cause of the present litigation. It also serves to explain the intensity of the plaintiff's wish to pursue the underlying arrangement issue and to ensure that there has been a full and proper compliance with the November discovery order.

24 The plaintiff company had tendered for the project in its own right but its tender was not successful. However, the defendant subsequently awarded certain electrical and air-conditioning works to the plaintiff. It is the contract relating to those works that has given rise to the dispute the subject of the present litigation between the parties.

25 The plaintiff alleges that during the course of the negotiations whereby certain works under the prime contract were to be subcontracted to the plaintiff, namely, fire protection services, mechanical services, hydraulic services and electrical services, the defendant represented that the duration of the project would be 56 weeks. The plaintiff allegedly relied upon this and other representations in entering into a subcontract whereby the plaintiff agreed to perform the subcontracted work for the sum of $5,000,000.

26 It is alleged that on or about 30 October 1993 the defendant issued a construction programme which stated that the design and construction of the project was to commence on 21 October 1993 and practical completion of the project was to be achieved by 15 November 1994. However, practical completion of the project did not occur until 7 August 1995, that is to say, some 258 days after 15 November 1994.

27 The plaintiff says that as a consequence of the delay in achieving practical completion, the plaintiff was precluded from completing the subcontract for approximately 258 days after the date anticipated in the programme for completion of the work. It is alleged the plaintiff has suffered loss and damage in the nature of delay costs. The plaintiff contends that the representations allegedly made by the defendant were misleading and deceptive in that the defendant did not have reasonable grounds for making the same.

28 The defendant denies that it is liable to the plaintiff. It admits issuing a construction programme but denies that the statements relied upon by the plaintiff were misleading or deceptive in that the defendant had reasonable grounds for making the statements complained of and, in any event, the statements were subject to any extensions of time allowed under the prime contract.

29 The defendant says it could not reasonably have anticipated delays to the extent which occurred. It denies that the plaintiff was prevented from completing the subcontract for 258 days. It admits that but for the matters alleged in the counterclaim it would owe the plaintiff $430,367. It denies that the plaintiff has suffered any loss and damage.

30 The defendant counterclaims against the plaintiff alleging that because of breaches of the subcontract by the plaintiff, the defendant was required to demolish or remove completed parts of the apartment complex. This was necessary in order to enable the defendant to rectify the plaintiff's defaults and complete the services the subject of the subcontract. The defendant counterclaims for damages in the sum of $701,310 in respect of the defaults and in the sum of $162,921 for completing the subcontract. It seeks recovery also of the sum of $370,468 which the defendant was allegedly obliged to pay the Commonwealth in respect of liquidated damages.

31 On 17 August 2001 the plaintiff's solicitors contended (by letter) that the discovery provided by the defendant was deficient and sought discovery of all documents, memoranda, notes, agreements, proposals and other paperwork as between the defendant, Clough Engineering and Indosuez with respect to the project.

32 Subsequent exchanges reflected a contention by the plaintiff in relation to the defendant's counterclaim that if the plaintiff was responsible for any delay in consequence of which the defendant suffered any loss then the quantification of such loss involves a consideration of both any financial losses suffered by the defendant in consequence of the delay and any offsetting financial benefits which might flow to the defendant in consequence of the delay.

33 In other words, as to the latter aspect of the matter, if the defendant obtained a benefit from the delay in the form of an increase in the consideration which it received from the assignment of its entitlement to receive the 12 payments, or some other benefit of a related nature, then the defendant was obliged to offset that benefit against the losses which it allegedly incurred as a result of the delay of which the plaintiff is said to be responsible. Alternatively, if the defendant failed to obtain any benefit from the delay, for which the plaintiff was said to be responsible, then that would raise an issue as to whether the defendant had mitigated its loss.

34 This brings me back to the so-called underlying arrangement. The plaintiff contended that the defendant had or might have entered into certain financial arrangements whereby a delay in the project had the effect of producing financial gains to the defendant and/or other parties including Indosuez and possibly the Commonwealth Government.

35 More particularly, the position expressed by the plaintiff was to this effect. The defendant was to receive 12 payments in the amounts set out in the instalment deed with the first payment to be made within seven days of actual practical completion of the work. The remaining 11 payments were to be made on the relevant anniversary of the date nominated for practical completion as distinct from the date of actual practical completion. If the project was delayed and the present value of the 11 payments increased from what the present value would have been if practical completion had been achieved on the nominated date, then that increase would have amounted to approximately $100,000 for every month that the works were delayed.

36 In that way, the plaintiff contended, a delay in the works would generate a windfall gain to either the defendant or to the Commonwealth. The documents in respect of which discovery was sought would allegedly reveal which of the defendant or the Commonwealth shared the alleged windfall gain and whether the gain was shared. If the defendant did receive the alleged windfall gain then that gain should be taken into account in quantifying the defendant's damages. If the defendant did not receive any of the gain then the defendant failed to mitigate its loss.

37 The defendant denied that there was any net benefit to the defendant, Indosuez or the Commonwealth as a result of any delay in relation to the 11 future instalment payments and submitted that the plaintiff's contention was fallacious and speculative. The defendant denies that there was an underlying arrangement of the kind contended for by the plaintiff and denies that it has failed to comply with the November discovery order. It opposes the plaintiff's application for further and better discovery.

38 Before proceeding to the details of the underlying arrangement issue, it will be useful at this stage to complete my description of the interested parties. I have noted that supervision of the project for the Commonwealth was handled by OPG. I should also note that OPG engaged a company called Claymore Structured Finance to assist it in structuring the financial elements of the project including the complex arrangements for payment.

39 The principal solicitor for the plaintiff, Mr Bellman, said in an affidavit sworn 24 July 2002 that after carefully examining the documents the subject of the supplementary discovery he entertained a strong suspicion that there were in existence further documents which ought to have been discovered.

40 Paragraph 5 and par 6 of Mr Bellman's affidavit are in these terms:

"5. After carefully examining those documents I entertain a strong suspicion that there are in existence further documents which would fall within the terms of His Honour's Discovery Order and which have not so far been discovered. That suspicion is based on a suspicion that Clough Engineering and Entact Clough ('EC') together with Indo Suez Australia Ltd ('ISAL') and the Commonwealth of Australia through the Overseas Property Group ('OPG') entered into an underlying arrangement ('the Underlying Arrangement').

6. So far as the materials permit I suspect that the terms of the Underlying Arrangement are as follows:

(a) If the Project (being the construction of two apartment blocks consisting of 52 apartments at Attakarn Prasit) was to be constructed in Bangkok using Thai labour then it would take approximately 18 months.

(b) The cost incurred by EC to design that Project would be $USD 365,270 and the cost to construct would be $USD 12,780,000.

(c) The period from the commencement of the Project to practical completion under the contract to design, document and construct ('the DDC Contract') the Project would be approximately 12 months.

(d) If the Project was in fact completed within 18 months OPG would not impose liquidated damages, which it would otherwise be entitled to do under the DDC Contract.

(e) The effect of setting an artificially short period as the period of construction would be to increase the present value of the second to the twelfth payment ('the Relevant Payments') made under the Instalment Payment Deed.

(f) An increase in the present value of the Relevant Payments would enable the ISAL to nominate a significantly lower interest rate regime.

(g) A significantly lower nominal interest rate regime would increase the discounted contract sum and it would in turn increase the amount of the site maintenance fee by approximately $USD 350,000.

(h) However given that there was going to be a delay of about 6 months and a consequent increase in the present value of the Relevant Payments that would result in an effective interest rate regime which was commercially acceptable to ISAL."

41 For ease of reference I will henceforth refer to the contention reflected in par 6 of the Bellman affidavit as the "plaintiff's contention concerning an underlying agreement".

42 Mr Bellman says at par 38 of his affidavit that if the plaintiff can establish that the underlying arrangement existed the plaintiff will then have no difficulty in establishing its claim in respect of misleading and deceptive conduct. In addition the plaintiff will be able to substantially reduce the quantum of the defendant's counterclaim in the event that the defendant can make out its counterclaim.

43 The deponent goes on to say that assuming that there was an underlying arrangement then the delay in the project from 15 November 1994 to 6 May 1995 is explicable by reference to that underlying arrangement.

44 Having set out the plaintiff's contention concerning an underlying agreement, Mr Bellman went on to refer in great detail to the various facts and matters and observations which were said to support the plaintiff's contention. The matters relied upon are of such complexity and of such length that it is difficult to summarise them succinctly. However, a central feature of the plaintiff's position is that in order to capture the supposed windfall gain for its own benefit OPG would have had to plan a delay from the outset. If a delay was planned from the outset then OPG could capture the financial benefit of that delay by requiring the financier to adopt an interest rate regime which was significantly lower than that which would otherwise be commercially acceptable.

45 The Bellman affidavit presented an extremely sophisticated analysis concerning interest rates which was designed to demonstrate that the Indosuez interest rate was not fixed by reference to commercial criteria and was artificial. This was said to lead to an inference that the plaintiff's contention concerning an underlying arrangement was correct.

46 In addition to the simulated interest analysis the Bellman affidavit pointed to other evidentiary materials in support of the plaintiff's case which were said to establish that the parties had entered into the alleged underlying arrangement. Exhibited to the affidavit was a copy of a letter dated 9 August 1993 written by a director of Claymore Structured Finance - the company acting as financial consultant to OPG. The Bellman affidavit referred in particular to a passage in the letter which reads as follows:

"We understand that Clough have undertaken to OPG that in all cases the Discounted Contract Sum will be calculated by adopting a 52 week period as the period between the date of execution of the project documents and the nominated date of completion of the works (the nominal date of payment of the Site Maintenance Fee), regardless of the actual date anticipated by Clough. We further understand that any difference between the Discounted Contract Sum thus calculated and the amount which would have otherwise been calculated had the actual period been applied will be made up to Indosuez by Clough."

47 Certain phrases in this letter such as "regardless of the actual date anticipated by Clough" and "had the actual period been applied" were said to indicate, in effect, that Clough contemplated that the operative dates were not necessarily those provided for by the governing contract but were dates fixed or influenced by some collateral arrangement between the interested parties such as the alleged underlying arrangement. For ease of reference, I will henceforth refer to this letter dated 9 August 1993 as "the Claymore letter".

48 The Bellman affidavit says at par 30 that the key phrases in the Claymore letter I have just mentioned "state quite clearly that Claymore had been instructed by OPG to assume that the date nominated as the date of practical completion in the DDC Contract was not intended by Clough to be the actual date when practical completion would be achieved."

49 The plaintiff, by reference to the Bellman affidavit, also sought to rely upon certain alleged incongruities concerning the formulation and implementation of the construction programme. These incongruities were said to reflect the presence of the alleged underlying arrangement.

50 The facts and matters relied upon by the defendant in opposition to the application for further and better discovery and related relief are set out in the affidavit of Kevin Joseph Luttrell sworn 25 September 2002. In that affidavit Mr Luttrell refers to the history of the proceedings and the history of the discovery dispute. He refers to correspondence in which the defendant's solicitors answer to the plaintiff's contention concerning the underlying agreement. The notion that a delay in the project would, or should, result in a windfall gain to the defendant or its financier was said to be fallacious and illogical.

51 The defendant's solicitors said that there was no basis for the assertion that a delay would result in an increase in the net present value of the payments to which the defendant could, or should, be entitled. The instalment payment structure over a period of 12 years was created by the OPG for the Commonwealth to fund the project off balance sheet. There was no net benefit to the defendant, Indosuez or the Commonwealth as the result of any delay in payment of the first instalment. Because the eleven remaining instalment payments were to be made on fixed dates in the future, Indosuez had sold or committed these future promissory notes on or soon after the discounted contract sum was finalised. There was no net benefit to the defendant, Indosuez or the Commonwealth as the result of any delay in relation to the eleven future instalment payments.

52 Mr Luttrell in his affidavit addresses a number of specific points in the Bellman affidavit bearing upon the plaintiff's contention concerning an underlying agreement. He says in answer to the mattes raised against the defendant that there was no planned delay. The original estimate for the length of time it would take to complete the project was fair and reasonable. As at August 1993 and October 1993 the matters which had the effect of delaying completion of the project until 21 August 1995 could not reasonably have been anticipated.

53 Mr Luttrell says further that whilst he did not disagree with the broad suggestion that the net present value of a sum of money to be received in the future is a function of, amongst other things, the period of time that will elapse between the date that the sum of money will be received in the future and the date at which the present value of that sum is being calculated, he did not agree with the hypothesis that a delay in the completion of the project would necessarily result in a gain to the financier (Indosuez) or to the Commonwealth. The hypothesis appeared to ignore the effects of the delay in recouping the funds previously advanced and assumed that the financier had not already committed to the sale of the promissory notes at a fixed price. He said that the hypothesis also appeared to ignore the fact that the overall funding process was subject to a probity audit by the Commonwealth. Importantly, he says at par 37 of his affidavit, that the matters adverted to in par 16 to par 28 of the Bellman affidavit "are all based on a false premise, namely, that there was an Underlying Arrangement".

54 As to the Claymore letter, Mr Luttrell observed that the comments in the letter seemed to have been taken out of context. At the time the letter was written a considerable amount of financial modelling was being undertaken by all interested parties. I note in passing that in the course of the hearing before me counsel for the defendant submitted strongly that the passages in the Claymore letter relied upon by the plaintiff were equivocal and did not amount to any clear acknowledgement that the parties were influenced by the supposed underlying agreement.

55 Mr Luttrell affirmed in par 42 that the defendant had already made discovery of all notes, memoranda, correspondence and other documents in respect of the relationship with Indosuez and the Commonwealth of Australia through the OPG in respect of the project.

56 It will be useful at this stage to look at the legal principles which are relevant to an application of the kind being advanced by the plaintiffs.

57 Order 26 of the Rules of the Supreme Court 1971 deals with discovery and inspection and provides for a party to obtain discovery by giving a notice requiring discovery to the other side. A party that has been requested to give discovery remains under a continuing obligation to give discovery. The purpose of discovery is to provide each party to an action with access before trial to the relevant documents in the hands of his or her opponent, so avoiding trial by ambush, saving costs and encouraging settlement in proper cases. The failure of a party to make a complete discovery of documents may sometimes damage his or her credit at the trial.

58 Order 26 rule 6(1) provides that the Court may at any time make an order requiring a party to make an affidavit stating whether any document specified in the application is, or has at any time been in his possession, custody or power. An order may be made against a party notwithstanding that he may already have been made or been required to make a list of documents or affidavit.

59 Order 26 rule 6(3) provides that an application for discovery of particular documents must be supported by an affidavit stating the belief of the deponent that the party from whom discovery is sought has, or at some time had, in the party's possession, custody or power the documents specified in the application and that those documents relate to one or more of the matters in question in the proceedings.

60 Seaman: "Civil Procedure" refers to the inherent jurisdiction of a Court at par 26.6.4. The learned author states that in an application to the Court's inherent jurisdiction the applicant, when seeking to displace the conclusive nature of the affidavit of discovery, is confined to information emanating from the opponent's affidavit and list, the documents the opponent discloses and the opponent's admissions, and may not rely upon a contentious affidavit. Limited to those materials the Court may make an order if it has reasonable grounds for being fairly certain that there are other documents which ought to have been disclosed, or if it is practically certain that the party making the affidavit has misconceived his or her case and that if he or she had acted upon a proper view of the law he or she would have disclosed the further documents.

61 The decided cases suggest that an affidavit filed in support of the application must offer substantial assistance in establishing whether the particular documents to which the application refers exist and relate to a matter in question determined by reference to the pleading: Mulley & Marney v Manifold [1959] HCA 23; (1959) 103 CLR 341 at 343. An order for a further affidavit of discovery will not be made where it is merely a matter of speculation whether the party has other documents in its possession. The Court must be fairly certain that there are further documents which ought to be disclosed before ordering further discovery under the rules: Beecham Group Ltd v Bristol Myers (Co) [1979] VicRp 27; [1979] VR 273 at 276. A contentious affidavit cannot be relied upon to overcome the conclusive nature of a further affidavit of documents sworn pursuant to an order for further discovery: Midalco Pty Ltd v Simpson, unreported; SCt of WA; Library No 6747; 5 June 1987.

62 The tendency of these previously decided cases is to underline the precept that discovery is essentially a procedure directed towards obtaining a proper examination and determination of the issues in dispute and is not directed towards encouraging or assisting a party to embark upon a fishing expedition: Mulley & Marney v Manifold (supra) at 345.

63 The law relating to cross-examination on affidavits of discovery is summarised in Seaman: "Civil Procedure" at par 36.2.3A. It used to be thought that cross-examination was not permitted on an affidavit of discovery. However, it seems that the judicial discretion to grant leave for cross-examination upon affidavits of discovery or further discovery is exercised in modern times on the basis that they should ordinarily be treated as conclusive and that leave will only be granted in order to do justice between the parties or to prevent an abuse of the Court's processes.

64 In Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd (1990) 20 NSWLR 359 Giles J held that an 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.

65 Harper J in Olympic Airways SA v Spiros Alysandratos & Consolidated Travel (Vic) Pty Ltd, unreported; SCt of Vic; 26 May 1997 undertook a review of the circumstances in which cross-examination will be allowed. He observed at page 9 that the fact that cross-examination on an affidavit of discovery has rarely ever been allowed is doubtless a reflection of the policy that affidavits of discovery are conclusive.

66 In regard to the case before him, Harper J noted that there was 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 were never in the possession of the defendants was much less cogent. The evidence raised serious doubts as to whether the process of the Court was being abused by the defendants in relation to discovery. His Honour was therefore prepared to make an order for cross-examination. His Honour then went on to say:

"...I wish to make it clear that I see this case as exceptional. I do not envisage a general widening of the ordinary rule that an affidavit of discovery is in the usual case conclusive, subject only to such application as may be appropriate pursuant to r 29.8.

If this appeal were allowed the processes of the court may be abused and injustice may be done to one side or the other. I say one side or the other because it may well be that the defendants have a very good answer to what appears to me at present to be prima facie an unsatisfactory state of the evidence. If they do have such an answer, it would doubtless be of advantage to the defendants to have that answer aired immediately.

If, on the other hand, the suspicions of the plaintiff are justified, then it may be that unless those suspicions are further explored, the plaintiff will suffer an injustice which it may be difficult, if not impossible, later to rectify and it may be that the processes of the court will be abused."

67 He then proceeded to make orders designed to ensure that the scope of the cross-examination was strictly limited. He accepted that one reason why the procedure for cross-examination should be regarded as unusual was that it had the potential of giving the plaintiff an advantage: the advantage of having two opportunities to cross-examine a witness for the defendants on an important part of the case. It would be quite wrong for the Court to permit the plaintiff to take unfair advantage of this. The plaintiff ought not to be put in a position where it will be enabled, at trial, to tackle once again an area of evidence in respect of which it has already had the opportunity of cross-examination.

68 In Auspine Ltd v HS Lawrence & Sons Pty Ltd [1999] FCA 1749 O'Loughlin J of the Federal Court reviewed the authorities concerning cross-examination on an affidavit of discovery. He noted at par 96 that, 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. He took Mulley & Marney v Manifold (supra) to affirm two propositions, namely, first, contentious affidavit material does not extend the discovery process and, second, with some exceptions, the normal rule is that the affidavit of discovery is conclusive.

69 He acknowledged that there were some cases in which it had been held to be appropriate to permit a party to cross-examine a deponent, such as the Olympic Airway case (supra). For example, Drummond J allowed cross-examination in Australian Securities Commission v Zarro (No 2) (1992) 34 FCR 427.

70 His Honour then summed up his review of the decided cases having regard to the circumstances before him in this way at par 108:

"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."

71 The cross-examination issue was also addressed by Moore J in Finance Sector Union of Australia v Commonwealth Bank Australia Ltd [2000] FCA 1389. His Honour concluded that a case had not been made out for the cross-examination of the deponent on the evidence then before him, although he was minded to adjourn rather than to dismiss the application to cross-examine. He observed at par 38 that discovery can impose a significant burden on a party and courts are moving away from a position where, in substance, parties are afforded an unfettered opportunity to obtain access to all documents by means of discovery.

72 Seaman: "Civil Procedure" has this to say about the matter at par 36.2.3:

"The discretion to permit cross-examination in interlocutory applications will be exercised sparingly, and even more so where there is a likelihood that the cross-examination will cover broad issues raised in the action: Freehill Hollingdale & Page v Bandwill Pty Ltd [2000] WASCA 150 at par 29. Hence a special case must be shown to obtain an order for attendance for cross-examination on affidavits in interlocutory applications. Lovell v Western Australian Police Union (1993 Lib No 930387, unreported). Special circumstances must be shown if it is desired to cross-examine a defendant showing cause against an application..."

73 As to the issue of subpoenas returnable before trial, O 36 r 12(4) provides that with the leave of the Court a writ of subpoena duces tecum may be issued so as to require the person to produce the documents referred to in the subpoena to the Court prior to trial. Sub-rule (5) contemplates that at the time of giving leave or at any other time called, a Court may order the parties suing out the writ of subpoena, or any other party, to attend the Court to inspect the document within a set period.

74 In contrast to subpoenas returnable at trial, applicants seeking leave to issue a subpoena returnable before trial must necessarily engage the Court in the process. The Court should not exercise jurisdiction simply because it can. Ultimately it is a matter of whether the Court is persuaded that it is appropriate to grant leave in the terms proposed. The onus is on the applicant.

75 In essence, an applicant must show that it is on the cards that the documents will serve some forensic purpose and is not entitled to have access to documents simply to see whether they may do so. An applicant is not entitled to conduct a fishing expedition: Attorney-General for New South Wales v Stuart (1994) 34 NSWLR 667 at 681.

76 It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not liable to make discovery: The Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573.

77 A proposed subpoena must specify with reasonable particularity the documents which are required to be produced. A subpoena ought not to be issued to a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter.

78 The plaintiff challenged the adequacy of the Luttrell affidavit in answering the case for cross-examination and further discovery advanced by the plaintiff. It was said the deponent had not specifically denied the allegation that the construction programme, taking place as it did in Bangkok, and using Thai labour as it did, could not have been completed in a period much less than 18 months. Nor did he seek to answer the contention that the programme used by the defendant seriously under-estimated the time it would take to complete this project. The language adopted by the Luttrell affidavit left open the possibility that all the deponent could be saying was that a timetable of 12 or 13 months was fair and reasonable if one assumed one was using Australian labour rather than Thai labour.

79 Counsel for the plaintiff submitted that the Luttrell affidavit denied the underlying arrangement without addressing and sufficiently denying each of the elements which made up the plaintiff's contention concerning the underlying arrangement. Thus, the deponent left open the question of whether he was denying the underlying arrangement in its entirety or merely denying certain elements of it.

80 More particularly, counsel for the plaintiff argued, there was no separate denial of the proposition that the nominal interest rate regime of 7.02 per cent and 7.88 per cent set by Indosuez in respect of the project was too low to be commercially acceptable to it. The Luttrell affidavit did not persuasively refute the simple proposition that Indosuez would not have agreed to that interest rate regime unless the company believed the project would have been substantially extended beyond a 12 or 13 month timeframe. If the hypothesis which was being put forward in the Bellman affidavit was without foundation then it would surely have been an easy matter for someone who was in a position to know, from OPG, or Indosuez, to depose to that fact, but no such step had been taken.

81 Reference was also made to the fact that the Loan Facility Agreement was not included in the 70 documents which were listed in the supplementary list filed and served in supposed compliance with the November discovery order. No sufficient explanation was provided as to how a significant agreement of that kind came to be omitted from the supplementary list and as to why it had not since been formally discovered, albeit discovered informally, during the course of exchanges between the respective solicitors.

82 The plaintiff submitted further that the Luttrell affidavit provided no sufficient answer to the questions arising from the Claymore letter bearing in mind that the passages relied upon by the plaintiff seemed to assume that the date nominated by the defendant in the contract for practical completion and the actual date anticipated by the defendant were not necessarily going to be the same. No attempt had apparently been made to contact the author of the letter and to ascertain what was intended to be conveyed by the relevant passages.

83 Counsel for the plaintiff submitted that the Luttrell affidavit had failed to provide any sufficient explanation concerning a payment of $37,761.55 (US) made by the defendant to the Commonwealth with particular reference to the question of whether it was paid in discharge of an entitlement.

84 The written submissions of the plaintiff concluded in this way at par 15:

"In light of the above, it is submitted, that the Luttrell Affidavit is evasive and that the plaintiff is entitled to suspect that documents are not being discovered which if discovered would significantly assist it in proving its case. It is clear on the authorities that if a party fails to discover a document(s) which would assist the opposing party then that is not only an injustice to the opposing party it is also an abuse of process by the party failing to make proper discovery. In those circumstances, even though an affidavit which verifies discovery is ordinarily conclusive, cross-examination of the deponent will be permitted if there are reasonable grounds for suspecting that in the absence of such a cross-examination an injustice may be done to one of the parties or that there may be an abuse of the Court's processes."

85 My review of the decided cases shows that further discovery will only be ordered when the judicial officer is fairly certain that the documents in question exist and ought to have been discovered. This conclusion is usually arrived at because the existence of such documents is pointed to by the documents that have been discovered. The discretion to order cross-examination will be exercised sparingly. It may be exercised where a cogent reason has been advanced or if the failure to make such an order might condone or lead to an abuse of process. Such an order should not be allowed to afford to one party an opportunity to cross-examine in respect of matters which should properly be the subject of cross-examination at the trial.

86 It will be apparent from the discussion to this point that the plaintiff's application is based essentially on the hypothesis that there was an underlying arrangement between the Commonwealth, Indosuez and the defendant, the effect of which was to produce a windfall gain to the defendant in the event that there was a delay in the completion of the project. However, the plaintiff does not appear to have been able to identify any specific document which points unequivocally to the making and carrying into effect of the alleged underlying arrangement. To my mind, the passages relied on in the Claymore letter are equivocal. On any view of the matter they do not point to or identify specific documents which ought to be discovered.

87 The hypothesis advanced by the plaintiff is supported largely by what are said to be inferences drawn from the surrounding facts. However, when one strips away some of the elaborate reasoning which is relied upon to underpin the plaintiff's hypothesis, it becomes apparent that, in essence, the central premise from which the plaintiff seeks to proceed is that something akin to a conspiracy was entered into between the defendant, the Commonwealth and the other interested parties such as Indosuez prior to the commencement of the project. This is an extremely serious and contentious allegation and must be viewed with caution, bearing in mind that the Commonwealth is subject to public service standards and scrutiny by auditors.

88 When one turns to the various facts and matters which are sought to be relied upon by the plaintiff many of them seem to be somewhat equivocal. The Claymore letter is rather ambiguous and the passages relied upon by the plaintiff are open to other interpretations of a kind contended for by the defendant. An interest rate regime adopted by a party may be due to misjudgement. I must also keep steadily in mind that the Luttrell affidavit contains a firm denial that an underlying arrangement was in fact made.

89 At the end of the day, I consider that the plaintiff has not made out a sufficient case to justify the orders sought. The evidentiary materials before me contain a denial that the alleged underlying agreement was made. The decided cases suggest that some weight must be given to the conclusive nature of an affidavit of discovery. The plaintiff cannot identify a document pointing specifically to the making and existence of an underlying arrangement. Most of the arguments being advanced by the plaintiff are speculative and involve the drawing of inferences which precede from a questionable foundation, namely, that certain parties entered into a somewhat underhand and conspiratorial arrangement at the beginning of the transaction.

90 It follows that I am not fairly certain that documents of the kind contended for exist and that there has been a failure to comply with the November order for discovery. I am not persuaded that Mr Luttrell should be cross-examined on his affidavit of discovery. The facts and matters relied upon by the plaintiff are not sufficiently cogent and it seems to me that such an order is likely to confer an advantage upon the plaintiff prior to the trial of the action.

91 Further, I am not persuaded that the Commonwealth of Australia or the directors of Indosuez should be required to produce documents before trial in response to a subpoena when they are not parties to the present litigation. To my mind compelling reasons have not been advanced to justify the proposed orders. I am not satisfied on the evidence before me that there has been an abuse of process of the kind alleged.

92 In summary, then, the plaintiff's application will be dismissed. I will hear from the parties as to whether any further orders or directions are required.