New South Wales Supreme Court CITATION : TCS ACES Pty Limited v Mikohn Gaming Australasia Pty Limited [2007] NSWSC 1139 HEARING DATE(S) : 30 August, 4 September 2007 JURISDICTION : Equity Division Duty List JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 4 September 2007 DECISION : Order made for separate determination of issues. Order releasing solicitors from undertakings to keep confidential certain affidavit material. Order that notice to produce be set aside. Order that defendant produce document for inspection. CATCHWORDS : PROCEDURE – separate determination of questions – expedited hearing – matter having great urgency – impossible to resolve all issues finally – possible to resolve issue that may be decisive – other issues deferred – PLEADING – pleading must state effect of document, not incorporate by reference – PROCEDURE – production of documents – confidentiality – private confidentiality undertaking does not excuse compliance with notice to produce given force by rule of Court – PROCEDURE – Notice to produce – unreasonably burdensome in extent and time LEGISLATION CITED : (NSW) Uniform Civil Procedure Rules 2005 r 34.2 CASES CITED : TCS ACES Pty Limited v Mikohn Gaming Australasia Pty Limited [2007] NSWSC 988 PARTIES : TCS ACES Pty Limited (plaintiff) Mikohn Gaming Australasia Pty Limited (defendant) FILE NUMBER(S) : SC 50138/07 COUNSEL : Mr I M Jackman SC w Mr M R Tyson (plaintiff) Mr J B Simpkins SC w Mr E A J Hyde (defendant) SOLICITORS : Ebsworth & Ebsworth (plaintiff) Deacons (defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST BRERETON J Tuesday, 4 September 2007 50138/07 TCS ACES Pty Limited v Mikohn Gaming Australasia Pty Limited JUDGMENT (ex tempore) 1 HIS HONOUR: On 30 August 2007 I granted the plaintiff an interlocutory injunction until further order [[2007] NSWSC 988]. Because the transaction which that injunction has the effect of preventing is due to be entered into by the end of this week, I expedited the final hearing and fixed it for hearing before White J tomorrow. It was then envisaged that the matter might not be ready for final hearing on all issues by tomorrow, in which case it might be appropriate to formulate for determination a separate question or questions. In any event, it was envisaged that the Court would not hear any question of quantification of damages on 5 September. 2 As it transpires, the defendant – who has the prime interest in an early final hearing, so that the transaction to which it wishes to be a party may proceed on or about 6 September – accepts that not all issues to be agitated in the proceedings will be capable of being resolved tomorrow. As well as the issue which was agitated on the interlocutory application – namely, whether an implied term in the Distribution and Service Agreement prevents Mikohn from alienating the casino licences, as it proposes to do – the defendant wishes to argue that the Distribution and Service Agreement has in any event been otherwise terminated, and also that the plaintiff is precluded by unclean hands from seeking equitable relief. 3 The defendant accepts that the second issue – whether the Distribution and Service Agreement has been terminated – cannot be litigated on a final basis tomorrow. All parties accept that questions of damages are not to be litigated tomorrow. The plaintiff, at least at this stage, is not in a position to commit to being able to argue the unclean hands defence tomorrow and I think that is a reasonable position: it is going to be difficult enough to be ready to argue the limited issues which are now to be argued tomorrow, without also requiring investigation, within a period of twenty-four hours, preparation and adducing of evidence and argument on the unclean hands issue. 4 Accordingly, I propose to make orders the effect of which will be that the matter will proceed to a final hearing tomorrow only on the question of the implied term and breach of it. That will excise from tomorrow's hearing the termination issue, the unclean hands issue, and any question of damages. If the defendant succeeds on the implied term issue, that will finally resolve the proceedings in its favour, and the transaction will be able to proceed. If the defendant fails on that issue, then unless the interlocutory injunction – which I granted until further order – is dissolved, it will continue until the final hearing of the other issues. 5 The defendant has foreshadowed that it wishes to reagitate at least some aspects of the interlocutory injunction before White J tomorrow. It is true that I reserved to the defendant the opportunity to further argue the adequacy of the undertaking as to damages. If that is to involve a substantial examination of the plaintiff's financial position, then it may well be that tomorrow is not a time at which that can reasonably take place. It will be a matter for White J to consider whether or not, if the defendant fails on the separate question, his Honour should entertain an application for variation or discharge of the interlocutory injunction, and his Honour will no doubt consider whether such application should be entertained in view of the timeframe and opportunity which the parties have had to adduce evidence relevant to it by tomorrow. 6 Accordingly, I order that the issues raised by paragraphs 29, 30, 31 and 32 of the statement of claim, and paragraphs 12(2), 14, 15 and 16 of the defence, be determined separately and after all other issues in the proceedings. 7 The draft defence in paragraph 2(1) pleads that the defendant "will rely on the terms of the agreement for their full force and effect", in paragraph 7(1) that the defendant "relies upon the terms of clause 6.2 of the agreement for its full force and effect", and in paragraph 11(1) that the defendant "relies upon the terms of clause 18 of the agreement for its full force and effect". As I have pointed out more than once, this is an impermissible form of pleading. A party must not incorporate terms of an agreement by reference, but must set out in its pleading the effect of the terms for which it contends. The defence has not yet been filed and my observations are made in respect of a draft defence, but I indicate that if a defence were filed containing those paragraphs in the form in which they appear in the draft, I would order that they be struck out. 8 The defendant insisted as a condition of providing some of its affidavit evidence to the plaintiff that four solicitors acting for the plaintiff give undertakings to the Court and to the defendant to keep confidential Confidential Exhibit RZ1 referred to in an affidavit of Robert Ziems sworn 3 September 2007, and the entirety of an affidavit of Heather Rollo sworn 3 September 2007. The undertakings provide that the solicitors will not disclose such documents or any part of them, directly or indirectly, to any person, unless the solicitor has obtained the prior consent of the defendant's solicitors, or the disclosure is expressly authorised by the Court. 9 The plaintiff submits that the material the subject of the undertakings, on closer examination, could not legitimately be the subject of a claim for confidentiality against the plaintiff. In the time available I am not prepared to reach that conclusion in respect of the contents of Confidential Exhibit RZ1. I am prepared to reach that conclusion, as is now conceded, in respect of most, but not all, of the affidavit of Ms Rollo. The procedure provided by the undertaking for obtaining the prior consent of Deacons is one which should, with commonsense, permit the plaintiff to consult necessary personnel in connection with the preparation of the matter for hearing in respect of so much of the material as will remain subject to the undertakings. I will reserve liberty to apply on very short notice should any difficulty arise in that behalf. 10 I order that Robert McGregor, Michael Neylan, Ross Glover and David Nicoll be released from their undertakings to the Court and to the defendant dated 3 September 2007 in respect of the affidavit of Heather Rollo, except in so far as those undertakings relate to the information contained in paragraphs 15(2) and (3), 18 and 17 (where secondly appearing) in that affidavit. I reserve liberty to the parties to apply by telephone to my Associate on 15 minutes notice in the event of any difficulty arising in connection with the obtaining of any consent referred to in paragraph 3(a) of those undertakings, or for an authorisation pursuant to paragraph 3(b). 11 The defendant has served on the plaintiff a notice to produce appointing 5pm yesterday for production of all documents or things in the plaintiff's possession or control evidencing or recording, in essence, anything to do with its financial circumstances. In my view it was plainly impossible for the plaintiff to comply with this in the time available, and it would be unreasonable to expect it to comply with it by the hearing tomorrow. It is said to be relevant to the plaintiff's capacity to satisfy an undertaking as to damages, rather than to the question for final determination. It may well be that a much more limited document focussed on summaries of the plaintiff's financial position might be reasonable for the purposes of tomorrow, but that also will depend on its extent and the time at which it is served. 12 Pursuant to (NSW) Uniform Civil Procedure Rules 2005, r 34.2, I order that the plaintiff need not produce the documents or things referred to in the defendant's notice to produce dated 2 September 2007. 13 The plaintiff has served on the defendant a notice requiring production of the "Shuffle Master Agreement", referred to in an affidavit sworn in the proceedings and which is, prima facie, a key document in the proceedings. The defendant informs the Court that there is a non-binding letter of intent which it is prepared to produce in answer to that requirement, subject to the Court making an order that it do so, it being under an obligation of confidentiality to a third party in respect of that document unless and until there is an order of a court requiring its production. 14 The effect of UCPR r 34.2 is to equate the obligations of a notice to produce to the obligations imposed by a subpoena, so that rather than an order of the Court, a rule of the Court requires production of documents called for in a notice to produce. There is no material difference, and a private confidentiality arrangement cannot excuse the defendant from compliance with an obligation imposed by a rule of Court. However, for more abundant caution and for the protection of the defendant, I will make an order covering that and any further notice to produce. 15 I order that by 11.30am on 4 September 2007 the defendant produce for inspection by the plaintiff the documents referred to in the plaintiff's notice to produce dated 31 August 2007. I further order that, in the event that the plaintiff serves any further notice to produce on the defendant, the defendant produce the documents or things in accordance with any such notice, unless the defendant has made an application to the Court to be relieved from compliance with the notice. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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