Barrick Gold of Australia Ltd v F L SMIDTH Inc [No 3] - [2009] WASC 364

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BARRICK GOLD OF AUSTRALIA LTD -v- F L SMIDTH INC [No 3] [2009] WASC 364

CORAM: MASTER SANDERSON

HEARD: 21 SEPTEMBER 2009

DELIVERED : 7 DECEMBER 2009

FILE NO/S: CIV 1753 of 2001
CIV 2413 of 2000
CIV 2358 of 2002
CIV 2359 of 2002
CIV 2366 of 2002

BETWEEN: BARRICK GOLD OF AUSTRALIA LTD (ACN 008 143 137)
NORKAL PTY LTD (ACN 008 940 743)
KALGOORLIE LAKE VIEW PTY LTD (ACN 004 990 274)
NEWMONT GRPL PTY LTD (formerly GOLD RESOURCES PTY LTD) (ACN 008 976 958)
NORTH KALGURLI MINES PTY LTD (ACN 008 747 886)
First Plaintiffs
KALGOORLIE CONSOLIDATED GOLD MINES PTY LTD (ACN 009 377 619)
Second Plaintiff
AND
F L SMIDTH INC
First Defendant
F L SMIDTH MINERALS PTY LTD (ACN 000 221 590)
Second Defendant
GRD MINPROC LTD (ACN 008 992 694)
Third Defendant
LYCOPODIUM ENGINEERING PTY LTD (ACN 055 880 209)
Fourth Defendant
SIEMENS LTD (ACN 004 347 880)
Fifth Defendant
NEWMONT POWER PTY LTD (formerly NORMANDY POWER PTY LTD) (ACN 065 116 841)
Sixth Defendant

Catchwords:

Practice and procedure - Application for further and better discovery - Whether policy of business interruption insurance discoverable - 'Related to matter in issue'

Legislation:

Nil

Result:

Discovery ordered

Category: A

Representation:

Counsel:

First Plaintiffs               :     Mr J A Thomson
Second Plaintiff            :     Mr J A Thomson
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance
Fifth Defendant            :     Dr J T Schoombee
Sixth Defendant            :     No appearance

Solicitors:

First Plaintiffs               :     Jackson McDonald
Second Plaintiff            :     Jackson McDonald
First Defendant             :     No appearance
Second Defendant         :     No appearance
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance
Fifth Defendant            :     SRB Legal
Sixth Defendant            :     No appearance

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

Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529
Davie v New Merton Board Mills Ltd [1959] AC 604
Hunt v Severs [1994] 2 AC 350
Johnson Tiles Pty Ltd & Dean v Esso Australia Pty Ltd [2003] VSC 27; (2003) Aust Torts Reports 81‑692
Lister v Romford Ice & Cold Storage Co Ltd [1957] AC 555

MASTER SANDERSON: This application began life as the fifth defendant's application for extensive further and better discovery from the plaintiffs. Gradually, as a result of discussions between the parties, the number of categories of documents at issue has been reduced. Some matters remain outstanding. However, the parties are confident all but one issue can be resolved by negotiation. That issue, which I am to determine, relates to whether or not policies of business interruption insurance held by the plaintiffs should be discovered. The fifth defendant says they should be; the plaintiffs say they should not be.
It is appropriate to begin with a brief summary of the issues between the plaintiffs and the fifth defendant in the litigation. The action is brought by the first two first plaintiffs as participants in, and by the second plaintiff as manager of, two gold mining joint ventures. The claim concerns the loss allegedly suffered by the joint venturers when a semi‑autogenous grinding mill ('the SAG Mill') employed in their gold processing operations was damaged. The SAG Mill was incorporated into the gold processing operations when they were upgraded in 1994 and 1995. The SAG Mill commenced processing operations in October 1995.
Prior to 1 October 1996 the electricity required for the gold processing operations was supplied by Western Power from the Goldfields Integrated Electricity Supply System. On 1 October 1996 the joint venturers and their manager ('KCGM') entered an electricity supply agreement ('ESA') with the sixth defendant for delivery of electricity from the Parkeston Power Station. Soon after delivery of electricity from the Parkeston Power Station commenced, the supply to the SAG Mill was suddenly and unexpectedly shut off due to events called 'power excursions'. These power excursions occurred on 2, 14 and 27 October, and 6 and 18 December 1996.
The plaintiffs claim these power excursions pushed the SAG Mill's girth and pinion gears out of alignment and caused stress fractures in the girth gear which later required earlier replacement. As a result of the effects of the power excursions, the plaintiffs say the gold processing operations ceased immediately after each excursion and that the girth gear failed earlier than expected requiring the gold processing operations to cease in June 1998 and May 1999 for remedial and replacement work. In addition, the plaintiffs say that gold processing operations occurred at a reduced rate between June 1998 and May 1999.
The plaintiffs make claims in negligence and based upon misleading and deceptive conduct against the first to fifth defendants. These defendants were responsible for designing and constructing the SAG Mill and its drive system.
In broad terms, the plaintiffs claim against these defendants that the girth gear of the SAG Mill would not have been damaged by the power excursions had the drive system for the SAG Mill been fitted with either a torque limiting coupling or an underfrequency device. It is alleged that in either case the devices, if fitted, would have acted (to use counsel's words) as a 'fuse'. In other words, the damage to the SAG Mill would have been limited.
The plaintiffs also make a claim for breach of contract against the sixth defendant based upon the failure to deliver electricity in accordance with the terms of the ESA. So far as the sixth defendant is concerned it is unnecessary to say anything further.
The plaintiffs' pleas in tort against the fifth defendant are found in par 137 of the plaintiffs' further re‑amended consolidated statement of claim. Essentially, it is alleged that the fifth defendant owed each of the first plaintiffs a duty of care to exercise reasonable care, skill and diligence in designing, supplying, fabricating, delivering, erecting and commissioning the SAG Mill and its relevant components. This duty is then particularised. Inter alia, the first plaintiffs say that in contending for the said duty they rely on their vulnerability to financial harm if the SAG Mill did not operate effectively.
The fifth defendant answers that claim in par 137 of the amended defence. They deny the existence of a duty of care and by par 137(b)(iii)(ee) say:
[E]ach first plaintiff was in a position to assess its own need for protection against loss and damage in the case of any failure of the SAG Mill and was in a position to insure against the same - matters which Siemens had no knowledge or means of knowledge.
The defendants say that in the circumstances, not only are any policies of business interruption insurance held by the plaintiffs related to a matter in issue but that they are directly relevant. The simple submission of counsel for the fifth defendant was that production of the policies of insurance and their subsequent tendering at trial would be the best evidence of the availability of insurance and allow the fifth defendant to make good its plea on the vulnerability question. In response, the plaintiffs admitted the insurance policies existed. However, they rejected the view that they were discoverable. As an alternative they submitted that if they were discoverable then inspection ought not be permitted under O 26 r 11 of the Rules of the Supreme Court 1971 (WA).
The traditional view is that questions of insurance are wholly irrelevant to whether tortious liability is established. This principle has been confirmed in numerous cases including Lister v Romford Ice & Cold Storage Co Ltd [1957] AC 555, 576 ‑ 577; Davie v New Merton Board Mills Ltd [1959] AC 604, 627; and Hunt v Severs [1994] 2 AC 350, 367. Of course, all of these decisions were made sometime ago and it must be acknowledged that the law of tort, as it relates to liability for economic loss, has been and still is developing.
However, it is the case that so far as the High Court is concerned, the judges have generally held to the view that the existence, or otherwise, of insurance is irrelevant to the question of liability: see, for example Stephen J in Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529, 580 ‑ 581.
It would appear that there has only been one decision where the existence of policy of insurance has been held to be relevant. That is the case of Johnson Tiles Pty Ltd & Dean v Esso Australia Pty Ltd [2003] VSC 27; (2003) Aust Torts Reports 81‑692. This was a case that involved various claims for damages resulting from an explosion at the defendant's Longfield gas facility. The decision is not concerned with whether or not policies of business interruption insurance are discoverable. The judgment is the first instance determination of the action as a whole. It is clear from the report that not only have these insurance policies been discovered but they have been admitted into evidence. Justice Gillard dealt with the relevance of the policies in this way:
The evidence revealed that the customers were insured for events that may cause financial loss due to business interruption, but each declared values for property damage and loss of profit, and some policies were subject to a deductible. …
As at 25 September 1998, none of the said customers had backup equipment and a decision made to protect each from harm, resulting from business stoppage, was to take out an insurance policy. The business decision was no doubt influenced by the size of the premium compared with the cost of any backup equipment. In my opinion, the existence of insurance is relevant to the issue of vulnerability and negates the vulnerability. In that sense, the policy was the preferred option of covering a risk.
Vulnerability is concerned with the capacity of a claimant to protect itself. Companies and people in their everyday activities are expected to look after their own interests and protect themselves against risks of harm. The law encourages self‑reliance. … Insurance is relevant to the issue of vulnerability. Business interruption insurance is commonplace, is an option open to any business to protect its interest against business interruption and in my view, is relevant to the issue of whether there was a duty of care in the present proceedings [1099 ‑ 1103].
It is to be remembered that this is an application in relation to discovery. The question is whether or not any policy of insurance is related to a matter in issue between the parties. It is for the trial judge to determine whether or not any attempt to lead that evidence is permissible. But in my view, there can be no doubt that applying the so‑called Peruvian Guano test the document relates to a matter in issue and should be discovered.
It was submitted on behalf of the plaintiffs that even if the document was related to a matter in issue and was therefore discoverable, discovery ought be refused as a matter of discretion. With respect, I can see no reason to adopt that course. I would accept there may need to be some arrangements with respect to confidentiality in relation to the documents and I will give the parties the opportunity to discuss a regime for inspection which will protect the plaintiffs' interest.
For these reasons I am satisfied that the application for the discovery of the policy of insurance should succeed. The parties should either bring in a minute of orders to reflect this decision or relist the matter for short argument. Given the way this matter has developed, the costs of the application, so far as the discovery is concerned, ought be costs in the cause.