Cargill Australia Ltd v Viterra Malt Pty Ltd (No 10)

[2018] VSC 439

IN THE SUPREME COURT OF VICTORIA	Not Restricted
AT MELBOURNE COMMERCIAL COURT

S ECI 2014 000146

CARGILL AUSTRALIA LIMITED (ACN 004 684 173)	Plaintiff
v
VITERRA MALT PTY LTD (ACN 096 519 658) AND OTHERS	Defendants
and
CARGILL, INCORPORATED AND OTHERS	Third parties

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JUDGE:	ELLIOTT J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	31 JULY, 1 AUGUST 2018
DATE OF RULING:	2 AUGUST 2018
CASE MAY BE CITED AS:	CARGILL AUSTRALIA LTD v VITERRA MALT PTY LTD (No 10)
MEDIUM NEUTRAL CITATION:	[2018] VSC 439

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PRACTICE AND PROCEDURE – Application for leave to file third further amended statement of claim – allegations made in respect of third parties – risk of prejudice – leave granted – Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 36.01.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff and the 1st and 2nd third parties	Ms L Nichols QC Dr C Button Ms K Burke Mr T Barry	Gilbert + Tobin
For the Defendants	Mr S Parmenter QC Mr S Prendergast Mr O Wolahan	King & Wood Mallesons
For the 3rd third party	Mr S Rosewarne	Maddocks
For the 4th third party	Mr D Bongiorno	Ward Lawyers
For the 5th third party	Ms M Szydzik	Ward Lawyers
For the 6th third party	Mr C Archibald Mr T Jeffrie	HWL Ebsworth
For the 7th third party	Mr S Pitt Ms C Alden	Ward Lawyers

HIS HONOUR:

A.       Introduction

1. The plaintiff, Cargill Australia Limited Pty Ltd (“Cargill Australia”) seeks to amend its statement of claim by way of a proposed third further amended statement of claim.[1]

   [1]The application was heard over 2 days.  Since the trial commenced, all applications have been heard outside usual court hours so the progress of the trial is unaffected.

1. This proceeding concerns the sale of a company, Joe White Malting Pty Ltd (“Joe White”),[2] by Viterra Malt Pty Ltd, Viterra Operations Ltd and Viterra Ltd (collectively, “Viterra”) to Cargill Australia.  Cargill Australia alleges that the business operated by Joe White employed a number of practices in the production of malt which were in breach of its customer contracts.  It is alleged that these practices were known to Viterra and its parent company, Glencore International AG (“Glencore”) (together, “the Viterra Parties”), and that the nature and extent of those practices were deliberately not disclosed to Cargill Australia or its parent company (“Cargill, Inc”)[3] prior to acquisition.  Cargill Australia, Cargill, Inc and Joe White (together, “the Cargill Parties”) are jointly represented in the proceeding.  The facts of this proceeding are set out in detail elsewhere.[4]

   [2]Joe White, the 2^nd third party in the proceeding, is now known as Cargill Malt Asia Pacific Pty Ltd.

   [3]Cargill, Inc is the 1^st third party in the proceeding.

   [4]Cargill Australia Ltd v Viterra Malt Pty Ltd (No 2) [2017] VSC 283, [6]-[9]; Cargill Australia Ltd v Viterra Malt Pty Ltd [2017] VSC 126, [2]-[28] (Daly AsJ).

B.       Matters raised

1. The matters the subject of the application may be broadly grouped into 3 issues.

B.1     Particulars

1. The first concerns the amendment of particulars.  This is said to be by way of consolidation of previous particulars, by updating particulars previously provided and by provision of entirely new particulars.  Some of the particulars Cargill Australia has indicated are to be provided are yet to be completed.  Further, during the course of argument it became apparent that there are potential difficulties with the form of some of the proposed particulars.

1. Without determining whether leave will be granted to Cargill Australia with respect to the proposed amended particulars, the court ordered that Cargill Australia complete the exercise of finalising its particulars with respect to specific paragraphs in the statement of claim by 4.00 pm on 10 August 2018.  Accordingly, this aspect of the application has been deferred until the exercise of finalising the proposed particulars has been completed.

B.2     Unopposed amendments

1. The second issue concerns amendments to existing paragraphs or the introduction of new allegations which were not the subject of any opposition.  In those circumstances it suffices to say that, having read those proposed amendments, it is appropriate that leave be granted.  Thus it will be ordered that leave be granted to amend or introduce, as the case may be, paragraphs 12, 27, 38AA, 39B, 39G, 63HA and 68A substantially in the proposed form.

B.3     Opposed amendments

1. The final issue is the substantive matter for determination.  Cargill Australia seeks to introduce a new paragraph 18A in the following terms:

During a management presentation held at the offices of King & Wood Mallesons in Sydney on 26 June 2013, representatives of Joe White, on behalf of Glencore and/or Viterra, said words to the effect that:[5]

[5]Counsel for the 7^th third party, Scott Argent, took exception to the use of the words “said words to the effect that” on the basis that most of the representations set out below were in writing.  However, leaving aside paragraph 18A(k), it is clear from the particulars that Cargill Australia alleges the written representations were also stated orally and substantially in the same terms.

(a)Joe White’s business model is focused on ensuring customers receive the highest quality malt to meet their exact specifications and requirements (page 8);

(b)Joe White has a “top down approach” to understand each customer’s unique requirement (page 8);

(c)in relation to procurement, Joe White selects and has access to high quality barley that best meets customer specifications (page 8);

(d)Joe White has best in class manufacturing facilities producing consistently high quality malt (page 8);

(e)quality and technical capabilities underpin each operating function within Joe White (page 8);

(f)Joe White has an ability to retain customers, who have established, long-term relationships, due in part to having high quality product (page 11);

(g)Joe White has a stable, high quality barley supply (page 11);

(g1)Joe White had an active barley research and development program in place with the University of Adelaide and closely collaborated with customers, barley breeders, and researchers to enhance the research and development effort, with specific programs completed for 9 of Joe White’s top 10 customers since 2006 (page 20);

(h)in relation to capital expenditure, Joe White had low future capital needs in the short to medium-term (page 21);

(i)Joe White has a reputation for production uniformity, consistency and ability to meet exact specifications (page 22);

(j)in relation to risk management (page 39):

(i)Joe White maintains a disciplined approach to minimising operational, business and financial risks whilst securing quality malting barley to allow full plant operation over the medium term; and

(ii)in relation to exposure to the operational risk of being unable to source barley of the correct variety, quality and specification, the risk management disciplines are barley sampling (on delivery and in storage), self-insurance and contract terms;

(k)whilst Joe White had limited storage capacity, Joe White managed their customers well, and there were no real quality issues.

1. The particulars to subparagraphs (a) to (j) of paragraph 18A read as follows:

The management presentation was attended by Doug Eden, Marc Viers, Sabine Sagaert, Steven De Samblanx, Lisa Jewison, Philippa Purser, Brenda Arndt, Ryan Engle, Mark Chow, Khai Le Binh, Patrick Bowe and Bram Klaeijsen of Cargill together with Joe Niven and Nick Dowling of Goldman Sachs.  It was attended by Gary Hughes and Scott Argent and representatives of Bank of America Merrill Lynch on behalf of Glencore and/or Viterra.

The statements at subparagraphs (a) to (j) appeared in the written powerpoint slides that accompanied the oral presentation given by Gary Hughes and Scott Argent, on the pages identified in the subparagraphs.

1. The particulars to subparagraph (k) read as follows:

The statement at subparagraph (k) was oral. It was made by Gary Hughes in response to a question from Steven De Samblanx on behalf of Cargill, in which Mr De Samblanx asked how Joe White was managing the low silo capacity he could see in the data room.

1. With the exception of subparagraphs (g1) and (k), the proposed amendments were brought to the attention of the Viterra Parties and the third parties on 21 June 2018.  This was before any oral evidence was led at trial.  However, notice was only given of the proposed subparagraphs (g1) and (k) on 25 July 2018. 

1. If leave is granted with respect to paragraph 18A, there are also consequential amendments sought to be made in later paragraphs of the proposed pleading. 

1. In preparation for trial, witness statements were ordered.  In a witness statement filed on 24 November 2017 on behalf of the Cargill Parties, Stephen De Samblanx (“De Samblanx”) set out his account of evidence he intended to give of oral representations said to be made on 26 June 2013 at the management presentation referred to in the proposed paragraph 18A (“the Management Presentation”).  However, by agreement between the parties, the proposed evidence was struck out on the basis that De Samblanx would give his evidence orally on this topic.  

1. De Samblanx was called to give evidence on 18 July 2018.  As part of De Samblanx's oral evidence, he said that, at the Management Presentation, he asked a question about the low silo capacity that he had observed in the data room and in response was told that Joe White was managing their customers well and that there were no real quality issues.  Although he could not be certain, he expressed a belief that it was Hughes who said this.

1. Based on this evidence, Cargill Australia now seeks to introduce the proposed paragraph 18A(k).  There is no suggestion this representation was contained in the written powerpoint slides presented on 26 June 2013, as referred to in the particulars to paragraph 18A (“the Powerpoint Slides”).  In contrast, the new paragraph 18A(g1) is alleged to have been in writing by means of the Powerpoint Slides.[6]

   [6]But also see fn 5 above.

C.       Further background

1. Some general observations should be made at this point:

(1)        There is no suggestion that subparagraphs (a) to (j) of paragraph 18A do anything other than set out accurately what is contained in the Powerpoint Slides.

(2)        The written document was referred to in witness statements of numerous witnesses, most, if not all, of which were provided last year.

(3)        In the Viterra Parties opening their case, express reference was made to the Management Presentation and, in particular, the legal disclaimer included in the Powerpoint Slides.  Further, the Viterra Parties’ senior counsel acknowledged Cargill Australia relied on the contents of the Management Presentation as part of its case.

(4)        The trial is now in its seventh week.  Of the witnesses referred to in the particulars above, Doug Eden (“Eden”), Marc Viers, De Samblanx, Philippa Purser, Ryan Engle, Khai Le Binh and Patrick Bowe Junior have already given evidence.  Of the remaining persons referred to in those particulars, the Cargill Parties have indicated they intend to call Sabine Sagaert (“Sagaert”) and Lisa Jewison.

D.       Principles

1. The principles relating to the granting or refusal of leave to amend pleadings are well established. Rule 36.01(1) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) provides:

(1)         For the purpose of –

(a)         determining the real question in controversy between the parties to any proceeding; or

(b)         correcting any defect or error in any proceeding; or

(c)         avoiding multiplicity of proceedings –

the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.

(Emphasis added.)

1. In deciding whether to grant leave to a party to amend its pleadings, the court must consider whether the proposed amendments facilitate the identification of the real issues in dispute and the just resolution of the proceeding.[7]

   [7]AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 204-205 [69] (Gummow, Hayne, Crennan, Kiefel and Bell JJ). See also ABL Nominees Pty Ltd v Mackenzie (No 2) [2014] VSC 529, [17] (Derham AsJ).

1. The power to grant leave to a party to amend its pleading to raise an arguable issue is a discretionary power.  There is no right or entitlement for a party to amend its pleading subject to the payment of costs referable to the amendment.[8]  The nature and importance of the proposed amendments must be considered.[9]  This factor must be weighed against case management considerations such as cost, delay and the potential for unfair prejudice to other parties to the proceeding, the court and other litigants.[10]

   [8]AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 212 [96], 213 [98]‑[99], 217 [111] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).

   [9]Ibid, 214 [102] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).

   [10]Ibid, 213 [98]-[99], 214-215 [102], 217 [111] (Gummow, Hayne, Crennan, Kiefel and Bell JJ); Civil Procedure Act 2010 (Vic), s 7.

E.        Ruling

1. The proposed introduction of paragraph 18A may be divided into 2 categories: the representations that are alleged to be in writing and the remaining oral representation.

1. As to the former, the application for leave is relatively straightforward.  The Viterra Parties and the third parties have been on clear notice that the written document was going to be the subject of evidence and was to be relied upon on the question of reliance.  Based on the conduct of the case to date, it is apparent that there has been a full appreciation of this fact.  Some of the witnesses have been cross-examined accordingly.

1. The issues arising from the Management Presentation are already squarely before the court.  Indeed, many of them are already raised in other parts of the existing statement of claim, including in allegations concerning an information memorandum that was distributed by the Viterra Parties to prospective purchasers in May 2013.

1. In opposition to leave, it was submitted by the third parties that they will suffer prejudice if leave were granted.  In particular, Hughes' counsel submitted that Hughes' witness statement and defence will need to be revisited, together with a further need to consider contribution claims, if the Powerpoint Slides and the events of the Management Presentation are allowed to form part of Cargill Australia's pleaded case.  It was submitted that the prejudice was significant given the point in time in the proceeding at which the application is made.

1. Whilst I do not doubt the considerable inconvenience and extra work that will need to be undertaken if leave is granted, these matters are not of such a nature as to amount to prejudice in the relevant sense.  If there is a need to adjust the current trial timetable to address such matters, that may be considered by the court in due course.  However, any adjustment is highly unlikely to be of a magnitude to cause any real disruption to the conduct of the trial.

1. Paragraph 18A(g1) needs to be mentioned separately.  It was said prejudice arises because Eden gave evidence referring to that part of the Powerpoint Slides at a time when there was no notice of this amendment.  In my view, it is likely there will be very little, if any, prejudice in this regard.  The subject matter of the University of Adelaide’s involvement in Joe White’s business was already referred to in the witness statements filed last year.  Further, if the court were later satisfied that there was any real prejudice arising out of this amendment it would not be of the kind that could not be addressed by having Eden recalled for cross-examination.  Given the very limited issue, this could be done by video link.[11]

   [11]Eden resides overseas.

1. With respect to the oral representation alleged in paragraph 18A(k), in my view the prejudice identified by those opposing the amendment is more illusory than real.  De Samblanx's witness statement, filed in November last year, indicated that he would be giving evidence of some matters that were communicated orally at the Management Presentation.  The fact that his oral evidence did not exactly replicate what was contained in his witness statement is hardly surprising given the lapse of time.  In any event, to the extent that witnesses who preceded him in giving evidence were at the Management Presentation and gave no evidence to support his account, it is bordering on fanciful to suggest that counsel would have sought to raise the issue of De Samblanx’s version of events when none of them had given an account in their evidence-in-chief of the words alleged in the proposed paragraph.

1. When this issue was raised with counsel during argument, no-one suggested to the court that they would have adopted such an approach in cross-examining these witnesses.[12]  Further, the limited amount of storage at Joe White’s facilities is already a substantial issue in the proceeding.  De Samblanx, and other Cargill witnesses, have been cross-examined extensively on their knowledge of Joe White’s storage capacity independently of any foreshadowed amendment to the statement of claim.

   [12]Since giving this ruling orally, Sagaert has been called and cross-examined.  No parties’ counsel sought to put De Samblanx’s account of what was said to her or invited her to reject that account.

1. In my view, the Management Presentation is central to a number of issues between the Cargill Parties and the Viterra Parties, and between the Viterra Parties and the third parties.  They ought to be raised formally before the court in a pleading.  In fact, this should have been done quite some time ago, as readily acknowledged by the Cargill Parties’ senior counsel.

1. The fact that the matters now raised were overlooked for some time is unfortunate, and the delay in making such an application is not to be encouraged.  However, this oversight on the part of those involved ought not to prevent these issues being raised in the absence of any real prejudice and the ability of the court to make appropriate costs orders.[13]

   [13]The circumstances of the application may be readily distinguished from Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. There is no suggestion that Cargill Australia made a deliberate decision to delay the application to amend until now: cf 181 – 182 [4], 189 [24], 192 [31] (French CJ), 203 [64], 215 [103], 216 [108] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).

F.        Conclusion

1. Accordingly, leave will be granted to amend paragraph 18A substantially in the form sought.