Silver v Dome Resources NL [2004] NSWSC 226

New South Wales Supreme Court

CITATION : Silver v Dome Resources NL [2004] NSWSC 226 HEARING DATE(S) : 25 March 2004 JUDGMENT DATE : 25 March 2004 JURISDICTION: Equity JUDGMENT OF : Hamilton J DECISION : Discovery ordered.

CATCHWORDS : PROCEDURE [454] - Discovery and interrogatories - Discovery and inspection of documents - Production and inspection - Grounds for resisting production - Other grounds - Fishing expedition. CASES CITED : Nece Pty Ltd v Ritek Incorporation (1997) 24 ACSR 38 Michael Bernard Silver (P1) PARTIES : Fair Choice Limited (P2) Dome Resources NL (D1) Durban Roodepoort Deep Limited (D2) FILE NUMBER(S) : SC 2586/01 COUNSEL : M J Watts (Ps) T G R Parker (Ds) SOLICITORS : Bull Son & Schmidt (Ps) Allens Arthur Robinson (Ds)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

THURSDAY, 25 MARCH 2004

2586/01 MICHAEL BERNARD SILVER & ANOR v DOME RESOURCES NL & ANOR JUDGMENT 1 HIS HONOUR: This is an application for discovery of documents in certain categories in these proceedings. The proceedings concern whether a Retirement Deed, as varied by a Retirement Variation Deed, is binding on certain companies. In relation to each of the two companies involved, the deed was signed by two directors. Although there were two, the directors signed as directors, not as witnesses to a common seal, and the documents were not sealed. Amongst the various defences that are put forward are defences that the deeds are not binding on the companies because the signatories were not authorised to execute the deeds on the companies' behalf. In the case of each company, the authority relied on is express actual, implied actual and ostensible. No question arises in the present argument concerning the allegations of express actual and ostensible authority. The argument is about discovery relating to implied actual authority. 2 Particulars of the authority alleged have been sought. Without going into detail of the correspondence, the allegation in respect of implied actual authority has been that the signatories signed on behalf of the respective companies contracts in respect of which no actual authority was conveyed by resolution of the board, or otherwise, but that those executions without express authority should be inferred to have been made with the knowledge and acquiescence of the board. The question as to what the actual contracts were that were relied on in this way was answered in the particulars that they could not be identified before discovery. We thus reach the chicken and the egg situation. Mr T G R Parker, of counsel for the defendants, has succinctly put that it is for the plaintiffs to prove their case. If they cannot give particulars of the contracts relied on, so be it, but to grant discovery would simply be to permit the plaintiffs to "trawl about" among the documents of the defendants in a fishing expedition. 3 If there were no evidence at all that any such contract existed, this might have great force. However, evidence has been led by the plaintiffs of information given by one of the signatories, now alienated from the defendants, that he did in fact sign many contracts on behalf of the companies without specific authorisation of the boards. Indeed, the evidence seems to suggest that there may have been hundreds of such contracts. The plaintiffs contend on this material that the application for discovery cannot be regarded as a fishing expedition. The relevant documents are in the possession and power of the defendants and their nature and content is within the defendants' exclusive knowledge and not within the plaintiffs' knowledge. In that case what is asked for is, rather, a proper exercise of discovery than a fishing expedition. Essentially, I accede to the plaintiffs' submission in this regard on the state of the evidence before me. 4 The other objection that is put to discovery on the defendants' behalf is that the process would be oppressive, as there are potentially hundreds of contracts and these may be in various scattered locations in South Africa, Australia and Papua New Guinea. It struck me that, if the defendants were minded at this stage to put on their evidence concerning authority (the evidence on other aspects of these proceedings being already on), the discovery exercise may be able to be designed in a way involving less work on the defendants' part. For example, if statements were made by their witnesses as to the categories of contract which the various signatories in fact signed (without or without specific authorisation), it may be that the width of the discovery could be narrowed. Mr Parker has informed me that his clients are unwilling to follow that course and do not wish to put on their evidence in this regard until the plaintiffs have filed their evidence. The plaintiffs say that they are, practically, unable to do that until after discovery. In those circumstances, it seems to me, discovery being in my view a valid exercise, that there is nothing to do but to order discovery in the usual way of relevant contracts. 5 At one stage the plaintiffs asked for wide categories, including contracts signed by persons other than the signatories of the deeds the subject of the proceedings and contracts signed by those signatories on behalf of companies in the group other than the parties to the litigation. However, counsel for the plaintiff does not now press for those, but asks for discovery of contracts of the defendants signed by the signatories of the relevant deeds. The period during which those persons were signatories is comparatively short, being less than 12 months, so that search through documents gathered over many years is not required. On the other hand, as I have said, it appears from the evidence that a wide search may be necessary to locate numerous documents to give the discovery. 6 Mr Parker asked that the orders be restricted in two further fashions. The first was, he said that, where the words "contracts and agreements" are used in the proposed discovery orders, it should be made plain that what is contemplated is what he called "formal contracts", so as to exclude any question of the defendants having to search correspondence files to identify contracts formed in the course of correspondence. I do not think the expression "formal contracts" a happy way of conveying this idea and, indeed, I quite misunderstood Mr Parker when he first used the expression. But I think that he is quite right that the discovery should be limited to contracts actually embodied in single documents signed on behalf of the parties and the discovery should not extend to contracts formed in the course of correspondence or in some other less formal fashion. I shall make the orders in terms of "contracts and agreements", but they should be read in the light of what I have just said. 7 The other qualification that Mr Parker sought to have put on the orders is that it should be limited to contracts with respect to employment conditions or resignation or retirement benefits of employees. He has referred me in that regard to the decision in the Federal Court of Lehane J in Nece Pty Ltd v Ritek Incorporation (1997) 24 ACSR 38, especially at 43, where his Honour drew attention to the fact that implied authority may well extend to some classes of contracts and not others, depending on various matters, including the status of the person acting on behalf of the company and the nature of the contract. However, I think it is too narrow to limit the discovery of contracts to the very narrow subject matter of the deeds actually in contention. The execution by the signatories on behalf of the companies of contracts on quite different subject matters may nevertheless be relevant to the assessment of the existence and extent of any implied actual authority which the signatories had. Whilst I would gladly limit the burden on the defendants even further than the limitations that have already been placed upon the orders, I do not think Mr Parker's suggested formulation produces a satisfactory result and I cannot myself readily call to mind any satisfactory formula to limit the discovery in this way. 8 I should add that I have made it quite plain during the arguments of both parties – and the matter has been conducted on this basis – that my decision today should not be regarded as exhausting the possibility or categories of discovery in this case. The plaintiff is not precluded by this decision from applying for discovery of documents in further categories if there is evidence that the circumstances warrant that. 9 There is no objection to discovery of minutes of directors of the companies and that will be included in the order. 10 Costs are reserved.