Cargill Australia Ltd v Viterra Malt Pty Ltd (No 24)
[2019] VSC 438
•27 JUNE 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2014 00146
| CARGILL AUSTRALIA LIMITED (ACN 004 684 173) | Plaintiff |
| v | |
| VITERRA MALT PTY LTD (ACN 096 519 658) & ORS | Defendants |
| and | |
| CARGILL INCORPORATED & ORS | Third Parties |
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JUDGE: | ELLIOTT J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 27 JUNE 2019 |
DATE OF RULING: | 27 JUNE 2019 |
CASE MAY BE CITED AS: | CARGILL AUSTRALIA LTD v VITERRA MALT PTY LTD (No 24) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 438 |
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PRACTICE AND PROCEDURE – Application for leave to adduce further evidence – Further witness statement and summary of historical data – Whether evidence responsive to recent amended defence and belatedly led evidence – Whether prejudice if leave granted – Whether evidence facilitates just determination of real issues in dispute – Civil Procedure Act 2010 (Vic), ss 7, 9 – Supreme Court (General Civil Procedure) Rules 2015, s 36.01 – Evidence Act 2008 (Vic), s 50.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff and the 1st and 2nd third parties | Ms L Nichols QC Ms K Burke Mr T Barry Mr M Tennant | Gilbert + Tobin |
| For the Defendants | Mr A Myers QC Mr S Parmenter QC Mr O Wolahan | King & Wood Mallesons |
| For the 3rd third party | Mr S Rosewarne | Maddocks |
| For the 4th third party | Mr M Galvin QC | Gilchrist Connell |
| For the 5th third party | Mr R Attiwill QC Ms M Szydzik | Gilchrist Connell |
| For the 6th third party | Mr C Archibald | HWL Ebsworth Lawyers |
| For the 7th third party | Mr S Pitt Ms C Alden | Gilchrist Connell |
HIS HONOUR:
A. Introduction
The plaintiff, Cargill Australia Ltd (“Cargill Australia”), the first third party, Cargill, Incorporated (“Cargill, Inc”), and the second third party, Joe White Maltings Pty Ltd (“Joe White”)[1] (together, “the Cargill Parties”), seek leave to adduce further evidence in this proceeding. This includes a further witness statement of Liam Ryan (“Ryan”), who has already given evidence.
[1]Joe White is now known as Cargill Malt Asia Pacific Pty Ltd.
Broadly speaking, the evidence of Ryan concerns further analyses of existing data relating to certificates of analysis[2] produced over a number of years by Joe White, and provided to its customers.
[2]See fn 9 below.
The Viterra Parties seek to characterise the Cargill Parties’ application as an application seeking leave to re-open a case closed many months ago. The Cargill Parties contend that the evidence of Ryan is merely responsive to evidence recently led by the defendants[3] (“the Viterra Parties”), as well as to amendments made to their defence, for which leave was only recently given.[4]
[3]The defendants are Viterra Malt Pty Ltd, Viterra Operations Ltd and Viterra Ltd, together with their ultimate holding company, Glencore International AG (“Glencore”).
[4]See Cargill Australia Ltd v Viterra Malt Pty Ltd (No 22) [2019] VSC 351.
However the application might be characterised, the court must determine the application in accordance with the overarching purpose, and with the intention of facilitating the determination of the real questions in dispute between the parties.[5]
[5]See Civil Procedure Act 2010 (Vic), ss 7, 9. See also Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 36.01.
For the reasons that follow, the Cargill Parties will be granted leave to file and serve the further witness statement of Ryan, and, for the purpose of seeking to adduce evidence pursuant to s 50 of the Evidence Act 2008 (Vic), to file and serve a summary of some of the reported data (and related information) Ryan analysed.[6]
B. Background
[6]See fn 29 below.
B.1 The proceeding
This proceeding commenced on 18 June 2018. Since that time, the court has heard and ruled on numerous applications brought by the main parties to the proceeding, the Cargill Parties and the Viterra Parties. The key facts of this proceeding have been set out in those previous rulings and for the purposes of this application, may be shortly stated.[7]
[7]For a more detailed account of the facts, see 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).
This proceeding was brought by Cargill Australia against the Viterra Parties following Cargill Australia’s entering into an agreement for the acquisition of Joe White on 4 August 2013 (“the Acquisition Agreement”). Cargill Australia agreed to purchase Joe White for the sum of A$420 million from the Viterra Parties.[8] The purchase was completed on 31 October 2013 (“the Acquisition”).
[8]Save for Glencore.
Cargill Australia pleads the Viterra Parties failed to disclose certain alleged practices engaged in by Joe White, to the knowledge of the Viterra Parties (“the Viterra Practices”). The Viterra Practices alleged are that Joe White “routinely” supplied malt to customers that did not comply with contractual requirements and specifications and did so without informing its customers. It is alleged that this conduct was accompanied by the supply of certificates of analysis[9] that misstated the results of analytical testing on the malt, so that the certificates reported that the malt complied with contractual requirements and specifications when it did not. It is further alleged that the Viterra Practices were recorded and endorsed by certain written policies (“the Viterra Policies”).
[9]Certificates of analysis accompanied malt supplied by Joe White to its customers, and included or purported to include details of testing that had been conducted in respect of numerous characteristics of the malt supplied.
Cargill Australia claims that it would not have agreed to acquire Joe White had it known of the Viterra Practices and the Viterra Policies before it executed the Acquisition Agreement. Further, Cargill Australia alleges if it had been properly informed of the Viterra Practices and the Viterra Policies after the Acquisition Agreement was entered into, it would not have completed the Acquisition.
B.2 Events leading up to the present application
On 22 May 2019, the Viterra Parties filed a further defence pursuant to leave granted the previous day.[10] By that amendment,[11] the Viterra Parties introduced the concept of “a decision rule” based on scientific evidence, and further pleaded that procedures and policies adopted by Joe White up to the end of October 2013 were examples of “a decision rule”.[12] In addition, leave was granted to the Viterra Parties to call an expert, Professor Hibbert (“Hibbert”),[13] to give evidence concerning “a decision rule” in this context.
[10]See Cargill Australia Ltd v Viterra Malt Pty Ltd (No 22) [2019] VSC 351.
[11]To review the entirety of the paragraph which introduced this amendment, see Cargill Australia Ltd v Viterra Malt Pty Ltd (No 22) [2019] VSC 351, [39].
[12]Though, relevantly, leave was not sought to directly address the procedures Joe White engaged in.
[13]Professor David Brynne Hibbert, a professor emeritus of analytical chemistry at the University of New South Wales.
However, not all matters the subject of the Viterra Parties’ application to amend their defence were the subject of leave. Initially, the Viterra Parties also sought leave to introduce 2 additional subparagraphs.
Those 2 subparagraphs read as follows:
30. As to paragraph 19, they:
…
(f)say further that, to the extent that the contents of the certificates of analysis identified in the particulars to subparagraph 19(a) of the Fifth Further Amended Statement of Claim (under the heading “analytical specifications”) included measurements which had been adjusted to account for error, such adjustments were consistent with relevant international standards (as identified in the particulars to subparagraph (e) above); and
(g)say further that, to the extent that the contents of the certificates of analysis identified in the particulars to subparagraph 19(a) of the Fifth Further Amended Statement of Claim (under the heading “analytical specifications”) included measurements which had been adjusted by references to requirements and specifications set out in customer contracts (which is denied), those certificates were prepared by [Joe White] in compliance with the [Joe White] Decision Rule, and, therefore, in accordance with relevant international standards (as identified in the particulars to subparagraph (e) above).[14]
[14]There were particulars to these allegations, however it is not necessary to discuss these.
Leave to amend the defence in that form was refused.[15] However, the matter did not rest there. On 21 May 2019,[16] the Viterra Parties sought to advance a different formulation of the further matter they sought to raise.
[15]Cargill Australia Ltd v Viterra Malt Pty Ltd (No 22) [2019] VSC 351, [39], [48]-[50], [61]-[65].
[16]Ibid, [65].
The subsequently proposed paragraph 30(f) read as follows:
30. As to paragraph 19, they:
…
(f)say further that the plaintiff will not establish the allegations in subparagraph (a) of paragraph 19 of the statement of claim unless it shows that the changes to the Certificates of Analysis it relies upon were made for the sole purpose of representing that malt which did not in fact comply with contractual specifications, complied with those specifications.
The particulars read as follows:
The sole purpose referred to above will not be established unless the plaintiff shows the changes were not made:
(a)to account for error; and
(b)in compliance with a Decision Rule.
During the course of argument on 21 May 2019, the application to amend the defence on these terms was withdrawn. Nonetheless, the Viterra Parties informed the court that a further proposed amendment would be the subject of an application for leave following a redrafting of the pleading. A timetable was then put in place for this to occur.[17]
[17]The orders made 21 May 2019 included the following orders:
3.The defendants have leave to file and serve a defence to the fifth further amended statement of claim, substantially in the form of the document exhibited as exhibit “MAT-4” to the affidavit of Mark Anthony Troiani sworn on 13 May 2019, save for paragraph 30(f) and (g).
4.The defendants file and serve a proposed amended defence to the fifth further amended statement of claim with respect to a proposed paragraph 30(f) (“the Proposed Amended Defence”), by 10:00 am on 22 May 2019.
5.The defendants file and serve any further affidavits and any further written submissions in support of their application by 4:00 pm on 24 May 2019.
6.The Cargill Parties file and serve any material in response by 4:00 pm on 29 May 2019.
7.The hearing of the defendants’ application for leave to file the Proposed Amended Defence is listed at 10:00 am on 31 May 2019.
Despite their stated position on 21 May 2019, the Viterra Parties then resiled from their intention to further amend their defence. Yet again, that was not the end of the matter. A series of emails were exchanged between the court and the Viterra Parties on 22 May 2019.
Beginning with an email sent at 9:58 am, the Viterra Parties stated that they did not intend to file an application to amend their defence and introduce the proposed paragraph 30(f). Their email stated:
Dear Associates,
We refer to … the orders dated 21 May 2019.
In light of the exchanges that occurred in court yesterday afternoon … and the orders made, the [Viterra Parties] will deal with the substance of proposed subparagraph 30(f) in their final submissions, and do not propose to proceed with any application to further amend paragraph 30 of their Defence.
The court responded later that morning, stating:
Dear All,
We refer to your email below.
His Honour is not satisfied with the approach suggested. In order that the issues relevant to yesterday’s application may be properly ventilated and any consequences properly considered, the matter will be listed for mention at 10:00 am on 27 May 2019.
In the meantime, his Honour expects the parties to comply with the orders pronounced yesterday. To be clear, if the [Viterra Parties] intend to maintain the position put forward yesterday, it will need to be plainly stated in a pleading so that it may be incorporated into the list of issues for determination.
As the time for doing this has passed, his Honour directs that any such pleading is to be filed and served by 10:00 am tomorrow, 23 May 2019.
Despite receiving that direction from the court, the Viterra Parties sent further correspondence at 12:03 pm, informing the court and the other parties as follows:
Dear Associates,
The orders made yesterday include … an order to the effect that the [Viterra Parties] file and serve an amended defence with respect to the previously proposed paragraph 30(f).
Our instructions are not to proceed with any application to further amend the [d]efence. In other words, the [Viterra Parties] propose to proceed on the basis of the [d]efence in the form allowed under the leave granted … yesterday.[18]
It is the [Viterra Parties’] position that the Plaintiff is not entitled to prevent them from maintaining, in closing submissions, that the Plaintiff has failed to prove any factual matter pleaded in its claim.
If it might be of assistance to the Court, we are happy to prepare an aide memoire which summarises any previous discussions in the case on the subject of how certificates of analysis were to be dealt with as a matter of evidence. We propose to provide the aide memoire in draft form to the solicitors for the Cargill Parties by Monday, 27 May 2019 in order to obtain any further comment from them and to provide his Honour with an agreed document. This might be of assistance in anticipation of the parties’ closing submissions.
[18]See fn 17 above.
Shortly thereafter, the court responded:
Dear All,
Thank you for the email below.
His Honour has made it plain that the case will be decided on the pleadings and, by extension, the list of issues.
It is a matter for the [Viterra Parties] as to whether or not they wish to raise the further issue the subject of yesterday’s application. If they wish to do so, then they must comply with the most recent orders and raise that issue by way of a proposed pleading.
Thank you for the offer of an aide memoire. However, it is not necessary.
Regardless of which course the [Viterra Parties] adopt, the matter will be listed for hearing at 10:00 am next Monday, 27 May 2019 ...
On that occasion his Honour, with the assistance of the parties, will finalise the list of issues for determination (subject, of course, to the resolution of any application which may proceed on 31 May 2019).
Following this correspondence, and in accordance with the leave that had been granted, the Viterra Parties filed and served the amended defence dated 22 May 2019.
The matter was duly listed on 27 May 2019. On that day, the court, with the assistance of the parties, finalised the list of issues for determination, subject to some minor exceptions.[19] Consistent with the defence as filed, nowhere in the list of issues was any reference made to the matters that had previously been raised in the proposed paragraph 30(f) and (g), or the subsequently proposed paragraph 30(f).
[19]For the purposes of this ruling, it is not necessary to refer to those minor exceptions.
Notwithstanding this fact, and the fact that the Viterra Parties confirmed they did not seek leave to further amend their defence, the Viterra Parties’ senior counsel indicated that in closing submissions the Viterra Parties intended to raise the very matters set out in the most recently proposed paragraph 30(f).
The Cargill Parties took issue with the Viterra Parties’ ability to do so. The court also indicated that the Viterra Parties’ intended approach did not accord with the manner in which the court had directed the issue ought to be raised.[20]
[20]See par 21 above.
Various further issues have been raised in connection with this issue, the detail of which is not necessary to recount. In short, the Viterra Parties maintain that they are entitled to raise the matters as foreshadowed in the previously proposed paragraph 30(f) notwithstanding they were not expressly raised in their defence. Further, in more recent developments, the Viterra Parties have indicated that the precise manner in which such matters will be raised will be a matter for them upon the filing of their closing submissions. The Cargill Parties have continued to take issue with the Viterra Parties’ approach.
On 14 June 2019, Hibbert gave his evidence, including by way of cross-examination. I propose to say nothing about that evidence beyond that it included evidence relating to “a decision rule” on a generic level, and also, by reason of the cross-examination, specifically with respect to Joe White's former procedures, policies and reporting.
That same day, orders were made for the Cargill Parties to file any further evidence and any other materials upon which they sought to rely by reason of the further matters that had been advanced by the Viterra Parties. The hearing of that application was made returnable today.
B.3 The present application
On 24 June 2019, the Cargill Parties filed and served further evidence, including a summary with the stated intention of adducing evidence pursuant to s 50 of the Evidence Act. To elaborate, the Cargill Parties put forward a further witness statement of Ryan, together with a summary of data contained in malt analytes proficiency scheme reports[21] for the period 3 February 2011 to 15 October 2013, and a bundle of 12 related documents sought to be tendered in the proceeding.
[21]The malt analytes proficiency testing scheme is a regime which allows laboratories, undertaking the analysis of malt and barley, to monitor and improve the quality of their measurements for a range of analytes. The scheme involves distributing portions of a single sample of malt or barley to different laboratories around the world for testing, and collating and comparing the data, so as to determine the proficiency of individual laboratories.
The Viterra Parties opposed the Cargill Parties’ application to rely upon this material. In seeking to establish why leave ought not be granted, they relied upon affidavits of Mark Anthony Troiani, a solicitor for the Viterra Parties, sworn on 3 and 26 June 2019.
C. Ruling
Turning to the defence as it now stands, the recently pleaded paragraph 30(e) provides that laboratory test measurements of malt are necessarily subject to error and uncertainty. This error and uncertainty is alleged to exist because of, amongst other things, inherent limitations on the precision of the testing equipment and testing procedures, random and sampling effects, and “systematic/recovery bias errors”.
Another aspect of paragraph 30(e) of the defence concerns industry programs utilised by industry participants to objectively test the accuracy of laboratory test results. Critically, it is alleged such programs incorporate a “tolerance of 2 standard deviations to the measurement of measurands in respect of malt”, to account for “all of the known effects of error and uncertainty” previously alluded to.
Although the topic of 2 standard deviations has been referred to throughout the trial, even as far back as the Cargill Parties’ opening submissions, prior to leave being granted to the defendants on 21 May 2019, there was no independent expert report on this issue. Consistent with the usual management of a commercial case, the parties were ordered to file all expert reports well before the trial commenced. Accordingly, until leave was recently granted, the Cargill Parties were entitled to conduct their case on the basis that the Viterra Parties would not be leading independent expert evidence of the type that is now before the court.
Moreover, in my view, the precise manner in which the Viterra Parties now seek to challenge Cargill Australia’s case, including as reflected in the previously proposed paragraph 30(f), was far from clear until the various iterations of the proposed defence were served in the first 3 weeks of May 2019.
In resisting this application, the Viterra Parties rely heavily on the fact that the topic of 2 standard deviations has been a matter raised throughout the trial. They contend that the non-admission of the allegations relating to the Viterra Practices and the Viterra Policies from the time they first filed their defence has meant that all matters relating to those allegations were at large. Further, the Viterra Parties contend that it was a forensic decision made by the Cargill Parties to present their case in the way that they did, including not addressing the reasons behind adjustments to each of Joe White’s certificates of analysis.
Further, it was submitted that the evidence of Ryan did not constitute “fresh evidence” and accordingly, did not justify the re-opening of the Cargill Parties’ case.[22] The Viterra Parties also relied on this application being made at a late stage of the proceeding, and the fact that the parties had called all of their witnesses.[23]
[22]See Spotlight Pty Ltd v NCON Australia Ltd (2012) 46 VR 1, 6 [23]-[26] (Harper and Tate JJA, Beach AJA); Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22, [24]-[26] (Kenny J). See also Ezra Abrahams Pty Ltd v Milburn [2017] VSCA 355, [46]-[58] (Kyrou, Kaye and McLeish JJA), and the cases there cited; Advanced Fuels Technology Pty Ltd v Blythe [2017] VSC 250, [5]-[13] (Macaulay J), and the cases there cited.
[23]Cf Urban Transport Authority of New South Wales v Nweiser (1992) 28 NSWLR 471, 475C (Clarke JA, with whom Mahoney and Meagher JJA agreed).
In my view, these factors do not take the matter very far. The issue concerning 2 standard deviations has only very recently been raised on a basis and at a level that had not been specifically and clearly identified by the Viterra Parties previously. More broadly, it is plain that the indulgence granted by the court to the Viterra Parties to amend their defence and to lead the evidence of Hibbert has both enlargened, and sharpened the focus on certain aspects of, issues relating to the Viterra Practices and the Viterra Policies.
Moreover, the position, first clearly articulated on 21 May 2019 by the then proposed paragraph 30(f), is that the Viterra Parties now contend that the Cargill Parties will be unable to establish the existence of the Viterra Practices and Viterra Policies, unless they can demonstrate that the certificates of analysis, which are alleged to have misstated the analytical results, were completed for purposes other than accounting for error and uncertainty, in compliance with “a decision rule”.
Whether or not this can be classified as a re-characterisation of the Viterra Parties’ case, it is clearly a matter which had not been articulated with the degree of specificity which now appears in the defence and the recently articulated submission. In summary, although not specifically pleaded, the Viterra Parties have now identified they will challenge the case of the Cargill Parties on a basis, and at a level, that had not been identified clearly until a short time ago. Subject to issues of case management and prejudice to which I will refer, it would be quite unfair to prevent the Cargill Parties from having an opportunity to respond to these matters.
The principal issue on this application is whether the proposed further evidence is truly responsive to the amended defence and the evidence of Hibbert. I am satisfied that it is.
With respect to the proposed witness statement of Ryan, it specifically addresses the issue of the extent to which amendments were made to analytical results that were within or outside 2 standard deviations and related matters.[24] Although this evidence could have been led before, the importance and the degree of relevance of such evidence has significantly increased in light of the more recent matters raised by the Viterra Parties. In these circumstances, the Cargill Parties ought not be held to the position they previously adopted.
[24]See par 32 above.
Equally, the evidence concerning the malt analytes proficiency testing scheme reports, sought to be introduced by way of the summary, goes directly to whether or not the alleged practices and policies were in fact made or adopted consistent with a decision rule (as pleaded by the Viterra Parties).
Although the exact level of the inconvenience to the conduct of the trial cannot be precisely identified,[25] in a case of this size and duration, any inconvenience will be relatively slight. Also, consistent with the ruling allowing Hibbert to give his evidence, the further evidence will assist the court in determining the real controversy between the parties relating to the alleged practices and policies.[26] There has been no suggestion from the Viterra Parties, nor could there be, that the Cargill Parties’ proposed evidence is not relevant to the issues at hand.
[25]At this point, the court does not know whether there will be a need for any responsive evidence.
[26]See fnn 4, 5 above.
As to the prejudice, the Viterra Parties’ submissions largely mirrored those made by the Cargill Parties when they were resisting leave being granted to the Viterra Parties to lead further evidence.[27] The suggestion put forward was that they have conducted their case in a particular manner based on the fact the Cargill Parties have not sought to adduce evidence they now seek to adduce. For similar reasons to those expressed on the earlier application, I am not satisfied the Viterra Parties will suffer any relevant prejudice if leave is granted. In short, and broadly speaking, “the issues raised have been live ones throughout the trial”.[28]
[27]See Cargill Australia Ltd v Viterra Malt Pty Ltd (No 22) [2018] VSC 351, [67].
[28]Ibid.
Further, the Viterra Parties will be given a sufficient opportunity to consider the further evidence. This will address any perceived prejudice alleged by the Viterra Parties in having to respond.[29]
[29]The malt analytes proficiency scheme reports relied upon by Ryan comprise of around 5,550 pages.
D. Conclusion
Leave will be granted to the Cargill Parties to file and serve the further witness statement of Ryan, as well as the summary of the malt analytes proficiency scheme reports. The granting of leave to file these documents says nothing about the admissibility of the proposed evidence, which will be addressed in due course.
Once the Viterra Parties and the third parties have been given the opportunity to put on any responsive evidence, a date will be fixed for the timely hearing of the further evidence.
Orders will be made accordingly.
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