FEDERAL COURT OF AUSTRALIA

Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2012] FCA 290

IN RELATION TO THE APPLICATION FOR THE RESPONDENT TO ANSWER INTERROGATORIES, THE COURT ORDERS THAT:

1.    No order is made in respect of the proposed interrogatories.

2.    The application is stood over to a date to be fixed, with the applicant to have liberty to re-apply for an order that the respondents answer further particular interrogatories. Such application is to be made on 14 days notice.

3.    Costs of the application are reserved with liberty to any party to apply for costs of the application to date, by filing and serving within 21 days of publication of reasons for Order 1 hereof a written submission specifying the orders sought and the submissions in support of it and any other party may then within a further period of 21 days file and serve written submissions in response and the party or parties applying for costs may within a further 14 days file and serve written submissions strictly in reply, to the intent that the costs of the application to date will then be determined on the papers.

4.    The time within which any application for leave to appeal from Orders 1 to 3 hereof shall run until 2 May 2012.

IN RELATION TO APPLICATION FOR PARTICULAR DISCOVERY, THE COURT ORDERS THAT:

5.    The respondents and each of them within 49 days from the making of this order on such further claim as the Court may allow, do make particular further discovery of any documents which they or either of them have not yet discovered which concern the prospectivity of the Paralana Plains area, including in relation to tenements adjacent to the Tenement (EL 2874), and which comprise:

5.1    documents which came into existence between 30 August 2002 and 30 August 2004 recording data which the first respondent considered in determining the nature and extent of its exploratory drilling program to search for sedimentary-hosted uranium mineralisation in the Paralana Plains area including but not limited to ground based surveys;

5.2    documents recording the information obtained by the first respondent as a result of the drilling program conducted by it or the second respondent in the Paralana Plains area in the period of about August 2004;

5.3    documents passing between the first respondent and the second respondent in the period between May 2004 and 13 October 2004 in which one respondent conveyed to the other respondent views about the prospectivity of the Tenement.

6.    The respondents have liberty to apply for orders confining the extent in which the documents may be inspected by the applicant or its legal advisors or representatives, provided such application is made by notice given at the time of the provision of the further discovery.

7.    Cost of the application for further discovery are reserved with liberty to any party to apply for costs of the application to date, by filing and serving within 21 days of publication of reasons for Order 5 hereof a written submission specifying the orders sought and the submissions in support of it and any other party may then within a further period of 21 days file and serve written submissions in response and the party or parties applying for costs may within a further 14 days file and serve written submissions strictly in reply, to the intent that the costs of the application to date will then be determined on the papers.

8.    The time within which any application for leave to appeal from Orders 5 to 7 hereof shall run until 2 May 2012.

9.    Liberty to any party to apply to determine whether the particular documents specified by the applicant in its submissions in reply fall within the documents referred to in Order 5 hereof, such liberty to be exercised on reasonable notice to the other party.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR DECISION

INTRODUCTION

1    Alliance Craton Explorer Pty Ltd (Alliance) seeks orders that Quasar Resources Pty Ltd (Quasar) and Heathgate Resources Pty Ltd (Heathgate) provide answers to interrogatories administered in the form of the draft document filed and service by Alliance on 4 February 2011 and for further discovery from Quasar and Heathgate.

2    The interrogatories are extensive. There are in excess of 200 individual questions (including sub-questions of more general questions) and they run to some 32 pages in length.

3    All the interrogatories are the subject of objection by Quasar and Heathgate. They argue that the interrogatories go well beyond (and thus do not relate to) matters in question between the parties, that the pleading of the respondents in any case is sufficiently responsive, that the interrogatories are oppressive and vexatious, and that the application ultimately amounts to “fishing” for evidence.

BACKGROUND

4    This matter has already been the subject of an interlocutory ruling, in which the background to the proceedings appears: Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd [2010] FCA 1415 (Ryan J). It is desirable to summarise the background to place consideration of the interrogatories in context.

5    The proceedings arise out of a joint venture agreement on 30 August 2002 between Alliance and Heathgate (and then Quasar as assignee) to exploit the Four Mile Uranium Project (Four Mile) which is in the Arkaroola Region adjacent to the Northern Flinders Ranges in South Australia. After the formation of the joint venture, Alliance became the registered holder of Exploration Licence 2874 (the Licence) (which was later renumbered to EL 3666) in respect of a prospect also located near Arkaroola.

6    The licence area (the Tenement) is mostly within the Flinders Ranges area. The Tenement also includes a small area called Paralana Plains near its south eastern boundary. Within the Paralana Plains area of the Tenement, near its eastern boundary, exists Four Mile.

7    It is helpful to understand the issues in the proceeding and to refer to the licence tenements adjacent to the Tenement, in particular to its Paralana Plains area.

8    Beyond the eastern boundary of the Tenement the adjoining tenement is the Paralana-Heathgate tenement (EL 2633 and now renumbered EL 3251) and within it sits the Beverley Uranium Mine, on the mining lease pursuant to which Heathgate operates that uranium mine. At all relevant times, Heathgate has been the owner and operator of the Beverley Uranium Mine.

9    Further east of the Paralana-Heathgate tenement, there lies the Heathgate-Giralia tenement (North Mulga) (EL 3002). A small portion of its boundary is adjacent to the Tenement. Beyond the south-east boundary of the Tenement, Paralana Plains stretches south and east towards Lake Frome. This area forms the subject of another adjoining tenement, the Heathgate-Giralia tenement (Wooltana) (EL 3012). Both of these tenements, as discerned from discovered documents and as explained in submissions, are subject of a separate joint venture agreement between Girilia and Heathgate.

10    The Quasar-Paladin-Riseinger (Paladin) tenement (EL 3001) lies east of the Tenement and further north of EL 3001 exists the Quasar-Paladin (Petermorra) tenement (EL 3078). The latter does not share a boundary with the Tenement. Those two tenements, EL 3001 and EL 3078, were originally, according to discovered documents, subject of a further joint venture between Paladin Resources and Heathgate. However, in December 2002, Heathgate assigned its joint venture interest to Quasar (contemporaneous in time with the assignment of the Heathgate’s interest in the joint venture subject of these proceedings to Quasar).

11    Each of those tenements either partly adjoins the Tenement or is wholly or partly within the wider area called Paralana Plains, an extensive area running east from the eastern side of the tenement and spreading northwards and southwards.

12    Returning to the events preceding this action, Heathgate agreed to pay the costs of exploration under the Licence for at least two years, amounting to not less than $300,000 and was to have the opportunity of acquiring a 75% interest in the Licence in that period. In order to earn and maintain its interest in the Licence, Heathgate was required to fund and undertake all of the exploration of the Tenement (the Joint Venture Agreement).

13    On 17 December 2002, Heathgate assigned to Quasar its right, title and interest and corresponding obligations under the joint venture agreement with Alliance. Despite the assignment, Heathgate performed some of Quasar’s functions and exercised some of its powers as manager of the Tenement on behalf of the Joint Venture. Heathgate charged Quasar the cost of that work and Quasar submitted to Alliance accounts for the amounts so charged in respect of salaries, wages and a management fee for the purpose of claiming that it had earned a 75% interest in the Licence pursuant to its earn-in right.

14    On 5 August 2004, shortly before the two year earn-in period expired (29 September 2004) the Joint Venture Agreement was varied in various respects including an extension for one year of the “earn-in” period in return for Quasar increasing its expenditure commitment to $450,000.

15    It is contended that Quasar sought and obtained the consent of Alliance to the one year extension of the earn-in period because it was unlikely to be able to meet its expenditure commitment of $300,000 before the earn-in period expired. The circumstances in which Quasar allegedly obtained the consent of Alliance to the extension of the earn-in period are subject of the principal issues to be decided in these proceedings.

16    Alliance alleges that, at the time of obtaining that extension, Quasar and Heathgate did not disclose to it that Quasar was planning an exploratory drilling program searching for sedimentary-hosted uranium mineralization on the Paralana Plains. Nor, it is alleged, did Quasar or Heathgate disclose to Alliance any exploratory activities undertaken, and the information acquired by Quasar, concerning the prospectivity of that part of the Tenement for sedimentary-hosted uranium. However, on 29 April 2005, Quasar wrote to the Department of Primary Industry and Resources of South Australia (“PIRSA”) reporting that uranium mineralisation had been intersected in areas of the Tenement now known as “Four Mile”.

17    After the extension of the “earn-in” period, Quasar in April 2005 drilled three exploratory holes in the Four Mile East area and one in the Four Mile West area of the Tenement. Then, on 25 June 2005, Quasar informed Alliance that it had expended $650,811.11 in relation to the Tenement and sought a transfer to it of a 75% interest in the Licence. That transfer occurred on 13 September 2005 and Quasar remains registered as transferee in the Mining Register.

18    Alliance alleges that on 5 August 2004, when it agreed to the proposed extension of Quasar’s “earn-in” period, it did so unaware that Quasar had caused to be carried out ground-based surveys in the area of the Paralana Plains, and that the results of those surveys and other information possessed by Quasar had been available to Quasar but not disclosed to Alliance when it agreed on 5 August 2004 to extend the “earn-in” period.

19    Alliance also contends that, before 5 August 2004, Quasar had formulated a proposal for an extensive drilling program to be undertaken on Paralana Plains for which it had identified the location of some 18 drill holes. However, it is alleged, neither the formulation of this proposal nor the preparatory work which had been undertaken was disclosed to Alliance by 5 August 2004.

20    Further preparatory work, including the lodging with PIRSA of an application for approval to undertake an exploratory drilling program on the Paralana Plains and the obtaining of Aboriginal heritage clearance for the location of the drillholes, including the 18 referred to above, is said to have been carried out between 20 August and 12 September 2004. However, according to Alliance, none of these matters had been disclosed to it by 13 October 2004 when ultimately it executed the agreement extending Quasar’s “earn-in” period to 30 October 2005.

21    There are a number of causes of action pleaded. Relevant to this application, it is said by Alliance that in entering into the transaction constituted by the extension of the earn-in period of one year, Quasar did so for its own benefit when, by virtue of its position as manager and joint venturer under the Joint Venture Agreement and by use of information obtained in those capacities during the previous two years, it faced a real and substantial prospect of a conflict of interest between its personal interest in obtaining that extension, and its duty of loyalty owed to Alliance by virtue of the Joint Venture Agreement. It is said that Alliance could not have excused any breach of duty obtaining the fully informed consent of Alliance to that extension of the earn-in period. Alliance says that Quasar did not disclose all material facts relevant to informing Alliance’s decision on whether to grant the extension of the earn-in period and that Quasar is precluded from contending that fully informed consent was given in the circumstances so as to excuse any breach of the fiduciary obligations or of its equitable obligation not to use information acquired in the course of effecting the extension of the earn-in period in pursuit of its own interests or contrary to the interests of Alliance.

22    Alliance also seeks to erect, on the same factual allegations, causes of action against Quasar for breach of contract and contraventions of s 52 of the Trade Practices Act 1974 (Cth) (“the TPA”) as then in force and s 9 of the Fair Trading Act 1999 (Vic) (“the FTA”) and against Heathgate for involvement in or assisting Quasar’s breaches of duty, breach of contract or contraventions of the TPA and the FTA.

23    On the present application, Alliance claims that these issues are genuine and substantial and that the interests of justice require that it be permitted to administer interrogatories to Quasar and Heathgate in the terms proposed, and to secure further discovery from them.

GENERAL PRINCIPLES - INTERROGATORIES

24    The relevant Rule under the Federal Court Rules 2011 as to the administration of interrogatories is Rule 21. I do not consider that the earlier Federal Court Rules, if applied, would result in a difference in the principles to be applied or in the outcome of this application, so I will deal with this application under Rule 21 of the 2011 Rules. There is a difference between granting leave to administer interrogatories, and ordering a party to provide written answers to interrogatories. It would make no difference to the outcome. The relevant step in the proceeding for the purposes of Rule 1.04(2) will be the ordering of the respondents to answer certain interrogatories.

25    The ultimate aim of the process of discovery of information by interrogatories is to shorten the trial and save costs. They are to enable a party to litigation to obtain discovery of material facts in order either to support or establish proof of his or her own case, or to find out what case (but not the evidence) the party has to meet; or to destroy or damage the case brought by his or her opposition: Adams v Dickeson [1974] VR 77, as cited with approval in Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Ltd [2010] FCA 230 (ACCC v ANZ) (at [95]).

26    The three step approach articulated by Greenwood J in ACCC v ANZ provides a useful starting point for the proper assessment of whether to administer interrogatories and as to their form. His Honour stated at [91]:

First, is the interrogatory directed to a matter pleaded in the statement of claim but not admitted in the defence? ... Secondly, if the interrogatory is not directed to that question, is each interrogatory otherwise directed to a denial or non-admission which is said to be unclear? If so, on either basis, the third question is whether the interrogatory is vexatious or oppressive in the sense that those terms are understood in the authorities.

27    However, underlying that approach is the overall discretion of the Court to allow or disallow the administering of interrogatories. In recent times, orders giving leave to interrogatories or now, more accurately, under Rule 21.01 ordering a party to answer particular interrogatories are rare. They are often seen as expensive and unnecessary to secure a proper disclosure of information. There are other avenues to secure the proper disclosure of information. Modern case management has explored more efficient and effective avenues to achieve that end.

28    Quasar and Heathgate dispute that any of the interrogatories relate to a matter in question, as informed by a close scrutiny of the pleadings (including particulars contained in those pleadings). In Ring-Grip (Australasia) Pty Ltd v H.P.M Industries Pty Ltd [1971] 1 NSWLR 798 at 800, the New South Wales Court of Appeal observed that it is impermissible to interrogate as to matters that go beyond the issues as disclosed by the pleadings and the particulars. The expression “relating to any matter in question” in the past has been taken to mean that the interrogatories are not confined to facts directly in issue but extend to any fact the existence or non-existence of which is relevant to the existence or non-existence of facts directly in issue: Potter’s Sulphide Ore Treatment Ltd v Sulphide Corporation Ltd (1911) 13 CLR 101 (at 109-111); Sharpe v Smail (1975) 5 ALR 377 (at 381); Seidler v John Fairfax & Sons Ltd [1983] 2 NSWLR 390 (at 392); ACCC v ANZ at [14], [17], [97].

29    Alliance submits that it is a legitimate objective of interrogatories to seek to ascertain admissions as to material facts which, where is necessarily relevant to parts of their claim, such as the question of “fully informed consent”, are beyond the knowledge of Alliance but well known to Quasar and Heathgate. The following statements of Woodward J in Aspar Autobarn Co-operative Society v Dovala Pty Ltd (1987) 16 FCR 284 (at 284-285) (Aspar Autobarn) largely reflect the contention of Alliance on this application:

There can be no doubt that, in certain types of case, interrogatories administered with care and discretion and answered responsibly can play a very useful part in preparing a case for trial. It makes for a fairer and more efficient hearing if the parties know the outlines of each other's cases before they come to court. The statement of claim goes some way towards stating the applicant's case, but will often range wider, and be expressed in more general terms, than the basic allegations of the applicant require. The defence often discloses nothing of the respondent's real case and, in my view, serves little purpose in most litigation in this Court. Except where it is necessary to identify the issues with particular precision (as, for example, where statutes of limitation may be involved), there is much to be said for cases going to trial on the basis of affidavits rather than pleadings. If the affidavits are carefully and responsibly prepared there should be no need for interrogation. But where pleadings are used, they will often need to be supplemented by interrogatories in order to identify and narrow the areas of factual dispute or, as in the present case, to enable applicants to establish facts which are beyond their knowledge but well known to the respondents. (Emphasis added)

30    Quasar and Heathgate contend that the interrogatories are simply “fishing”. In the Full Court decision of WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 (WA Pines) Lockhart J said at 190-191:

There are four objects of interrogatories: 1. To obtain admissions as to facts which will support the case of the interrogating party. 2. To obtain admissions which will destroy or damage the case of the party interrogated. 3. Interrogatories which are in the nature of a request for further and better particulars. 4. Interrogatories which seek to obtain accounts from a party occupying a fiduciary position.

However, among the well-established limitations upon the power to interrogate and to discovery of documents is the rule that this power cannot be used for the purpose of "fishing".

In Hennessy v. Wright (No. 2) (1888) 24 Q.B.D. 445 (reported as a note to Parnell v. Walter (1890) 24 Q.B.D. 441) Lord Esher M.R. said:

“In other words, the plaintiff wishes to maintain his questions, and to insist upon answers to them, in order that he may find out something of which he knows nothing now, which might enable him to make a case of which he has no knowledge at present. If that is the effect of the interrogatories, it seems to me that they come within the description of `fishing' interrogatories, and on that ground cannot be allowed.

The moment it appears that questions are asked and answers insisted upon in order to enable the party to see if he can find a case, either of complaint or defence, of which at present he knows nothing, and which will be a different case from that which he now makes, the rule against `fishing' interrogatories applies”.

…

In Associated Dominions Assurance Society Pty. Ltd. v. John Fairfax & Sons Pty. Ltd. (1952) 72 W.N. (N.S.W.) 2, Owen J. said: "A `fishing expedition', in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not". See also Bray on Discovery (1885), pp. 13, 16, 98 and 461.

…

I have no doubt that the appellant is seeking to use the weapons of discovery and interrogatories to find out if it has a case of which it presently knows nothing. It is a fishing expedition to which this Court will not lend its aid. I respectfully agree with the following passage from the reasons for judgment of Smithers J. in Melbourne Home of Ford Pty. Ltd. v. Trade Practices Commission and Bannerman:

"Accordingly in a proceeding pursuant to s. 163A(1), certainly in the absence of satisfactory evidence that the Chairman did not have the relevant reason to believe, the applicants are faced with the prima facie validity of the notice. In the absence of such evidence the proceeding is essentially speculative in nature. In such circumstances, for the court to assist the applicants by making available to them the processes of interrogatories and discovery would be to assist them in an essentially fishing exercise and from this the court on established principle should refrain".

31    Thus, in circumstances where a party makes allegations in a pleading based on suspicion, they should not be entitled to interrogate on those suspicions, for to do so is an example of fishing by making a case where none presently exists: WA Pines at 173-174 per Toohey J; 181-182 per Brennan J; and 190-191 per Lockhart J, and more recently see Minister for Immigration & Multicultural & Indigenous Affairs v Wong [2002] FCAFC 327 at [32].

32    A more recent elaboration of principles informing legitimate objections to interrogatories and the relationship between processes of discovery and interrogatories is given by McKerracher J in Austal Ships Pty Ltd v Incat Australia Pty Ltd (No 3) (2010) 272 ALR 177 (Austal Ships No 3) at [6]-[8]:

As will be apparent from r 6, an interrogatory may be objected to by a party when it is too wide, fishing or immaterial: Aspar Autobarn Co-operative Society v Dovala Pty Ltd (1987) 16 FCR 284. It may be objected to as being vexatious when it is fishing Aspar at 287. It can be objected to on grounds of being oppressive if it is unfair or unreasonable in the sense that the burden of answering it far outweighs the likely benefit which may be adduced from the answer.

The administering and answering of interrogatories is a form of discovery. Just as this Court has now substantially limited the scope for wide ranging discovery, the circumstances on which leave to administer interrogatories will be granted is increasingly rare. That is not to say that interrogatories and discovery of documents are mutually exclusive. It is clear that they may overlap on occasions. In this Court it will be unlikely that interrogatories will be permitted as a substitute for discovery of documents.

Interrogatories which are directed towards ascertaining the contents of documents may be an exercise in fishing and are not generally permissible: WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175 at 181-182 per Brennan J, and at 191-191 per Lockhart J….

33    The apparent infrequency with which interrogatories are utilised in modern litigation as a means of discovery should not prevent a careful consideration of the merits of a particular application.

34    As to the content or form of particular interrogatories, McKerracher J in Austal Ships No 3 identified four categories of well-grounded objections to interrogatories at [9]:

The first category is where the question calls for the expression of a legal opinion from a layperson. The second category is on the grounds that the interrogatory is fishing in that it seeks discovery of documents or other information in order to attempt to convert a speculative claim into something else. The third category is where the question is embarrassing or too wide in that it is not capable of being answered or otherwise requires the deponent to embark on an inquiry or inquiries that would outweigh any benefit to be gained from providing an answer having regard to the issues in dispute and would place an undue burden on the deponent. The fourth and final category is where the question does not relate to any matter in issue between the parties; is otherwise too wide; or is an exercise in fishing…

35    Reference may also be made to the observations of Woodward J in Aspar v Autobarn at 287-288.

36    In ascertaining whether interrogatories taken as a whole are oppressive, one must consider the number sought to be administered, the extent to which providing an answer imposes an unreasonable and onerous burden on the interrogated party, whether the interrogatory requires the interrogated party to form opinions, to exercise judgment or to draw conclusions, and whether the questions are repetitive: ACCC v ANZ (at [101]). If the energy, effort, time and cost required to address the interrogatories is not reasonably proportionate to the end sought to be achieved, then the interrogatories should not be administered. In making a decision, a balancing exercise must be undertaken: the benefits of narrowing and clarification of issues against the costs and the burden placed over the respondents inherent in the task of answering the written questions fully and accurately.

CONSIDERATION - INTERROGATORIES

37    Alliance submits that the draft interrogatories are directed to the existence of facts in issue which relate to the following matters in question in these proceedings. They are stated in the following terms:

1.    The extent and significance of information concerning the prospectivity of Paralana Plains for sedimentary-hosted uranium mineralisation acquired by Heathgate and Quasar prior to the joint venture agreement with Alliance on 30 August 2002, including any analysis of drilling undertaken by the previous explorers such as West Nuclear in the 1970s and any analysis of the results of the survey undertaken in 2002 (Interrogatories 1-20)

2.    The extent and significance of information concerning the prospectivity of the Paralana Plains for sedimentary-hosted uranium mineralisation acquired by Heathgate and Quasar during the period from 30 August 2002 to 17 December 2002, the date of assignment by Heathgate of its joint venture interest to Quasar (Interrogatories 21-23)

3.    The roles of and relationship between the respondents following the assignment by Heathgate of its joint venture interest to Quasar including the engagement of Heathgate to undertake or arrange for and on behalf of Quasar the activities and services of Quasar as manager of the joint venture and the manner and extent to which information acquired by Heathgate concerning the licence was made available to Quasar (Interrogatories 24-28)

4.    The extent and significance of information concerning the prospectivity of Paralana Plains acquired by Heathgate and Quasar and the exploration activities undertaken by Heathgate and Quasar during the period from 17 December 2002 to 30 June 2004 and during the period from 1 July to 13 October 2004 including the 2004 gravity survey and other geophysical surveys undertaken over adjacent tenements (Interrogatories 32-38)

5.    The instigation and planning of the 2004 drilling program including the drilling program over the Paralana Plains including the addition and location of drillhole AK019 and the removal of the western ‘fenceline’ of five drillholes (Interrogatories 39-42)

6.    The identification of information concerning the prospectivity of the Paralana Plains for sedimentary-hosted uranium in the possession of Heathgate and Quasar as at the time of execution of the agreement to extent the earn-in period and the extent of disclosure of the information to Alliance (Interrogatories 43-44)

38    The real essence of the case of Alliance, as it is expressed in submissions, is clear enough. Alliance asserts that, in the period it was asked to consider the extension of the earn-in period, both Heathgate and Quasar had knowledge about the prospectivity of the Paralana Plains area, being knowledge particularly about the prospectivity of certain of the tenements adjoining the Tenement, which a reasonable and experienced mining explorer would have realised would have been relevant to the assessment of the prospectivity of the Tenement. Hence, both Heathgate and Alliance had information available to them that was directly relevant to the assessment of the value of the “earn-in” option (then sought to be extended). It is alleged (and for present purposes it has been accepted) that the asserted knowledge (if it existed) was not conveyed to Alliance. The general nature of the knowledge is set out in [16]-[20] above.

39    In my view, the general thrust of the concerns of Alliance as set out in the preceding paragraph of these reasons is a legitimate one. By using the term “legitimate”, I do not intend to convey that it is a correct one. That is a matter which may ultimately need to be decided. However, I am satisfied that Alliance has reasonable cause to assert, and has asserted (albeit not as clearly as it may have), that Heathgate and Quasar had available to them in the period up to the date of extension of the lead-in option on 29 September 2004, information which may well have been relevant to the value of the Licence at that time. I am also satisfied that such information may well have included information of the character set out in [16]-[20] above. I am further satisfied that such information was not conveyed to Alliance prior to 29 September 2009, and that it is reasonably arguable that the failure to do so amounted to a breach of duty on the part of Quasar as the then Joint Venturer with Alliance in relation to the exploration of the Tenement and that Heathgate was aware of those circumstances so that, if Quasar was in breach of its duty to Alliance, Heathgate was arguably complicit in that breach.

40    I do not accept that information of the character referred to is not shown to have been likely to exist. Nor do I accept that, if it existed it was so remote from relevance to the value of the Tenement as to not inform or be capable of informing the value of the Licence at the time of the extension of the “earn-in” option. I also accept that, in relation to those categories of information, the extent of disclosure made by Heathgate and Quasar to their respective joint venture partners in the adjacent tenements, compared to the disclosure made to Alliance with respect to the information following from the results of the geophysical surveys and intentions with respect to the 2003 and 2004 drilling programs on those tenements, may also be relevant to informing the extent of compliance (if any) with the disclosure obligations to Alliance.

41    However, I do not think that the pleading of Alliance is as clear as the submissions on its behalf suggested. That matter became apparent very early in the course of submissions. There was no suggestion that any amendment to the Alliance pleading would be sought, so it is necessary to decide whether the case as expressed on behalf of Alliance in argument is pleaded. If it is not, as counsel for Quasar and Heathgate contended, the interrogatories should not be administered and no further discovery should be ordered.

42    Alliance pointed to the following paragraphs, referred to as the “heart of the pleadings”:

24.    During the period from execution of the Deed of Assignment to 30 June 2004, Quasar as manager of the joint venture engaged in the following exploration activities with respect to the tenement:

…

(c)    Quasar planned and undertook exploration activities with respect to the prospectivity, including prospectivity for uranium mineralisation, of an area within the tenement forming part of the Paralana High Plains between the edge of the Mt Painter complex and the eastern boundary of the tenement (Paralana Plains) which included an area now generally known as Four Mile (Four Mile), which adjoined exploration licence EL3251 held by Heathgate (which Quasar did not reveal to Alliance);

(d)    Quasar acquired (from or in conjunction with Heathgate) information concerning the prospectivity of the Paralana Plains, including its prospectivity for uranium mineralisation (which Quasar and Heathgate did not reveal to Alliance)    

Particulars

Particulars of exploration activities planned and undertaken with respect to the M1-M9 prospect, the U1-U4 prospect and the Paralana Plains, including information acquired concerning the prospectivity of the Paralana Plains, are set out in schedule C.

25.    During the period from 1 July to 13 October 2004, Quasar as manager of the joint venture engaged in the following exploration activities with respect to the tenement:

(a)    Quasar planned and undertook further exploration activities with respect to the prospectivity of the Paralana Plains including its prospectivity for uranium mineralisation including a ground-based gravity survey of the Paralana Plains and a successful application to the Director of Mines for works approval for an 18-hole exploratory drilling program on the Paralana Plains in respect of palaeochannel-hosted uranium mineralisation (which Quasar did not reveal to Alliance).

(b)    Quasar acquired further information concerning the prospectivity of the Paralana Plains including its prospectivity for uranium mineralisation (which Quasar did not reveal to Alliance).

…

54.    The agreement which Quasar obtained from Alliance to the extension of the earn-in period was not made with the fully informed consent of Alliance in that Quasar did not disclose to Alliance beforehand all of the information which it had acquired which was material to the decision of Alliance whether to consent to the extension of the earn-in period including the following:

(a)    the exploration activities undertaken concerning the prospectivity of the Paralana Plains including its prospectivity for uranium mineralisation referred to in paragraphs 24 and 25;

(b)    the exploration results and other information obtained concerning the prospectivity of the Paralana Plains including its prospectivity for uranium mineralisation referred to in paragraphs 24 and 25.

43    I accept that para 24(d) raises the issue about information relating to adjacent tenements being subject of the duty of disclosure owed by Quasar to Alliance. The particulars refer to a lengthy schedule to give context to that issue.

44    I also accept that para 24(c) also raises the issue that information acquired and relating to adjacent tenements more generally, but again apparently by reference to Schedule C.

45    Schedule C refers to two relevant surveys, the 2002 AEM Survey (page 48 of Sch C) and the 2004 Gravity Survey (page 49 of Sch C).

46    Schedule C is headed “Particulars of paragraphs 24 and 25”. It is apparently a chronological sequence of some events involving testing and exploration of the Tenement and the adjoining tenements, and including a description of exploration activities more generally and their potential significance, with allegations that Quasar did not disclose its activities, its plans or outcomes or results to Alliance. It extends over nine pages (pp 46 to 54 of the Statement of Claim). Its content includes the claims that in May 2002 Heathgate undertook an airborne electromagnetic survey (2002 AEM survey) over several tenements including EL 2633 (Paralana), EL 3002 (North Mulga) and EL 3012 (Wooltana) and that the survey extended beyond the boundaries of the licences which Heathgate was entitled to explore at the time and also covered part of the Paralana High Plains which fell within the Tenement. It also claims that in August and September 2004 Heathgate and Quasar undertook a ground-based survey (2004 Ground Gravity survey) over the Paralana, North Mulga and Wooltana tenements, as well as the Paralana Plains area within the Tenement. The decision to do so was on the part of Quasar in conjunction with Heathgate, as part of a larger regional gravity survey to be undertaken by Heathgate covering parts of the adjacent tenements referred to above. It is claimed that both the existence and results of those were surveys were withheld from Alliance, although they were capable of informing the prospectivity of the Paralana Plains for sedimentary-hosted uranium mineralisation, and also informed Quasar’s plan to undertake a drilling program on the Paralana Plains for sedimentary-hosted uranium mineralisation which was instigated and planned in 2004 as a result of information produced by those surveys.

47    In summary, the 2002 AEM survey covered, at least so far as is known to Alliance, the two Heathgate-Giralia tenements and the 2004 Gravity Survey covered at least the two Heathgate-Giralia joint venture tenements as well as the Paralana tenement and the Tenement.

48    It is the case that, as pleaded, the surveys are geographically limited in the sense that they referred to surveys conducted over adjacent tenements but not over the Tenement. Nothing was said specifically of those kinds of surveys in the Statement of Claim. The distinction between surveys which cross over adjacent tenements and the Tenement and surveys which are confined only to exploration of adjacent tenements is to be noted, as it is information from such surveys which, arguably, is not information relevant on the pleadings. The particulars otherwise in Schedule C state that Alliance is unable to identify any other exploration activities undertaken or other relevant information obtained, concerning the prospectivity of the Paralana Plains before 13 October 2004. However, it does not follow that information concerning the prospectivity of the Paralana Plains may not inform the prospectivity of the tenement. I think the pleadings are sufficient to take the step of accepting, as I do, that that is what Alliance is alleging.

49    Counsel for Alliance referred to the Defences of Heathgate and Quasar to bolster the case on relevance of information relating to adjacent tenements, which may have informed the prospectivity of Paralana Plains, in particular of the Tenement.

50    In relation to the 2002 AEM survey, counsel for Alliance said the following of the Defence pleadings:

It should be said that the defence in part, refers to some of the surveys which were conducted on the adjoining tenements in that there is a form of the permission of the 2002 AEM survey was undertaken by Heathgate in May 2002 and that it covered a number of tenements in which Heathgate has an interest. Quasar puts the matter slightly differently but in effect admits that that particular survey covered part of my client’s tenement….

51    In relation to the 2004 Ground Gravity survey, counsel for Alliance said the following of the Defences:

Heathgate refers to an agreement between it and Petratherm Limited (in para 25(b)). That those two parties had undertaken a regional gravity survey over selected areas of Petratherm leases and Heathgate mineral exploration license in the vicinity of its uranium mine and a portion of my client’s tenement. If your Honour goes over the page to subparagraph 3, the defence then returns to this survey saying that it was conducted between 23 August and 4 September and …11 and 12 September, in an area surrounding the Beverley Uranium Mine…Subparagraph 4 says that the survey covered an area surrounding the Beverley Uranium Mine which was approximately 30 kilometres north-east of Wooltana, approximately eight per cent of which covered my client’s tenement. And the next paragraph goes on to say that that data did not and could not establish certain things and was not relied upon by Heathgate in planning the 2004 drilling program.

52    The report containing that data has been provided to Alliance along with other data generated by that report, which contained flight date coordinates which indicated it covered each of the adjacent tenements referred to. It is contended by Alliance in their Reply, that the report as referred to above, gives “signatures or indications of where one might drill to look for sedimentary hosted uranium”.

53    Heathgate, in response to the allegations made by Alliance with respect to non-disclosure of the 2004 ground Gravity Survey is much the same, except for the fact that (as counsel for Alliance said) in “one paragraph of the pleadings it is said that this survey extended into Heathgate’s Beverley tenement and the other tenements in the region in which it had an interest.”

54    It is my view that the relevance of the interrogatories proposed to be administered can be measured against the pleadings in that way. I am satisfied that the pleadings sufficiently identify the issues as to indicate that the allegation set out in [20] above is an appropriate measure of their relevance. I do not consider it appropriate to refer to the affidavits of Mr Evan Stents, referred to by Alliance in the course of submissions, to extend the concept of relevance as it emerges from the pleadings. That conclusion means that the topics in [16]-[20] above are matters in respect of which interrogatories might be administered.

55    However, in my view, not all the topics of the interrogatories are within that scope. In my view, only the interrogatories 32-44 could meet that test of relevance, as I have understood the pleadings. The information obtained by either Quasar or Heathgate in the period of time from 17 December 2002 to 29 September 2004 or alternatively 13 October 2004, when the earn-in period was extended relating to the prospectivity of the Paralana Plains, and their exploration activities in tenements adjacent to the Tenement in the Paralana Plains, and relating to the 2004 drilling program is material which, in my view, is relevant on the pleadings to the claims of Alliance.

56    However, at this point, I do not propose to order Quasar and Heathgate to answer those interrogatories in that particular form, or indeed at all. In my view, notwithstanding the decision in principle as to their relevance, I consider that it is not necessary in the interests of justice that Quasar and Heathgate be required to provide answers to those interrogatories at this point. That is simply because, on the complementary application for further discovery, I propose to make orders that documents which relate directly to those topics should be discovered to Alliance. If discovery is made, at present, I do not see that the answering of the interrogatories which touch upon those topics would then significantly advance the information available to Alliance upon which it might adduce evidence in support of its claims, and so I do not think that the interests of justice are advanced in any material way by requiring their answer.

57    In those circumstances, it is unnecessary to address the particular objections to the particular interrogatories which I have otherwise considered, in a generic sense, might be properly administered. That is, I do not have to determine whether the terms in which they are drafted are satisfactory or are oppressive, or would otherwise be disallowed.

58    The order I propose to make is simply that, at this point, there be no order that the interrogatories proposed to be administered by Alliance to Quasar and Heathgate should be administered. That is not intended to foreclose a renewed application for the administration of interrogatories in the light of the further discovery which I propose to order. If such an application is made, it can be made on the basis of the existing application without a fresh notice of motion.

GENERAL PRINCIPLES – DISCOVERY

59    The application for particular discovery was made under O 15 r 8 of the former Federal Court Rules. It sought discovery of a wide range of documents described in the Schedules which is Exhibit EAS.26 to the affidavit of Evan Anthony Stents sworn on 17 February 2011 (the Schedule) and now also referred to in the Index of Further Documents to be Discovered by the Respondents filed on 12 May 2011 in 9 Categories. The application for further discovery is vigorously resisted by Quasar and Heathgate.

60    I do not consider there is any significant difference between O 15 r 8 and the provisions which might otherwise apply to this application under the Federal Court Rules 2011. The hearing of the application extended into a period when the Federal Court Rules 2011 had come into operation. The next step in the proceeding will be the making of an order for discovery. I think Rule 1.04(2) of the Federal Court Rules 2011 therefore direct that those Rules apply to the resolution of this application. However, I do not think that, in this matter, any different outcome would result if the former Federal Court Rules were to be applied.

61    Rules 20.11 and 20.12 limit the circumstances for discovery to that necessary for the facilitation of the just resolution of the proceeding as quickly, inexpensively and efficiently as possible, and to circumstances where the Court has made an order for discovery. Those Rules reflect the practice and the prescription under the former O 15 r 8, as informed in O 15 r 2.

62    I accept that the measure of “relevance” or “direct relevance” is defined and limited by the pleadings and particulars: Mummery v Irvings Pty Ltd (1956) 96 CLR 99 at 110; Bailey v Federal Commissioner of Taxation (1997) 136 CLR 214 at 219, 227.

63    The real contest between the parties lay in what has been pleaded, and in particular whether the Statement of Claim of Alliance, with its Particulars including Schedule C to the Statement of Claim, alleged that information held by Quasar and/or Heathgate in the time leading up to the extension of the earn-in period concerning prospectivity of the tenements adjacent to the Tenement in the Paralana Plains was or should properly have been regarded as relevant to the prospectivity of the Tenement, and hence its value, at that time.

64    For reasons I have given, I have concluded that Alliance has pleaded such a case. The consequence is that, in my view, Quasar and Heathgate have taken a narrower view of what is discoverable because they have taken a narrower view than I consider is correct as to the scope of the pleadings.

65    It then becomes a matter of applying well-settled principles to the particular documents in issue. In the course of submissions, Alliance refined and reduced the extent of its claim for discovery in any event.

DISCOVERY – CONSIDERATION

66    The material supporting the claim for further particular discovery was voluminous. There was extensive responsive material. Indeed, the material simply describing what further orders for particular discovery were sought, and the responses to that material were also voluminous. The contentions respectively ranged across extensive materials. The written and oral submissions were themselves extensive. They addressed categories, as well as individual documents. There were specific submissions about specific documents, sometimes running to several pages about an individual document.

67    I prefer to revert to a more generic description of the documents which I think should be the subject of an order for particular discovery. I have made orders which give effect to that conclusion. That may lead to disputes about whether particular documents lie within or outside the further particular discovery orders. Particular focus can be given to those documents at that time.

68    The orders I have made encompass in a general sense those in Categories 1, 2, 3, 4, 5 and 6. That is subject to the time period specified in the orders made.

69    I do not consider that the orders encompass Category 7 as that appears to relate to a more extensive period and to be secondary material, based upon material which (if discoverable in accordance with the orders made) would constitute the primary material that is relevant. I note that only some of the documents which would be within Category 8 might be encompassed in the orders. Also, the Category 9 document is excluded.

CONCLUSION

70    For the reasons given, I made the orders published on 26 March 2012.

71    There is one final observation I should make. As is apparent, I think the resolution of these interlocutory applications should have been resolved largely by reference to the pleadings. There was considerable disputation about the role of affidavit evidence. I have had regard to that evidence principally to be satisfied that Alliance has reason to believe that there are documents held by Quasar and/or Heathgate which directly touch upon the prospectivity of the Paralana Plains area. The case by Alliance was described in the submissions recorded above. I determined only by reference to the pleadings, including the Schedule to the Statement of Claim, that its case as expressed in argument was pleaded. It was careful, through counsel settling the Statement of Claim, that it should not overstate what it thought it could clearly prove that he made that task a difficult one.

72    Of course, to consider that there is a prospect that the prospectivity of the Tenement, and so its value, may be informed by information concerning the prospectivity of the Paralana Plains in the adjacent tenements is not to conclude that that is the case. That may be a matter to be resolved in due course. But, to my mind, it would not facilitate the just resolution of this claim if it were the case that the information held by Quasar and/or Heathgate concerning the prospectivity of the Paralana Plains area outside the Tenement had that quality, but by successfully resisting a discovery order Quasar and Heathgate were able to prevent Alliance from making out that case. That is not to suggest that Quasar and/or Heathgate have acted improperly in resisting the further discovery, or in asserting that such material is irrelevant on the pleadings as they presently stand. Nor is it to suggest that Quasar and/or Heathgate did deliberately withhold material from Alliance in the time leading up to the extension of the earn-in option period. That may be a matter pursued by Alliance (as it has pleaded); and it may be that its proof of that matter may be assisted by the further discovery ordered.

73    In my view, fundamentally, this is a case where the just resolution of the dispute requires the order for further particular discovery which I have made.

74    As I have not used the contentious affidavits to enhance my conclusion that the case of Alliance, as explained by senior counsel, has been pleaded, I have not found it necessary to address the individual objections to the affidavits in detail.

75    At the expiration of the period of time fixed for the giving of further discovery, if there have been no issues requiring attention in the meantime (such as the extent of inspection permitted), I will list the proceeding for further directions.

76    It is unfortunate that the outcome of this application has turned on a fine interpretation of complex pleadings and particulars. If my conclusion about the meaning of the pleadings and particulars is erroneous, I would not routinely consider that Alliance should not be allowed to plead that which it clearly alleges more specifically. I appreciate that there is an obligation only to plead what can properly be proved. But assuming that there is some expert advice available to Alliance that information about the prospectivity of the Paralana Plains adjacent to the Tenement is capable of informing the prospectivity of the Tenement in the material period, there is enough material clearly to show that there was quite extensive material available to Quasar and Heathgate at that time concerning the prospectivity of those adjacent tenements. As presently advised, I would be inclined to allow the amendment of the pleading of Alliance to make more explicit what I think it already says. However, there may be good reasons why that should not be the case, so that is a provisional view only.

Associate:

Dated:    4 April 2012