FEDERAL COURT OF AUSTRALIA DISCOVERY - application for further particular discovery - whether documents sought relate to factual matrix in which agreement was made - consideration of limit of relevant factual matrix - consideration of whether further discovery necessary under O 15 r 15 - whether to exercise discretion to limit order for further discovery. Federal Court Rules O 15 rr 3, 8, 11 and 15 Corporations Law 1991 Income Tax Assessment Act 1936 (Cth) s 16 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, applied Mulley v Manifold (1959) 103 CLR 341, applied Commonwealth v Northern Land Council (1991) 30 FCR 1, applied Trade Practices Commission v CC (New South Wales) Pty Ltd (No 4) (1995) 58 FCR 426, applied Canadian Pacific Tobacco Ltd v Stapleton (1952) 86 CLR 1, considered Simionato Holdings Pty Ltd v Commission of Taxation (1995) 60 FCR 375, considered W A Pines Pty Ltd v Bannerman (1980) 30 ALR 559, considered DEPUTY COMMISSIONER OF TAXATION v RICHARD ANTHONY FOUNTAYNE ENGLAND AS LIQUIDATOR OF UB MINERALS INC (NEVADA) (ACN 010 506 108) SG 3130 of 1996 MANSFIELD J ADELAIDE 20 AUGUST 1998 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SG 3130 of 1996 BETWEEN: deputy commissioner of taxation Applicant AND: richard anthony fountayne england as liquidator of ub minerals inc (nevada) (acn 010 506 108) Respondent JUDGE: MANSFIELD J DATE OF ORDER: 20 august 1998 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: The applicant Deputy Commissioner of Taxation do file and serve as soon as practicable a further list of documents giving discovery of (1) such document or documents as fairly identify, if convenient in a form as a summary document or report, (a) the circumstance in which the issue as to the validity of the s 80G notices referred to in the letter of Australian Consolidated Investments Ltd ("ACIL") to the applicant dated 16 September 1991 arose and the nature of that issue when identified, as conveyed to ACIL or its advisers (b) the assessment of the implications or consequences to ACIL and its associated entities, including UB Minerals Inc (Nevada) ("UBM") and UB Minerals Inc (Louisiana ) ("UBL") of the possible invalidity of those s 80G notices or any of them, as conveyed to ACIL or its advisers (c) the analysis of the consequences of adopting the course of action of the validation of fresh s 80G notices, including concerning UBM and UBL, as referred to in the said letter. (2) Communications between the applicant and ACIL or its advisers or with UBM or UBL or records of such communications up to 16 September 1991 in so far as such communications or records specifically refer to the fact of, or the consequences of, UBM not being a subsidiary of ACIL in or in the period leading up to September 1991. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SG 3130 of 1996 BETWEEN: deputy commissioner of taxation Applicant AND: richard anthony fountayne england as liquidator of ub minerals inc (nevada) (acn 010 506 108) Respondent JUDGE: MANSFIELD J DATE: 20 august 1998 PLACE: ADELAIDE REASONS FOR JUDGMENT This judgment concerns a further step in the interlocutory skirmishing of the parties, namely the renewed claims by the respondent by his notices of motion of 26 May 1997 and 12 November 1997 for further discovery and inspection of documents to be given by the applicant. Those notices of motion are given pursuant to O 19 r 2 and O 15 r 11 of the Federal Court Rules ("the Rules"). It is I think better to preserve the descriptions of the applicant and the respondent as applying to the parties to this proceeding generally, even though it is the motions of the respondent now before the Court. I shall endeavour to do so in these reasons. It is also necessary to repeat certain information referred to in my judgment on the applicant's motion to strike out the respondent's defence and to enter judgment for the applicant under O 11 r 16 of the Rules. The facts alleged by the applicant in his statement of claim are largely admitted. Thus it is possible to identify the background to the real issues in the proceedings briefly. Prior to 29 February 1996 UB Minerals Inc (Nevada) ("UBM") was a registered foreign company under the Corporations Law 1991 ("the Law"), and a taxpayer within the meaning of that term in the provisions of the Income Tax Assessment Act 1936 (Cth) ("the ITAA"). UBM was assessed for income tax for the year of income ended 30 June 1986. Pursuant to the ITAA, on 11 December 1991 the applicant issued a notice of amended assessment in respect of the year of income ended 30 June 1986 ("the notice") to UBM specifying $1,980,212.02 ("the primary tax") as the tax payable by UBM. That notice specified the date for payment of that tax as 16 January 1992. That tax has not been paid. On 29 February 1996, UBM was ordered to be wound up. The respondent was appointed liquidator of UBM's affairs. On 28 June 1996, the respondent called for proofs of debt from the creditors of UBM. On 2 July 1996, the applicant submitted a proof of debt to the respondent claiming the primary tax and an additional amount for late payment pursuant to s 207 ITAA of $1,361,264.63, making a total of $3,341,482.65. On 1 November 1996, the respondent gave notice that he rejected that proof of debt by the applicant. The applicant's claim in this proceeding is for an order that the proof of debt be admitted. The defence identifies the relevant dispute for the purposes of these motions. The description of that dispute now referred to is taken from the defence and affidavit evidence before me. It is that the liability of UBM to pay the primary tax has been discharged by an agreement made between the applicant and Australian Consolidated Investments Ltd ("ACIL") pursuant to which the applicant agreed to accept $29,217,906.63 in full and final settlement of, inter alia, the tax liabilities for the 1986 financial year of ACIL and "each of its subsidiary companies" ("the agreement"). ACIL duly paid the agreed sum of $29,217,906.63. In 1986 UBM was a subsidiary of ACIL. The respondent says therefore that the applicant accepted that payment in satisfaction of the taxation liability of UBM for income tax for the 1986 financial year, so that UBM was thereby discharged from its taxation debt. The agreement comprised a letter of offer from ACIL to the applicant dated 16 September 1991, upon which is endorsed the applicant's acceptance of that offer on 19 September 1991. Argument proceeded on the basis that UBM was no longer a subsidiary of ACIL at the time of that agreement. The applicant's reply asserts that it ceased to be a subsidiary in September 1989. The relevant provisions of the agreement, for present purposes, record: "The directors of ACIL have resolved to make the offer contained in this letter to settle all disputes arising out of the audit conducted by the Australian Taxation Office ("ATO") in respect of ACIL and its subsidiaries in relation to the tax years ended 30 June 1984, 30 June 1985, 30 June 1986 and 30 June 1987. The audit issues related to the following: . . . (6) The grouping of tax losses pursuant to s 80G of the Income Tax Assessment Act and whether certain notices purportedly were given in accordance with that section by various ACIL group companies are valid. OFFER ACIL offers to pay the total sum of $29,217,906.63 on the terms and subject to the conditions set out below: (a) The ATO issues assessments to ACIL and its relevant wholly owned subsidiaries which together with the assessment issued to ACIL in respect of the year ended 30 June 1984 are for the aggregate sum of $29,217,906.63 . . ." The letter then recorded that amount as having been calculated in relation to primary tax, culpability penalty, late lodgment penalty and per annum interest penalty totalling $29,217,906.63. In relation to the primary tax it reads: "PRIMARY TAX calculated as set out in Appendix A to this letter and subject to the Commissioner in his discretion pursuant to s 80G(6)(c) of the Act, accepting the attached loss transfer notices pursuant to that section - $19,935,985.60" The conditions include the following: "1. The ATO acknowledges that the proposed assessments are in respect of all issues which arise out of the returns of income of ACIL and each of its subsidiary companies in relation to the years ended 30 June 1984, 30 June 1985, 30 June 1986 and 30 June 1987. . . . . . 4. Pursuant to s 80G(6)(c) the Deputy Commissioner accepts that each of the attached notices pursuant to s 80G is valid and allows each notice to be given notwithstanding that it was not given on or before the date of lodgment of the returns of income for each of the income companies referred to in the notices. . . ." Appendix A to the letter contains a series of columns detailing the primary tax and other taxation liabilities of ACIL and apparently of certain of its subsidiaries: Bell Resources Finance Pty Ltd, Bell Resources Development Pty Ltd and Bell Resources (UK) Ltd. There was also attached to that letter twenty two notices under s 80G(6) ITAA relating to transfer of loss deduction for various income years ended 30 June 1985, 30 June 1986 and 30 June 1987. They were all dated 11 September 1991. One such document records that UBM received a taxation loss transferred to it by Bell Coal Pty Ltd of $22,522,067.00 for the year of income 1987, the consideration for that transfer being the sum of $11,035,813.00 (49 per cent of the loss transferred). It also records that at relevant times during the financial year ended 30 June 1987 all the shares in both UBM and Bell Coal Pty Ltd were beneficially owned by ACIL. The applicant asserts that it is plain that the agreement, properly construed, does not affect or discharge the taxation liability of UBM because it was not then a subsidiary of ACIL. My decision refusing to strike out the defence, given on 12 December 1997, indicated why I concluded that the matter was not beyond argument (to use a compendious phrase to describe the relevant legal test to be applied under O 11 r 16 of the Rules). I reached the view that the defence of the respondent, which asserts that the expressions "ACIL and its subsidiaries" and "ACIL and each of its subsidiaries" in the agreement, might include UBM as arguable. I noted that there may be admissible evidence which may throw light in a legitimate way on the proper construction of the agreement: see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 per Mason Jat 347-352. There is reference in the agreement to the grouping of tax losses pursuant to s 80G of the ITAA as one of the audit issues to be resolved. There was a transfer of tax losses by Bell Coal Pty Ltd, an ACIL subsidiary, to UBM of $22,522,067 in the tax year 30 June 1987 (referred to above), as well as transfers of tax losses to ACIL by UB Minerals Inc (Louisiana) ("UBL"), the parent company of UBM, of $12,736,190 in the tax year 30 June 1986 and $12,193,963 in the tax year 30 June 1987. Those tax loss notices were among those which, during the tax audit of ACIL to which the agreement refers, were identified as possibly invalid and in respect of which for the 1987 loss transfers were replaced, and accepted as valid by the agreement. The respondent now contends that documents in the possession of the applicant: · in respect of the audit issue relating to the grouping of tax losses pursuant to s 80G and whether certain notices purportedly given by various ACIL group companies were valid, including internal working papers and reports prepared by the applicant; and · documents evidencing the negotiation of the agreement are documents which will throw light on the proper construction of the agreement. In particular, it is contended that such documents will assist in "the proper construction of the agreement and the true intention of the applicant and ACIL" by shedding light upon how those persons addressed the consequence to ACIL of the non-inclusion of the replacement s 80G notices relating to UBM and UBL in the agreement, and the rationale of the applicant for allowing the replacement of these notices. The respondent's contentions accepted that it is necessary for him to establish that documents of a particular description or category exist, and have not been discovered, and that such documents are discoverable under the test laid down, for example in Mulley v Manifold (1959) 103 CLR 341. A document relates in some way to a matter in issue if it would, or would lead to a train of inquiry which would, either advance a party's own case or damage that of its adversary. That formulation is the appropriate one under O 15 of the Rules: Commonwealth v Northern Land Council (1991) 30 FCR 1; per Black CJ, Gummow and French JJ at 23. Order 15 r 3 of the Rules provides: "(1) The Court may, before or after any party has been required under rule 1 to give discovery order that discovery under rule 2 by any party shall not be required or shall be limited to such documents or classes of documents, or to such of the matters in question in the proceeding, as may be specified in the order. (2) The Court shall, on application, make such orders under sub-rule (1) as are necessary to prevent unnecessary discovery." That rule entitles the Court in appropriate circumstances to limit discovery: Australian Broadcasting Commission v Parish (1981) 48 FLR 292 at 295. The Court is also empowered, at any stage of a proceeding, to order an affidavit to be filed giving discovery by a party which has a particular document or class of documents if there are grounds for a belief that some document or class of documents relating to any matter in question in the proceeding may be or may have been in the possession custody or power of a particular party: O 15 r 8, and see the observations of Burchett J in Murex Diagnostics Pty Ltd v Chiron Corporation (No 2) (1995) 62 FCR 424 explaining that O 15 r 8 enables the Court, where it is otherwise appropriate, to make an order for particular discovery of a class of documents. It is also important to bear in mind O 15 r 15, which 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." It is clear that an applicant for an order for discovery bears the onus of satisfying the Court that the documents sought to be discovered, and then produced for inspection, are necessary: Trade Practices Commission v CC (New South Wales) Pty Ltd (No 4) (1995) 58 FCR 426 per Lindgren J at 436. As his Honour there pointed out, the measure of necessity is against the purpose properly served by the procedure of discovery of documents, namely documents relating to any matter in question in the proceedings. Counsel for the respondent accepted that the Court has a discretion whether to order the discovery sought in any event. That discretion must be exercised judicially and in all the circumstances of the case. The minutes of order provided by the respondent described expressly the seven categories of documents in respect of which discovery is now sought. It is a more limited claim than that enunciated in earlier correspondence between the parties. I shall refer to those seven categories of documents below. The applicant, in submissions, did not seriously put in issue that those seven categories of documents existed, or that (with one exception) they had not been discovered. The applicant also accepted that, by reason of the issue as to the proper construction of the agreement, it was "relevant" in the wider sense of describing what documents are discoverable, to include in its discovery documents which came into existence in and about the taxation audit referred to and the negotiation and consideration of the then proposed and ultimately the concluded agreement which touch upon the proper construction of the agreement. The applicant further accepted that, in the discovery formally given to this point by the verified lists of documents dated 14 March 1997 and 28 August 1997, the applicant did not properly provide discovery. In particular he now accepted that, beyond those lists, there may be further discoverable documents which related to the factual matrix in which the agreement was arrived at. The applicant, however, asserted that he had now given full discovery on that matter by the documents produced as described in the affidavit of David Mathieson Cook ("Mr Cook") sworn on 10 July 1998 in the following terms: "However, by way of a general response, compliance with the respondent's requests for discovery in their entirety would be burdensome in the extreme. It would involve extensive searches for files held in a variety of locations in both the Cannington and Northbridge offices of the ATO which in my judgment would be extremely time consuming. Moreover, based on the removal of the UBM debt from the negotiations prior to the settlement agreement being entered into, and the significance of the s.80G issue to the ACIL settlement which is the subject of my evidence in this and my earlier affidavits, I do not regard myself at liberty generally, consistent with my duty of secrecy to third party taxpayers pursuant to s.16 of the Act, to produce all documents concerning the settlement negotiations or the s.80G issue. I have however endeavoured to discover all documents which shed any light on the issue of whether or not the agreement between the ATO and ACIL also settled any taxation liability of UBM. To this end, I have directed my ATO colleague Ms Cheryl Morgan to undertake an exhaustive search of all files held by the ATO which might contain any such documents. I have also undertaken my own searches of particular files to satisfy myself that full and proper discovery is provided by the Applicant. I am informed by Ms Morgan and believe that she has completed the search I requested of her, and that six further documents have come to light as being discoverable for the reason described earlier in this paragraph and are produced to the court and the Respondent by copies being annexed to this affidavit. . . . Discovery is sought of all documents evidencing the negotiations leading up to the settlement agreement. There would be many (possibly hundreds) of documents falling within the description of documents contained [within that description]. Discovery has already been provided of all such documents within the limits referred to in paragraph 11 above with four possible exceptions, which I now address. Annexed and marked "D", "E", "F" and "G" respectively are copies of: "D" - a letter from Coopers and Lybrand to the ATO dated 6 August 1991 enclosing a spreadsheet which refers to companies in the UBM group; "E" - a letter from ACIL to the ATO dated 3 September 1991 which encloses a document entitled "Assumptions on Cash Flow" which (in turn) makes reference to "Tax refund UB Minerals"; "F" - a memorandum from D Cullen (Coopers & Lybrand) to me dated 10 September 1991 enclosing a document entitled "Summary of groupings to ACIL Year of income ended 30 June 1996" which refers to the UBM group companies; "G" - a facsimile letter from Terry Christofides to Harry Fernando dated 11 September 1991 which refers to "UBMIN(L)" and the enclosed draft s.80G notices. In accordance with my obligations pursuant to s.16 of the Act, parts of both letters and the annexure which do not relate to UBM but relate to other taxpayers having no bearing on this action have been deleted from the copies. The Applicant objects to any further discovery being provided on the basis that it does not relate to any issue in this action." In effect, the applicant contends that what perhaps might have been discoverable earlier has now been discovered. The real issue now is whether, upon discovery, the applicant is obliged to discover generally documents evidencing the nature and process of the audit investigation, or the negotiations in relation to the agreement, beyond those which - to use Mr Cook's words - shed any light on the issue of whether or not the agreement between the applicant and ACIL also "settled any taxation liability of UBM". If so, then it will be necessary to consider whether that obligation is as extensive as the respondent contends. I bear in mind that, in the case of any issue concerning the construction of a contract, documents indicating the processes of pre-contractual negotiations will not routinely be discoverable unless they have the tendency to establish objective facts which were known to both parties and the subject matter of the contract: Codelfa (above, at 352). It was submitted by the respondent that I should not, in the particular circumstances, accept at face value the affidavit of Mr Cook even on that question. There was no application to cross-examine Mr Cook on his affidavit. It serves in the nature of an affidavit giving further discovery, and explaining the line drawn as to what is discoverable, as well as explaining the applicant's opposition to the present application beyond what is disclosed by that affidavit. It asserts the extent of the search undertaken to identify documents within the catchment area of what the applicant now accepts as discoverable. It is normally the case that an affidavit of discovery is regarded as conclusive unless it be shown by cogent material that other documents exist which ought to have been discoverable. There is no evidence before me that indicates that Mr Cook's searches were confined or incomplete, or that he has failed now to disclose documents which fall within his search zone. In those circumstances, I accept and act on his affidavit. Of course, if it is the case that his focus has been too narrow, because of a misapprehension as to the range of discoverable documents, his affidavit will not avail the applicant. He has clearly identified the range of his inquiry. I accept that within that range of inquiry, discoverable documents have now been disclosed to the respondent. Although Mr Cook's affidavit refers to s 16 of the ITAA, counsel for the applicant did not seek to avoid discovering documents because of the secrecy obligation imposed upon the applicant and his officers thereby. She accepted that, by reason of decisions such as Canadian Pacific Tobacco Ltd v Stapleton (1952) 86 CLR 1 and Simionato Holdings Pty Ltd v Commission of Taxation (1995) 60 FCR 375 at 385, that section would not constitute an impediment to the proper discovery of documents in these proceedings. It is unnecessary therefore to separately address that section in these reasons. It was also contended for the respondent that, at an earlier stage in these proceedings, the applicant by his counsel had conceded that the discoverable documents relating to the factual material in which the agreement was arrived at were much wider than the applicant now contends, and that in the light of that concession the respondent had himself discovered certain documents which otherwise he was not obliged to discover. The occasion of the acknowledgment by counsel for the applicant was the applicant's application that the respondent discover, and make available for inspection, certain transcripts of and other documents relating to examinations conducted by the respondent under Pt 5.9 of the Law. The documents required to be produced under s 597(9), as specified in the examination summonses to the particular persons, included: "The negotiation and execution of the agreement dated 16 September 1991 between Australian Consolidated Investments Limited and its representatives and advisers including Coopers & Lybrand and Freehill Hollingdale & Page and the Commissioner of Taxation whereby Australian Consolidated Investments Limited agreed to pay the Commissioner of Taxation $29,217,906.63 in full and final settlement of the tax liabilities of Australian Consolidated Investments Limited and each of its subsidiary companies in relation to the years ended of 30 June 1984, 30 June 1985, 30 June 1986 and 30 June 1987." Counsel for the applicant asserted that the transcripts and documents produced under those summonses are documents which may touch upon the negotiation and conclusion of the settlement of the ACIL group tax audit are relevant and discoverable in this proceeding. Upon that basis, the respondent agreed to make informal discovery of the documents and transcripts procured in the examinations which touched upon the matters identified in that section of the examination summonses set out above. I then adjourned for hearing the present motions, expressly noting the applicant's acknowledgment. The respondent contends that the applicant should not be permitted to 'approbate and reprobate' so that the applicant should not, on these motions, be permitted to adopt a narrower view of what should be discovered than was then acknowledged. I do not think that the acknowledgment referred to, in its context, assists in resolving the present motions. The documents required to be produced were confined to those relating to the examinable affairs of UBM, and the acknowledgment of counsel for the applicant should be read in that context. It does not unequivocally accept that all documents of the applicant which came into existence concerning the taxation audit of ACIL or any of its subsidiaries, or which led to the agreement, are themselves discoverable. It does not, in my view, advance the respondent's position. I note also that the transcripts of examinations were agreed to be provided in due course to the applicant by the respondent in any event at a time prior to the hearing of the applicant's request for further discovery. There is one further general submission I should note. The applicant contends that the discovery now sought is essentially no more than speculative: W A Pines Pty Ltd v Bannerman (1980) 30 ALR 559, and that I should therefore simply decline it for that reason. I do not accept that submission. At the time of each of the motions being instituted, no documents touching upon the factual matrix in which the agreement was made had been discovered and the applicant now acknowledges that some such documents did exist and has now discovered them through Mr Cook's affidavit of 10 July 1998. It is really the scope of what is discoverable on the particular issue, or more precisely in view of my decision to act upon Mr Cook's affidavit of 10 July 1998 whether the perimeters of his documentary search are appropriate, which is the issue before me. I also bear in mind that O 15 r 15 of the Rules requires that the Court be satisfied that an order of the kind sought is necessary in the interests of a fair trial and for the fair disposition of a case. The respective capacities of each party to know what documents exist, or to open up a legitimate line of inquiry, or to prove or disprove particular matters, will be relevant to that assessment. In Trade Practices Commission v CC (New South Wales) No 4 (above, at 437) Lindgren J observed: "In a case such as this, where one party and not the other is likely to have documents relating to the matter in question, it seems to me to be prima facie "necessary" in the sense referred to that discovery be ordered. But this general position is subject to the well established exception that discovery should not be ordered to enable a mere "fishing expedition"." I propose to address severally the categories of documents now identified by the respondent of which discovery is sought. There is no real issue that documents of the description identified do exist and have not been discovered, save to the extent that Mr Cook's affidavit of 10 July 1998 discloses and produces the documents therein referred to. The first claim is for all documents in respect of the taxation audit of ACIL and its subsidiaries in relation to the tax years ended 30 June 1984, 30 June 1985, 30 June 1986 and 30 June 1987 in relation to audit issue (6) referred to in the agreement, namely the grouping of tax losses pursuant to s 80G of the ITAA and whether certain notices purportedly given in accordance with that section by various ACIL group companies are valid. Evidence on these motions refers to evidence given by Mr Cook on an application for summary judgment by the applicant under O 20 r 1 of the Rules. It discloses that the issue as to the validity of the s 80G notices arose during the tax audit of ACIL. If the s 80G notices were invalid, the tax payable by ACIL or the ACIL group would be very much greater than if the notices were valid. Thus arose the question as to the validity of the transfer of losses involving UBM and UBL. Extensive discussions were undertaken between officers of the applicant and ACIL, and some records were kept of those discussions, including a record of the final negotiation called a "completion report", as well as a draft of the agreement. The acceptance of the s 80G notices as valid, or their replacement with valid and effective notices, was critical to the negotiations leading to the agreement. I am not satisfied that the broad description of the documents sought is appropriate to define the proper range of discovery, or that it is necessary that an order for discovery should be made in the terms sought. It is important to bear in mind that the function of this process of discovery in the circumstances is to reveal documents which touch upon the factual matrix in which the agreement was reached, and which may thereby provide the factual background to the agreement and so serve as a possible aide to its construction. The requested documents, as described, cover too wide a territory to my mind to have the potential to serve that function. On the other hand, I am concerned that the limit of the search and inquiry directed by Mr Cook is a narrow one: documents which shed any light upon whether or not the agreement also settled any taxation liability of UBM. The focus of that inquiry seems to be confined to whether ACIL or the applicant expressly sought to, or did, deal with the taxation liability of UBM in the agreement. It may be that my understanding of Mr Cook's affidavit is a narrow one, but I must take it in its terms. It may cover any documents which record the intention of the parties to the agreement, as to whether UBM's taxation position is to be encompassed within and determined by the agreement. The expression of such subjective intention is not, of itself, admissible. It is as Mason J said in Codelfa (at 352): ". . . we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting." The determination of the proper construction of the contract depends upon the presumed intention of the parties, rather than their actual intention. If Mr Cook's search range extended beyond documents evidencing the parties' actual intention, I am not of the view that it illustrates a proper focus on the objective framework of facts within which the agreement came into existence. I regard his affidavit as being limited to the documents specifically touching upon UBM, and as not including those documents which indicate the circumstances in which the validity of the s 80G notices arose, the assessment of the implications of the possible invalidity of those notices, and the consequences of adopting the procedure ultimately adopted of issuing further such notices and treating them as valid. That background material, presumably discussed between and therefore known to both the applicant and ACIL, could in my view provide a factual background relevant to the construction of the agreement. I exclude from that material the documents evidencing the circumstances in which the audit itself came to be undertaken, or the general consideration of it. In my view such material is too remote from the issue before me. I do not think it necessary that the applicant should discover all the documents which touch upon the factual areas I have identified. The important factual background is likely to be, or to have been, readily described or detailed in certain summary documents of the applicant. For example, the final of the three stages of background matters which I have described is probably contained in the "completion report" of the applicant. I do not think that the detailed process whereby the applicant and ACIL then addressed those factual matters beyond the general recognition and assessment of them is material which is necessary to be discovered. It would only provide a more detailed exposure of how the problems when recognised were addressed or negotiated. It would, as Mr Cook deposes, involve a very substantial task and require disclosure of much detailed information about the affairs of the taxpayers. The process of negotiation is not of itself directly relevant, save in so far as it reveals the underlying background facts. Accordingly, I propose to direct that the applicant give further and better discovery of such documents as necessary to properly reveal to the respondent: (1) the circumstance in which the issue as to the validity of the s 80G notices arose and the nature of that issue when identified as conveyed to ACIL or its advisers, (2) the assessment of the implications or consequences to ACIL and its associated entities, including to UBM or UBL, of the possible invalidity of the s 80G notices as conveyed to ACIL or its advisers, and (3) the analysis of the consequences of adopting the course of action ultimately adopted by the validation of fresh s 80G notices, including those concerning UBM and UBL. It may be that that direction will require the discovery of only a few further documents. It is my intention that that be the case, but I do not know what material the applicant has. It may have three summary documents, used as discussion papers, reflecting that information. It is not my intention that that order should lead to the applicant being obliged to discover extensive and detailed material. There may be some names or figures disclosed in such material which are not necessarily revealed for the purposes of a proper understanding of the documents, so that that information might be masked having regard to s 16 of the ITAA. Again, that is in the first instance up to the applicant although he will no doubt bear in mind, as the submissions before me revealed, that much detailed information as to the affairs of ACIL and its associated companies is contained within the agreement already discovered. It may be, but I suspect it is unlikely, that the documents already disclosed by Mr Cook are the only documents containing the sort of information which I have required to be disclosed, but if that is the case, then it is the confined expression of his search zone which will have led to my ordering further discovery. He will in that event simply depose to that fact. As an aide, I note that I have assumed from Mr Cook's affidavit that there are no documents comprising communications with, or records of communications with, UBM or UBL during the period of the taxation audit. If that is not correct, in my view the applicant should of course discover those documents. I do not separately make any order to that effect. The second category of documents for which the respondent now seeks an order for particular discovery is all documents including correspondence, memoranda, file notes, notes of meetings and telephone attendance notes, resolutions or directives evidencing the negotiations between representatives of the Australian Taxation Office and representatives of ACIL and its advisers Coopers & Lybrand and Freehill Hollingdale & Page leading and giving rise to the agreement. My reasons dealing with the first category of documents lead me to the conclusion that the discovery of these documents is not necessary, and I decline the order sought. In so far as material background facts to the agreement are relevant, I have concluded that the documents I have ordered to be disclosed should be sufficient to enable the respondent to be in a position to advance the matter at trial. The proposed order does put an obligation on the applicant to ensure the factual matrix is fairly presented through those documents to be disclosed but I am confident that it will do so. The third group of documents for which particular discovery is now sought are all documents including notes of meetings and conversations referred to in: (a) the report dated 5 August 1991 prepared by Mr G Rankine-Wilson in relation to UBM in relation to the 1984 and 1986 tax years contained in Annexure JDK2 to the affidavit of Jason Demetrios Karas sworn 3 August 1998 and referred to in par 16.5 of that affidavit, and (b) the statutory declaration of Geoffrey Rankine-Wilson dated 6 December 1996 marked Annexure X to the affidavit of Cheryl Anne Morgan sworn 18 December 1996. It is convenient to deal with this request in conjunction with the fourth category of documents for which particular discovery is sought, namely all documents relating to the UBM amended income tax assessment dated 11 December 1991 for the year ended 30 June 1986 and the objection by UBM in relation thereto, including but in no way limited to reports and communications addressing the notice of objection and the grounds on which it was disallowed. The report of Mr Rankine-Wilson of 5 August 1991 has been provided to the respondent. It refers to an arithmetic error made in the 1986 tax return of UBM which apparently led to the amended assessment being issued in 1991, and explains how that error occurred. The report apparently refers to three source documents upon which the facts it describes are based. It asserts that the error has been brought to the attention of "the taxpayer", and that the taxpayer has accepted that an arithmetic error has occurred and "does not dispute the proposed adjustment". It concludes: "At present there are negotiations on foot to settle the outstanding tax liabilities of all companies within the Group, the UBMIN liability being one of those. Other than to say it is believed that the CQCA interest has been sold by UBMIN and all funds onlent into the group no specific comment is warranted." There is a handwritten note of Mr Cook on the report directing Mr Rankine-Wilson to proceed to issue an amended assessment, and noting that he (Mr Cook) had been informed by a Mr Cullen that UBM had been sold to Bond Corporations Holding Ltd. In my view, such communications with "the taxpayer" on the topic of the arithmetic error are discoverable because they may disclose whether the knowledge or awareness that UBM was not a subsidiary of ACIL at the time of the agreement, some five to six weeks later, was shared by ACIL. Any note of information provided by Mr Cullen on that topic will also be relevant in that way. In my view, documents tending to show that the applicant and ACIL were aware by the time of the agreement, and tending to show the time at which they became so aware, may constitute part of the factual matrix in which the agreement was reached. I do not consider otherwise it appropriate or necessary to order discovery in the terms expressed in these two categories in the minutes proposed by the respondent. The respondent does not seek to challenge the amended assessment of 11 December 1991 in these proceedings: s 177 of the ITAA, but to assert that the taxation liability of UBM has been discharged by the agreement. The terms of discovery requested encompass details as to the process of arriving at the amended assessment, and to explore its consideration or processing between August 1991 and 11 December 1991 including the circumstances of, and the reasons for, the apparent delay which that period may reflect. Such documents could not assist the construction of the agreement. The documents considering UBM's objection to the amended assessment are also documents which I am not satisfied are capable of shedding light on the issue in proceedings. Even if it were the case that the applicant, in addressing the objection, expressed views as to its then understanding as to the intent or meaning of the agreement, those views would not be of assistance in construing the agreement. In addition, the affidavit of Mr Cook identifies, to the extent that they exist, that documents of that character have been provided to the respondent. I further note that the affidavit of Mr Cook of 10 July 1998 indicates that, after searching, no notes of discussions on the matters referred to in the statutory declaration of Mr Rankine-Wilson of 6 December 1996 can be found. I have indicated why I accept Mr Cook's affidavit. That is one reason why further discovery in respect of documents underlying that statutory declaration should not be made. I am also of the view that any such documents would not lead to a train of inquiry which might assist in the resolution of these proceedings. I do not think, for the reasons given, that the material referred to in the third and fourth categories relates to information which is relevant to the current proceeding beyond the limited description of documents which I have referred to above. Accordingly, I consider that the respondent should give discovery of documents up to 16 September 1991 recording or conveying or purporting to record or convey to ACIL or its advisers or to UBM or to UBL the fact that UBM was not a subsidiary of ACIL in or in the period leading up to September 1991, and any response from ACIL or its advisers or from UBM or UBM commenting upon or responding to that matter. The fifth group of documents of which discovery is sought is all reports including drafts prepared by the applicant in respect of the ACIL group audit including but in no way limited to the report referred to by Mr Cook in the course of his cross-examination on 14 November 1997 at transcript page 119, line 20. The report referred to by Mr Cook in his evidence is the completion report to which I have referred above in my consideration of the first group of documents for which discovery is sought. For the reasons given in relation to that group of documents, in my view no further discovery in the terms of this category of documents should be ordered. I have identified the limited nature and category of documents in respect of which, in my view, the applicant should give further discovery concerning the audit of ACIL generally in that part of my reasons. The sixth group of documents identified by the respondent is described as all procedure manuals and policy and guideline documents prepared by the applicant setting out the procedures to be followed by officers of the applicant in relation to the keeping of records and in particular the making of notes of meetings and conversations as such manuals, policies and guidelines were applicable to officers of the applicant in 1991. I decline to order discovery of such documents. I am not satisfied that any such documents could lead to a useful train of inquiry relevant to these proceedings. In any event, even if that were the case, I am far from satisfied that it is necessary in terms of O 15 r 15 that such documents be discovered. They are not documents which relate directly to the agreement or the circumstances surrounding it. Whether or not other documents exist which, of their nature, would show whether the applicant's officers complied with procedural guidelines could only be of the most remote, if any, assistance to the proper construction of the agreement. Finally, the respondent has sought complete copies of the UBM taxation returns as filed for the years 1984 to 1989. The applicant has agreed to provide those documents. It has already done so, but in view of the issue as to whether the copies provided contain a certain date stamp and notations, he has agreed to ensure that such full copies are provided. There is no need to deal further with this aspect. There are two further aspects of the motions which I need to address. The respondent complains that the applicant has not given formal discovery verified by affidavit of the documents referred to in Mr Cook's affidavit of 10 July 1998, nor a detailed list of the documents over which privilege is claimed. He is sensitive to those matters, as is deposed to in affidavits, because he regards the applicant as having been reluctant to give full and proper discovery in this proceeding. I do not need to comment on that reason. I am not to be taken as rejecting it or accepting it. I have concluded above that I accept Mr Cook's affidavit of 10 July 1998. It indicates that the applicant has undertaken a thorough and conscientious search for discoverable documents. I propose to order limited further discovery only because I regard the ambit of that search to have been a little narrow. I also accept the assertion put by counsel for the applicant in submissions that there are no discoverable documents withheld from production by reason of s 16 of the ITAA; such documents as have been withheld from production on the ground of privilege are only on the basis of client legal privilege. In those circumstances, in my view, it is not necessary now for the applicant to file and serve a further list of documents by way of discovery verified by affidavit which accommodates those two concerns of the respondent, and I decline to make orders as sought on that basis. The respondent also seeks an order that the applicant produce for inspection by the respondent complete copies of all documents which have to date been provided to the respondent in a partially masked form. The applicant has produced for inspection certain documents partially masked, based upon him respecting his obligations under s 16 of the ITAA. The respondent does not contend that, in a proper circumstance, the applicant might not adopt that masking procedure. Rather, he contends that it has been inappropriately carried out in the particular circumstances. The respondent by way of illustration points to the letter of 3 September 1991 from ACIL to the applicant, being one of the documents disclosed in Mr Cook's affidavit of 10 July 1998. It has been heavily masked, to the point where it is not really comprehensible. The respondent has an unmasked copy of that letter. It discloses ACIL revealing to the applicant the progress in dealing with its banks. The background fact of ACIL's financial capacity to meet a certain sum in settling its taxation position with the applicant, as understood by each of them, is said to be material to the proper construction of the agreement. In other documents produced by Mr Cook there is masking that, in the light of my reasons for the making of further limited discovery by the applicant, may require the applicant to revisit its masking processes. I do not think sufficient has been shown to make an order in the terms sought, and I decline to do so. However, in my view, it is incumbent upon the applicant to review the extent to which he has masked discovered documents to date in the light of my reasons. I am confident that he will do so, as part of the ongoing obligation to give proper discovery. In my view, the applicant should be ordered to make further specific discovery in the limited respects to which I have referred above. I shall give the parties the opportunity to make submissions on the question of costs of the two motions. I certify that this and the preceding eighteen (18) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield. Associate: Dated: 20 August 1998 Counsel for the Applicant Ms S Maharaj (Respondent to the Motion): Solicitors for the Applicant Australian Government Solicitor (Respondent to the Motion): Counsel for the Respondent: Mr M Hoffman Solicitors for the Respondent: Fisher Jeffries Date of Hearing: 7 August 1998 Date of Judgment: 20 August 1998