Alstom Power Ltd v Yokogawa Australia Pty Ltd - [2008] SASC 15

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
ALSTOM POWER LTD v YOKOGAWA AUSTRALIA PTY LTD & ORS
[2008] SASC 15
Reasons for Decision of The Honourable Justice Anderson
4 February 2008
PROCEDURE - DISCOVERY AND INTERROGATORIES - DISCOVERY AND INSPECTION OF DOCUMENTS - DISCOVERY OF DOCUMENTS - ORDERS FOR FURTHER AND BETTER DISCOVERY
Interlocutory application for further and better discovery for seven classes of documents - defendants argue documents discoverable in the interests of justice generally and in particular because of defendants' plea of unconscionability - Kadlunga list of documents sought.
Held: Documents in only two categories discoverable and Kadlunga list to be prepared for those documents.
Supreme Court Rules 1987 r 58A.04, referred to.

ALSTOM POWER LTD v YOKOGAWA AUSTRALIA PTY LTD & ORS
[2008] SASC 15
Civil

ANDERSON J. The defendants have applied for an order for further discovery in relation to seven classes of documents. The defendants maintain that the documents are discoverable in the interests of justice pursuant to r 58A.04 of the Supreme Court Rules 1987, even though they say that the documents are in any event directly relevant.
Rule 58A.04 states:
(1)Parties are not to include in their lists of documents any documents which are only indirectly relevant to any issue arising on the pleadings unless it is ordered by the Court where it is in the interests of justice to do so.
(2)Where an order under (1) is made after a list of documents has been filed a supplementary list of documents is to be filed within 14 days of the order.
The plaintiff entered into a contract for the refurbishing of a power station at Port Augusta. The head contract was between the plaintiff and the owner of the power station. The owner comprised a number of entities operating in a partnership known as the Flinders Power Partnership (“FPP”).
The defendants in turn were in contractual arrangements with the plaintiff as sub-contractors. The sub-contractors were involved in an unincorporated joint venture agreement known as YDRML.
When the progress under the contract was slow, the plaintiff entered into a settlement agreement with the owner in February 2005. The plaintiff blamed YDRML for the delay and the consequent need for it to negotiate a settlement with the owner. An amount of approximately $20 million was involved in the negotiated settlement, and that amount forms part of the overall claim of the plaintiff against the defendants. In September 2003 there had been a similar settlement agreement entered into.
The seven classes of documents for which the orders are sought are as follows:
1.Those surrounding a February 2005 settlement agreement with FPP.
2.Those involving extension of time claims.
3.Those documents surrounding a September 2003 settlement agreement, again with another party.
4.Site diaries and notebooks.
5.Final payment certificate records.
6.Internal management reports.
7.Those documents relating to an expert opinion for coal mills.
I will deal with these categories in order.
1. Documents surrounding a February 2005 settlement agreement
Alstom entered into a confidential settlement with FPP because of alleged breaches of contract by the defendants as a result of which Alstom claims it was forced to mitigate its loss. The defendants say that the settlement was reached because of Alstom’s breaches of contract. The defendants claim that the documents sought would shed light on Alstom’s motives and its internal assessments of the situation at the time the settlement was negotiated.
The documents sought are:
Drafts, correspondence, notes, internal assessments, minutes of meetings and other documents created in connection with the settlement agreement in February 2005 between the plaintiff and the FPP.
Whilst it is conceded by the defendant that some of the documents may be privileged, it is suggested that a Kadlunga list of documents should be provided.
It is argued that the significance of the documents sought derives from the plaintiff’s own pleading as to the reasonable beliefs of the plaintiff’s employees and their assessment of the ability to meet the deadlines of the head contract.
It is suggested that the documents should be discovered in the interests of justice because of the defendants’ plea of unconscionability. Therefore it is said that Alstom’s corporate state of mind is relevant as to what has been described as a core issue in the case.
The plaintiff maintains that the documents sought are neither directly relevant nor should they be provided in the interests of justice. They argue that the defendants are embarking upon a fishing expedition and furthermore that they should be protected against an oppressive burden being imposed on their being required to discover the documents.
The pleadings relied on by the defendants are paragraphs 183 to 191 of the amended statement of claim. They also rely on paragraphs 127, 281, 282 and 183 to 191 of the defence and counterclaim. These allegations raise issues related to the confidential negotiations leading to a settlement and the reasons for entering into those negotiations. The documents, on the face of it, are indirectly relevant.
It seems to me that, subject to issues of confidentiality, it is in the interests of justice for the defendants to be entitled to some form of modified Kadlunga list for this class of documents. There should be no problem with accessibility and the exercise would not be unduly onerous.
I would hear the parties as to the exact form the list should take. The documents already discovered, and for which privilege is generally claimed, are not described in sufficient detail and better descriptions are required of these documents in any event.
2. Extension of time claims
In relation to the extension of time claims, the defendants point to the fact that 176 applications were made and all of them were rejected. They say this shows a lack of impartiality and that therefore, on the face of it, the state of mind of Alstom is relevant. In this case, the plea of unconscionability also relates to a conflict of interest in the position in which Alstom had to assess these claims. It is maintained that the internal assessments should be provided in the interests of justice.
The documents sought are:
Documents including records, notes, working papers and calculations relating to Alstom’s assessment of YDRML’s extension of time claims or the process by which those claims were assessed.
The plaintiff maintains that all relevant discovery has been made and that this is not a core issue. The defendants ask me to infer that further documents exist but I cannot make that inference on the information I have.
The plaintiff says that it has discovered all relevant documents pursuant to its obligation under the rules. There is a presumption to that effect. I cannot see how this application can be taken any further. I am not able to find that further documents, if there are any, should be discovered in the interests of justice. The plaintiff has confirmed in writing following this hearing that it is unaware of any further documents. The plaintiff has a continuing obligation to discover relevant documents.
3. Documents surrounding a September 2003 settlement agreement
This is a similar situation to that which surrounded the 2005 settlement. The plaintiff alleges that in September 2003 it was required to negotiate a settlement with FPP because of delays for which it blames YDRML. Once again the defendants suggest that the state of mind of the plaintiff’s employees is relevant. It is suggested that further discovery is required in the interests of justice.
The documents sought are:
Drafts, notes and other documents prepared in connection with the settlement agreement, including documents evidencing how the agreement was structured and negotiated, and other advices prepared.
The defendants submit that documents should be discovered which may be privileged but which should again be done by way of a Kadlunga list. They point to the fact that it is likely there would be draft agreements. The plaintiff argues that there is no sufficient link to any specific pleas, as was the case in the first category of documents relating to the September 2005 agreement. It is suggested that this is purely fishing.
Although the link between the requested documents and the pleadings is not as strong as in the case of the 2005 agreement, I think there is a sufficient link from paragraph 96 of the amended statement of claim and from paragraph 86 of the defence and counterclaim. This is also the plea of unconscionability in paragraph 298. The documents would be indirectly relevant.
I am therefore prepared to make an order in the interests of justice and again will hear from the parties as to an appropriate way of dealing with the discovery by way of a Kadlunga list.
4. Site diaries and notebooks
The defendants have pointed to the fact that parts of some diaries have been discovered and that there should be discovery of all relevant diaries and notebooks. They say these diaries would be relevant to any suggested deviations from the path the work was to follow.
The documents sought are:
Site diaries and notebooks for the refurbishment of turbines 1, 3 and 4 and the boilers.
The first affidavit filed by Mr Regan on 23 October 2007 does not convince me that an order is necessary. It is inconclusive and not based on direct evidence.
The plaintiff says that such documents as are available have already been discovered in any event.
A further affidavit sworn by Mr Regan was filed on 18 December 2007 after I heard argument. I find that this takes the matter no further on the aspect of the diaries and notebooks.
The plaintiff has indicated in writing since the completion of the hearing that it has not located any further diaries or notebooks.
Discovery has been made of what exists and the plaintiffs have a continuing obligation to discover anything else which might surface during the preparation for trial. I would make no order under this head.
5. Final payment certificate records
The defendants say that the documents that are behind the actual certificate are required and discovery should be made in the interests of justice. They point to paragraph 134 of the amended statement of claim and allege that there must be working papers which are probably directly relevant.
The plaintiff in turn points out that the final payment certificate, with all its detail, is in itself a comprehensive document. It does go into some detail in relation to the way in which the final payment calculations were approached.
The documents sought are:
Documents referred to, or created in the preparation of the Final Payment Certificate (including programs), and other drafts, calculations, advices (other than advices from solicitors or counsel) prepared in relation to the Final Payment Certificate.
The certificate was attached to Mr Regan’s recent affidavit. I agree with the plaintiff’s submission that this is a very detailed document which, on its face, explains the way calculations were made.
Where there are clear references within the certificate, and in the attachments forming part of the certificate to other documents or classes of documents, such documents would, on the face of it, be discoverable. Any documents which are referred to within that certificate, including documents referred to in the attachment, should be discovered if they have not already been. I would make no order at this stage but hear the parties further if full discovery has not been made.
6. Internal management reports
The documents sought are:
Internal documents and reports concerning the performance of the works and the EC&I subcontract and documents referred to, and prepared in connection with those reports.
In this matter, parts of relevant documents have been redacted and the defendants have again suggested a Kadlunga list should be supplied to enable a general review of the redacted parts. The suggested justification for this is to determine if there is a valid claim for waiver, and if so, on what basis. The plaintiff simply maintains that this is not in issue and is not relevant. I am not convinced that this is necessary in the interests of justice. I am not prepared at this stage to inspect the documents and examine the redacted parts and I am not prepared to make an order.
7. An expert opinion for coal mills
The defendants seek, by way of further discovery, the plaintiff’s response to an expert report which was obtained. They seek to enquire into the way in which the plaintiff reacted when it received an expert’s report. They submit that such information would not be oppressive and is not fishing, and it does deal with the issue of the coal mills, which is a core issue in the case.
The documents sought are:
Documents prepared in connection with the report of Frank Meixner.
The plaintiff accepts but disputes any entitlement to further discovery as claimed by the defendants on the basis that it is both fishing and oppressive. It is my view that it is fishing and that it would be unfair to require the plaintiffs to disclose any such documents. I therefore make no order.
Of course things may change dramatically, as is often the case, as the matter is prepared for trial and documents emerge which are either directly relevant by their links to other discovered documents or which are discoverable in the interests of justice. Again, the plaintiff has confirmed in writing that it has not located any further reports or documents prepared in connection with the expert report.
The orders I would make are as follows:
1.That Alstom within 28 days provide discovery of the following categories of documents:
1.1    Drafts, correspondence, notes, internal assessments, minutes of meetings and other documents created in connection with the settlement agreement in February 2005 between the plaintiff and FPP.
1.2    That any documents discovered as privileged within the categories identified in paragraph 1.1 be specifically identified in an amended list and the basis for the claim for privilege in each case be identified.
1.3    Drafts, correspondence, notes, internal assessments, minutes of meetings and other documents created in connection with the settlement agreement in September 2003 between the plaintiff and FPP.
1.4    That any documents discovered as privileged within the categories identified in paragraph 1.3 be specifically identified in an amended list and the basis for the claim for privilege in each case be identified.
2.That no orders be made for further discovery in respect of all other categories in which the defendants seek further and better discovery.