Alcoa of Australia Ltd v Apache Energy Ltd [No 3]

[2013] WASC 334

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   ALCOA OF AUSTRALIA LTD -v- APACHE ENERGY LTD [No 3] [2013] WASC 334

CORAM:   LE MIERE J

HEARD:   8 APRIL 2013

DELIVERED          :   6 SEPTEMBER 2013

FILE NO/S:   CIV 1481 of 2011

BETWEEN:   ALCOA OF AUSTRALIA LTD

Plaintiff

AND

APACHE ENERGY LTD
First Defendant

APACHE NORTHWEST PTY LTD
Second Defendant

TAP (HARRIET) PTY LTD
Third Defendant

KUFPEC AUSTRALIA PTY LTD
Fourth Defendant

Catchwords:

Practice and procedure - Pleadings - Application to strike out parts of defence - Bare denial without particulars - Application allowed in part

Legislation:

Rules of the Supreme Court 1971 (WA), O 20 r 8, O 20 r 14, O 20 r 19

Result:

Application allowed in part

Category:    B

Representation:

Counsel:

Plaintiff:     Mr D G Collins SC & Mr K J A Lyons SC

First Defendant             :     Mr G P Harris

Second Defendant         :     Mr G P Harris

Third Defendant           :     Mr K Stewart

Fourth Defendant          :     Mr B Dharmananda SC

Solicitors:

Plaintiff:     Tottle Partners as agents for Landers & Rogers

First Defendant             :     K & L Gates

Second Defendant         :     K & L Gates

Third Defendant           :     Lavan Legal

Fourth Defendant          :     Allens Arthur Robinson

Case(s) referred to in judgment(s):

Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82

Fieldturf Inc v Balsam Pacific Pty Ltd [2003] FCA 809

O'Brien v Komesaroff (1982) 150 CLR 310

Pinson v Lloyd's and National Provincial Foreign Bank Ltd [1941] 2 KB 72

Re RGP Constructions Pty Ltd (in liq); Ewing v Hallett Brick Industries Ltd (1982) 31 SASR 170

Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190

1. LE MIERE J: The plaintiff, Alcoa, has applied pursuant to O 20 r 19(1)(c) of the Rules of the Supreme Court 1971 (WA) to strike out certain paragraphs of the defence filed by each of the defendants. Alcoa claims damages for economic loss for breach of duties of care owed by each of the defendants and damages for breach of gas supply agreements with the second, third and fourth defendants. The claims all arise out of a cessation of the supply of natural gas to Alcoa as a result of an explosion and fire at the defendants' processing facilities on Varanus Island.

The strike out application

1. In summary the plaintiff's case in support of its strike out application is as follows.  The impugned paragraphs comprise three categories.  First, there are bare denials of simple allegations that are within the knowledge of the defendants and which ought be largely uncontentious.  Those allegations ought to have been admitted or the defendants ought to have pleaded the facts by which they contend the allegations are incorrect.  Secondly, there are bare denials of allegations that the defendants breached a duty of care.  The bare denials are inconsistent with the defendants' affirmative case in contract that a reasonable and prudent operator could not have prevented the explosion.  It is unclear whether the defendants intend to argue that affirmative case in respect of the allegations in both tort and contract.  Thirdly, the defendants allege that the explosion was a force majeure event and that a reasonable and prudent operator could not have prevented the explosion.  Those allegations are central yet the material facts have not been pleaded.  The impugned paragraphs are evasive, embarrassing and will delay the fair trial of this action.  They do not comply with general law principles of pleadings or the Rules of the Supreme Court.

2. The first and second defendants (Apache defendants) oppose the application on the following grounds.  First, the application is incompetent and must be struck out because it was issued out of time.  Secondly, the complaints raised in respect of the paragraphs the subject of the application do not engage an entitlement to have those paragraphs struck out.  Thirdly, in so far as an entitlement, if any, arises by reason of the complaints made, that entitlement is confined to the provision of a request for necessary and proper particulars which is now also out of time.

3. The third defendant, (Harriet) opposes the application on the following bases.  First, the application is out of time.  Secondly, that the court should not consider the application until the plaintiff has made foreshadowed amendments to its statement of claim (SOC).   Thirdly, the impugned paragraphs of Harriet's defence are properly pleaded.

4. The fourth defendant (Kufpec) opposes the plaintiff's application on three bases. First, the application is out of time. Secondly, the authorities on which the plaintiff relies to support its argument that the impugned paragraphs of Kufpec's defence should be struck out do not support the plaintiff's argument. Thirdly, the impugned paragraphs appropriately meet the requirements of O 20 and in particular O 20 r 8 of the Rules of the Supreme Court.

Extension of time to bring application

1. Order 20 r 19(3) requires an application to strike out a pleading to be made within 21 days of the service of the pleading. The defences of the Apache defendants and Harriet were filed on 26 October 2012 and the defence of Kufpec on 29 October 2012. To comply with O 20 r 19(3) the plaintiff was required to apply to strike out the defences of the Apache defendants and Harriet by 16 November 2012 and the defence of Kufpec by 19 November 2012. The application was not brought until 29 November 2012. During the course of the hearing of the application senior counsel for the plaintiff applied for an extension of time in which to bring the application to strike out the defences.

2. In deciding whether to extend time the court should have regard to the length of delay in bringing the application, whether the extension is sought to enable genuine issues to be agitated, whether an extension of time is unfair to any of the parties and to the principles and objects of case flow management which are contained in O 1 r 4A and O 1 r 4B.  This action is a substantial commercial case.  It arises out of an explosion and fire at the Varanus Island gas facilities in June 2008.  The writ of summons was not issued until March 2011.  Alcoa's primary claim is for damages for economic loss for breach of duties of care owed by each of the defendants.  In addition, Alcoa claims damages for breach of contract for breach of the gas supply agreements by the defendants other than Apache Energy.  The delay of 10 or 13 days in filing the application is not significant in the context of the litigation.

3. In Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 Martin CJ referred to the role of pleadings in the context of case management techniques and pre‑trial directions. The Chief Justice observed that these processes leave little opportunity for surprise or ambush at trial and hence pleadings can be approached

   in a rather more robust manner, than was historically the case; confident in the knowledge that other systems of pre‑trial case management will exist and be implemented to aid in defining the issues and apprising the parties to the proceedings of the case that has to be met [6].

   The Chief Justice observed that:

   provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met, the court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment [7].

4. The approach to pleadings outlined by Martin CJ has been followed in numerous cases in this court and in other courts.  That approach should inform the exercise of the court's discretion whether to extend time for applying to strike out a pleading.  I would not have granted leave if the plaintiff's attack on the defences was based only on the first two categories to which I have referred.  The plaintiff's attack upon the paragraphs of the defences which fall in those categories largely involve the application of technical pleadings rules and the impugned paragraphs are adequate to fulfil the purposes of pleadings to which I have referred.  The third category is different.  The plaintiff's objections in relation to the pleading of force majeure go to the basic purposes of pleadings ‑ defining the issues to be tried and informing the plaintiff of the case it has to meet.  Allowing the plaintiff to apply to strike out the impugned paragraphs of the defences will not delay the efficient and timely disposition of the action.  There is no prejudice or unfairness to the defendants in granting an extension of time.  I will extend the time for the bringing the applications to strike out the defences so as to permit the applications to be brought.

Bare denials of matters within defendants' knowledge

1. It is convenient to consider the paragraphs of the defences attacked by the plaintiff by starting with the plaintiff's first category of bare denials of matters within the defendants' knowledge.  The plaintiff challenges a number of paragraphs of the defences which fall within this category.

Apache defence [5], Harriet defence [15.1]

1. In [5] of its SOC Alcoa pleads that the only significant sources of supply of gas in Western Australia were from North West Shelf gas operated by Woodside Petroleum Ltd (NWSG) and from the Varanus Island Hub facilities operated by Apache Energy. In [11] and [51] Alcoa pleads that each of the defendants knew or ought reasonably to have known the matters pleaded in [5]. In their defence the Apache defendants admit that significant sources of supply of gas in Western Australia were from NWSG and from Varanus Island facilities and otherwise deny the allegations in [5]. Apache Energy admits that it knew of the facts admitted in [5] but otherwise denies the allegations in [11]. Harriet admits that significant sources of supply of gas in Western Australia were from NWSG and from Varanus Island but otherwise denies the allegations in [5] of the SOC.

2. Alcoa says that the Apache and Harriet denials could only be made if Apache and Harriet are aware of other significant sources or potential sources of gas, that such knowledge can be inferred from the defences and their role as operators, licensees or joint venturers of the assets of the Varanus Island hub facilities.  Mr Collins SC, senior counsel for Alcoa, submitted that the defendants' denial carries with it an allegation that there is another significant source of supply of gas in Western Australia.  Mr Collins says that the allegation should be pleaded and the significant source of supply should be identified.

3. A defendant may traverse an allegation in the SOC either by a denial or by a statement of non‑admission: O 20 r 14(2). There is no difference in effect between denying and not admitting an allegation: Re RGP Constructions Pty Ltd (in liq); Ewing v Hallett Brick Industries Ltd (1982) 31 SASR 170, 171. A defendant will not be allowed to raise positive allegations in answer to the plaintiff's case under cover of a mere denial. The defendant must plead the facts and circumstances giving rise to that positive case: O'Brien v Komesaroff (1982) 150 CLR 310, 318. This is reflected in the surprise rule, O 20 r 9(1)(b), which has the effect that a defendant must plead specifically any matter which if not specifically pleaded might take the opposite party by surprise.

4. A defendant who pleads a denial which carries with it an implied affirmative case may be ordered to give particulars.  Whether a bare denial may stand without particulars depends on the nature of the denial.  In Pinson v Lloyd's and National Provincial Foreign Bank Ltd [1941] 2 KB 72, 83 ‑ 84 Stable J explained:

   A traverse in a defence is never an assertion of fact on oath.  Often it is not an assertion of fact at all, and may amount to no more than this:  'Prove your allegation, if you can. I do not intend to give you any help by admitting it.'  Where the traverse is a mere denial or putting in issue of some positive or affirmative allegation in the statement of claim, the rule that a defendant cannot be ordered to give particulars really rests on the commonsense basis that there is nothing which the defendant can particularize, in which case, to say the least of it, there would be no point in ordering him to do something which ex hypothesi is impossible.  Where the allegation in the statement of claim is a negative allegation, the traverse necessarily involves a double negative.  When used in ordinary speech a double negative must involve an affirmative proposition, but where the double negative appears in a defence in the form of a denial of a negative allegation in the statement of claim it does not necessarily follow, by reason of the very nature of a traverse which I have tried to indicate, that a positive or affirmative statement is contained in it.  It may or may not be so.

   Such a traverse ‑ that is, one involving a double negative ‑ may fall under one of three heads:  (i) it may be a mere traverse involving no affirmative allegation; (ii) it may be a negative pregnant which contains within the double negative an affirmative allegation; or (iii) it may leave the matter in doubt what its true nature is.  In my judgment, in the first case the defendant at the trial of the action can do no more than put the plaintiff to the proof of the negative alleged.  He can seek to shake or destroy by cross-examination any evidence which the plaintiff may bring on the point, but, when once the plaintiff has established a prima facie case, the defendant on such a pleading cannot set up an affirmative case in answer because that, ex hypothesi, would be to set up a case which he has not pleaded, and that is what the rules expressly preclude him from doing.  If it falls under the second head, the double negative extends beyond a mere traverse and amounts as in the present case to this: 'If you establish a prima facie case that I sold or purchased shares for you and that in so doing I acted without authority, then I intend to call evidence to establish that on each or some of the occasions there was an express authority to act as I did or an implied authority to be derived from certain facts.'  That, in my judgment is to set up an affirmative case of which particulars ought to be given and that none the less, though the affirmative case is concealed, albeit imperfectly, in a negative shell.  The third head may be excluded in the present case because [counsel for the defendants] has told us that at the trial of the action, if the pleading rests where it is, it is his intention to contend that he is entitled to set up an affirmative case and to prove the existence of an express authority of which he refuses to give particulars.

   In my judgment, in each case where a negative allegation by a plaintiff in a pleading is traversed in the defence, the question whether or not [the] defendant can be ordered to give particulars depends upon whether the traverse is a mere traverse or whether, though negative in form, the negative is pregnant with an affirmative, in which case particulars of that affirmative must be given.

   Stable J said (at 88) that if the pleading left the real nature of the traverse in doubt it would be embarrassing because the limits of the controversy would not have been properly defined and the pleading should be struck out.

5. The defendants' pleadings in response to SOC [5], [11] and [51] fall within the first head referred to by Stable J ‑ they are mere traverses involving no affirmative allegation.  The pleas are not embarrassing.  The pleas do no more than put the plaintiff to proof of the allegation pleaded in the SOC.  The pleas do not entitle the defendants to set up an affirmative case in answer.  That being so the defendants' traverses should not be struck out.  I do not believe there is anything in the judgments in Fieldturf Inc v Balsam Pacific Pty Ltd [2003] FCA 809 or Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190 which require a different decision.

Apache defence [6]

1. Paragraph 6 of the SOC pleads that the sales gas produced from Varanus Island was only supplied to approximately 15 large commercial gas customers including the plaintiff.  In their defence the Apache defendants admit that sales gas produced from Varanus Island facilities was supplied to commercial gas customers including Alcoa but otherwise deny the allegation.  Alcoa submits that that denial could only be made if the Apache defendants contend that gas produced from Varanus Island was supplied to either more or less than 15 large commercial gas customers and accordingly the Apache defendants should plead and identify the number of large commercial gas customers.  I do not accept that argument.  The plea by the Apache defendants is not an assertion that gas was supplied to any particular number of commercial customers.  In effect, the Apache defendants put Alcoa to proof of the number of commercial customers that gas was supplied to from Varanus Island.  The plea is not embarrassing.  It does not leave in doubt the true nature of the defendants' case.  The plea is a mere denial involving no affirmative allegation.  It should not be struck out.

Apache defence [15A] to [17D], Kufpec defence, Harriet defence [15.8]

1. Paragraphs 15A to 17D of the SOC allege a series of reviews, reports and manuals prepared by or on behalf of Apache Energy relating to the Sales Gas Pipelines.  The Apache defendants deny the allegations in [15A] to [17D].  Harriet denies the allegations in [51] of the SOC.  Kufpec does not admit each and every allegation in SOC [15A] to [17D].  Alcoa says it is unclear whether the defendants dispute the existence of the reports, whether they were prepared for Apache Energy or whether it made the recommendations alleged by Alcoa.  Alcoa says that precisely what is disputed by the defendants ought to be made clear.

2. It is sufficient to consider the challenge to the defendants' plea in response to SOC [15A].  The same considerations apply to the other impugned paragraphs.  SOC [15A] pleads that in a review conducted for Apache Energy by Ferrum Technology Pty Ltd in 1997 Ferrum advised certain things.  That plea contains three elements.  First, there was a review by Ferrum.  Secondly, the review was conducted for Apache Energy.  Thirdly, in the review Ferrum advised certain things.

3. The effect of [15A] of the Apache defence and the Kufpec defence and [15.8] of the Harriet defence is to deny each of the three elements or facts pleaded by the plaintiff in SOC [15A].  It appears from the oral submissions of the defendants' counsel that the gist of the denial by the Apache defendants is to deny the effect of the report referred to in the particulars to [15A].  However, the defence does not prejudice, embarrass or delay the fair trial of the action.  The plaintiff knows the case it has to meet and is not prejudiced in the preparation of its case by the form of the defendants' pleading.  The same considerations apply to [15B] to [17D] of the defences of the Apache defendants and [15.8] of the Harriet defence.

Inconsistent pleadings

1. Paragraphs 32, 38 and 53 of the SOC plead that the defendants failed to exercise reasonable care and skill in operating, maintaining, supervising, overseeing and/or repairing the 12 inch Sales Gas Pipeline or SGL to prevent its rupture.  The defendants deny those allegations in [32], [38] and [53] of the Apache defence, [17] of the Harriet defence and [53(c)] of Kufpec's defence.

2. The plaintiff submits that the defendants have failed to make clear by those denials whether they intend simply to put the plaintiff to its proof or whether the defendants intend to run an affirmative case of the steps they took in relation to the operation, maintenance and repair of the 12 inch SGL.  The plaintiff submits that this is particularly so as in response to Alcoa's contract case, in [57A] of the Apache defence, [21.2] of the Harriet defence and [57] of the Kufpec defence, the defendants have pleaded that a reasonable and prudent operator could not otherwise have prevented or overcome the explosion.  The plaintiff submits as follows.  The defendants' bare denials of the allegations in [32], [38] and [53] of the SOC are vague, uncertain and embarrassing.  It is not clear whether the defendants intend to put a positive case and respond to the allegation of breach of duty.  If they intend to assert that there was no breach of duty because a reasonable and prudent operator could not have prevented the explosion, they ought to positively allege the facts they rely on either in the pleading or in particulars.

1. Paragraphs 32, 38 and 53 of the Apache defence are not inconsistent with [57A] of their defence.  Paragraphs 32, 38 and 53 of the Apache defence are mere traverses involving no affirmative allegation.  There is no direct inconsistency between such traverses and a plea that a person in the position of the defendant acting as a reasonable and prudent operator could not have reasonably prevented or overcome the explosion.  I will consider the latter plea when considering the plaintiff's objections to the force majeure pleas by the defendants.

Force Majeure pleas

1. Alcoa claims damages for breach of the gas supply agreements.  The plaintiff's case is that the licensees (Apache North West, Harriet and Kufpec) failed to supply and deliver sales gas in accordance with the contract and the plaintiff is entitled to liquidated damages under the contract.  The licensees' defence to the claim for damages for breach of contract is that they are entitled to the benefit of the force majeure clause in the gas supply agreements.  Those are affirmative defences in the nature of confession and avoidance.  In support of that defence each defendant must plead the material facts to establish that defence.

2. Paragraph 57 of the SOC pleads that the failure of the defendants to supply gas was not due to an event of force majeure because the explosion was in the control of the defendants and reasonably able to be prevented by the defendants.  Paragraphs 57A and 57B of the Apache defence, [21.2] of the Harriet defence and [57] of the Kufpec defence plead that there was an event of force majeure and that a reasonable and prudent operator could not have prevented the explosion.  The plaintiff submits that [57A] and [57B] of the Apache defence and [21.2] of the Harriet defence do not plead the cause or the facts by reason of which the explosion could not reasonably have been prevented.  The plaintiff says that while [57] of the Kufpec defence pleads that the failure to deliver gas was due to a failure of plant equipment or pipelines and the explosion could not have been prevented by Kufpec exercising the requisite standard in its role as a non‑operator, it fails to identify the material facts giving rise to these allegations.

3. In its defence Apache North West denies the allegations in SOC [57] and refers, amongst other things, to [57A] and [57B] of its defence.  Paragraphs 57A and 57B are pleas of force majeure.  They are more than a traverse of the plaintiff's allegations.  Paragraphs 57A and 57B plead an affirmative defence of force majeure.  However, they do not state the material facts which give rise to the defence.  The statement that 'a person in the position of Apache North West acting as a Reasonable and Prudent Operator within the meaning of the Harriet GSA and the John Brookes GSA could not have reasonably prevented or overcome the explosion' is a statement by way of conclusion and fails to state the material facts from which that conclusion is to be drawn.  Material facts relied on by Apache North West must be pleaded so as to define the issues to be tried, to give notice to the plaintiff of the case it has to meet and for the trial to be conducted efficiently within permissible bounds.

4. Counsel for the Apache defendants, Mr Harris, submitted that Alcoa's case in negligence overlaps with Apache's force majeure defence.  Mr Harris submitted:

   If the court rules against Alcoa in relation to those matters, then we say the conclusion the court should draw – and we don't seek to lead any additional evidence in relation to that – is that force majeure is engaged.  If we lose the negligence case, then we don't seek to plead any other fact that we say we would nevertheless be entitled to claim force majeure.  So the factual controversy is defined by Alcoa and put in issue by us

   …

   We don't seek to lead any additional evidence by which we would then say we're entitled to force majeure.  If they lose their negligence case, they don't seek to agitate any proposition beyond that as a basis for saying that it wasn't a force majeure event.  Your Honour, we have to live in the real world here.  The case is – and your Honour will appreciate the [liquid damages] claim is $5.7 million.  The real case here is the negligence case, that's what this case is all about.

   In my view the Apache defendants cannot avoid pleading the material facts on which their defence of force majeure is based on the basis submitted by their counsel.  Paragraph 57A and 57B of the Apache defendants defence should be struck out with leave to re‑plead.

5. In [21], and in particular [21.1], of its defence Harriet denies the matters pleaded at SOC [57]. Harriet further says that the Incident constituted an event of force majeure as that term is defined in the Harriet GSA as a consequence of which the obligations of inter alia the third defendant to the plaintiff under the Harriet GSA were suspended, and any failure by inter alia the third defendant to meet its delivery obligations pursuant to the Harriet GSA is deemed not to constitute a breach of the Harriet GSA. Harriet gives particulars of notification of the force majeure event but does not state the facts on which it relies to establish that the Incident constituted an event of Force Majeure. Paragraph 21 of Harriet's defence should be struck out with leave to re‑plead.

6. In [57] of its defence Kufpec pleads that its failure to deliver gas in accordance with the GSA was due to an event of force majeure.  Kufpec does not stop at that.  Its pleading says that its failure to deliver gas was due to:

   (i)a failure of plant, equipment or pipelines;

   (ii)further alternatively an event that was not within the control of Kufpec; and

   (iii)an event that could not reasonably have been prevented or overcome by Kufpec by the exercise of diligence, prudence and foresight consistent with that of a Reasonable and Prudent Operator.

   Kufpec gives particulars of (ii) and (iii).  The particulars that the event was not within the control of Kufpec include that Apache North West or Apache Energy was in control of the day‑to‑day operation, management and maintenance of the Harriet Joint Venture facilities, which included the 12 inch SGL and the 16 inch SGL, and that Apache North West or Apache Energy had charge of and control of all operations of the Harriet Joint Venture.  Kufpec's particulars of its plea that the event could not reasonably have been prevented or overcome by its exercise of diligence, prudence and foresight consistent with that of a Reasonable and Prudent Operator are that it was not the operator of the 12 inch SGL and did not have day‑to‑day control of the maintenance, operation and management of the 12 inch SGL and that the incident could not reasonably have been prevented or overcome by Kufpec exercising the requisite standard in its role as a non‑operator.  Kufpec has set out the facts on which it relies to establish its defence of force majeure.

Conclusion

1. The time for the plaintiff to apply to strike out paragraphs of the defendants' defence is extended to enable the plaintiff to apply to strike out [5], [6], [15A] to [17D], [32], [38], [53], [57A] and [57B] of the Apache defendants' defence filed 26 October 2012, [15.1], [15.8], [17] and [21.2] of Harriet's defence filed 26 October 2012 and [7(b)], [10(c)], [15A] to [17D], [53(c)] and [57] of Kufpec's defence filed 29 October 2012. Paragraphs 57A and 57B of the Apache defendants' defence and [21.2] of Harriet's defence are struck out. The plaintiff's application is otherwise dismissed.