Citisecurities Ltd & Ors v John Fairfax Holdings Ltd & Ors [1995] FCA 309

IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. NG584 of 1994 GENERAL DIVISION )

BETWEEN: Citisecurities Limited & Ors Applicants AND: John Fairfax Holdings Limited & Ors Respondents

CORAM: SHEPPARD J PLACE: SYDNEY DATE: 15 May 1995 REASONS FOR JUDGMENT HIS HONOUR: By its notice of motion filed in court on 10 March last the first respondent (hereafter referred to as "Fairfax") sought an order that each of the applicants give discovery and inspection of all documents in their possession, custody or power referring or relating to a number of proceedings in this court and in the United States District Court for the Southern District of New York. Six proceedings in all were referred to. Each of them concerned a claim made by persons who had invested in bonds in Fairfax companies prior to its subsequent receivership. The bonds, which were referred to in the former proceedings as junk bonds, had a face value of approximately $US450 million. After it became apparent that the Fairfax companies were in financial difficulties, the bondholders sued them and also two of the banks which comprise the second applicants in these proceedings. The causes of action were for misrepresentation in each case. The proceedings were eventually settled when the Fairfax companies were acquired by Tourang Pty Ltd, now the second respondent, John Fairfax Group Pty Ltd. Before the matters were settled, substantial steps had been taken to prepare them for hearing. These steps included discovery and inspection of documents by the parties to the various proceedings including the applicants in these proceedings (to which I shall refer as "the banks"). The current proceedings are one of three proceedings being heard at the same time. The nature of the proceedings is explained shortly in reasons for judgment published in relation to an application for particulars in this matter on 8 May 1995. The motion now to be decided was one of two filed in court on 10 March 1995. In order to distinguish it from the other motion, it was marked "A". The initial hearing of the motion was on 17 March 1995. At the end of that day the hearing of the motion was adjourned until 27 March 1995. At the conclusion of oral reasons for judgment delivered on that day I said that I proposed to direct the applicants to put on such affidavits as they might be advised in relation to their difficulties of complying with an order for discovery of the kind sought by Fairfax "bearing in mind the types of documents that I think should be discovered..." I said that I would put the matter back in the list at a suitable time to enable the form of the order to be considered. In the course of the reasons I said that the problem between the parties was crystallised in a letter dated 24 January 1995 written by the solicitors for the banks to the solicitors for Fairfax. That letter was written in response to a letter dated 18 January 1995 from the solicitors for Fairfax. The letter of 18 January 1995 said in part: "It seems to us that many documents which should be in the possession, custody or power of your clients, concerning the bondholder litigation, have not been discovered or, at least, have not been included in Part 1 of the respective lists. We, of course, acknowledge that we cannot make a full assessment of the adequacy of your clients' discovery until we are served with final lists, including the required particularisation of privilege claims. We would, nonetheless, appreciate your informing us whether your approach to discovery has been to provide all material in respect of the bondholder litigation. Critical to the issues in this case will be the state of mind of your clients regarding the prospects of the bondholder litigation. Although, as acknowledged, we do not yet have your detailed claims, it may be that privilege has been claimed in relation to documents arising out of, or referring to, the bondholder litigation. If that is the case, and assuming (which is not admitted) that such claims could be maintained in the circumstances, we invite your clients to waive any such claim and make the documents available for inspection. We note that, if this is not done, we will ask the court to draw inferences as to the effect of what is contained in those documents, at the hearing."