Endeavour Coal Pty Limited v Winten (No. 9) Pty Limited

[2008] NSWSC 121

CITATION:	Endeavour Coal Pty Limited v Winten (No. 9) Pty Limited [2008] NSWSC 121
HEARING DATE(S):	18/02/08, 19/02/08, 21/02/08
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
EX TEMPORE JUDGMENT DATE:	22 February 2008
DECISION:	Leave granted
CATCHWORDS:	practice and procedure - leave to file statement out of time - principles
LEGISLATION CITED:	Civil Procedure Act 2005 Trade Practices Act
CATEGORY:	Procedural and other rulings
PARTIES:	Endeavour Coal Pty Limited (Plaintiff) Winten (No. 9) Pty Limited (Defendant)
FILE NUMBER(S):	SC 50040/06
COUNSEL:	Mr N Hutley SC, Mr R Carruthers (Plaintiff) Mr R Smith SC, Mr M Jones (Defendant)
SOLICITORS:	Blake Dawson Waldron (Plaintiff) Corrs Chambers Westgarth (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Friday 22 February 2008 ex tempore
Revised 25 February 2008

50040/06 Endeavour Coal Pty Limited v Winten (No. 9) Pty Limited

JUDGMENT

The application

1 At the commencement of the hearing of these proceedings Endeavour Coal sought leave to read an additional statement from Mr Chapman. The case management directions anterior to the commencement of the hearing had not included the grant of any such leave. The application was rigorously opposed. This interlocutory judgment deals with that application.

The proceedings

2 These proceedings concern a deed entered into on 13 March 2003 between Endeavour Coal Pty Ltd of the one part and Winten (No 9) Pty Ltd and Soredo Pty Ltd of the other part. The circumstances in which the deed was executed are said to have involved:

i. Winten being in the process of developing a residential development known as Haywards Bay;

ii. Winten requiring coal wash or excavated material for that development;

iii. Soredo owing an amount of $1,116,411 to Endeavour for previously delivered emplaced coal wash at the same development;

iv. Winten agreeing to take an assignment of the debt from Endeavour in consideration of a nominal amount paid by Winten to Endeavour.

3 Endeavour commenced the proceedings claiming that Winten, albeit having made payments to Endeavour in the sum of $175,000, had refused to pay the balance said to be owing to Endeavour in the sum of $114,135.76 plus interest.

4 Winten claims to set off against the sum claimed by Endeavour, damages which Winten alleges arose from Endeavour’s breach of obligations under the Deed or for alleged misleading and deceptive conduct.

5 It is the alleged misleading and deceptive conduct allegation to which the additional evidence is directed.

The pleadings

6 Insofar as the Trade Practices Act misrepresentation case is concerned, the defence and cross-claim [which generally repeats the defence] have not materially altered over an extended period of time. Shortly put:

i. Winten alleges that prior to the entry into of the deed, Endeavour made a number of representations to Winten concerning Endeavour's ability to supply to Winten, landfill suitable for emplacement purposes at the Haywards Bay development site; Endeavour having had processes in place that enabled it to separate from the excavated material extracted from its coal washery, material suitable for emplacement purposes at the development site, from material unsuitable for that purpose; and that the separated material that was unsuitable for emplacement purposes at the development site would be sent by Endeavour to a site located at Wongawilli;

ii. The particulars of those representations were pleaded as express and made orally by Endeavour [by Mr Grimson and Mr Mark Beale], to Mr Chapman [on behalf of Winten] on identified dates;

iii. The further allegation is that Endeavour had represented to Winten that it had in place systems and technology that enabled it to, within reasonable variances, identify and separate for supply to Winten, material for emplacement purposes including as to its moisture content, at the above described residential development site;

iv. There is then pleaded the allegation that the representations were as to future matters; that in reliance upon the representations and induced thereby, Winten entered into the deed and that the representations were misleading or deceptive or likely to mislead or deceive, within the meaning of section 52 of the Trade Practices Act ;

v. Importantly paragraph 19 of the defence/cross-claim claimed that by reason of the above described conduct, Winten had suffered loss and damage and particularised that loss and damage as follows:


The defendant says that if the abovementioned express and implied representations were not made to it, it would not have entered into a supply agreement with the plaintiff, but would have entered into a supply agreement with Huntley Heritage to supply it with fill for the Haywards Bay Residential Development site.

The defendant further says that:

a) If it had entered into an agreement with Huntley Heritage, it would have purchased suitable fill at the average price of $3.60 per tonne for all of its requirements;

b) It would also have not experienced the difficulties of having to deal with the unsuitable fill material supplied by the plaintiff. The defendant says that pursuant to its obligations to mitigate its loss it mixed the unsuitable fill material with suitable fill material in an attempt to reach a minimum acceptable standard for the mixture to be used; a process that ultimately did not prove to be successful. That process has meant that the defendant will have approximately 263,360 tonnes of unsuitable material on site that needs to be disposed of. The defendant says that the cost of disposal of that material could be as much as $136.75 per tonne.

c) In addition to the costs of disposal, the defendant has expended considerable sums on geotechnical and other experts in seeking ways to utilise or deal with the unsuitable material.

7 The amended reply included the following in paragraph 3:

In response to the allegations contained in paragraph 14 of the Defence (and adopting the definitions in the Deed) the plaintiff:

(a) in relation to the allegations contained in paragraph 14(a) of the Defence:


(i) admits those allegations insofar as they relate to representations concerning Excavated Material;

(ii) says that, through its representative Keith Grimson, it represented that the majority of the Coal Wash supplied would be suitable for emplacement but that, due to the variable nature of Coal Wash, some of the Coal Wash might not be suitable for emplacement.

(b) in relation to the allegations contained in paragraph 14(b) of the Defence:


(i) says that it represented, through its representative Keith Grimson, that Excavated Material suitable for emplacement could be separated from unsuitable Excavated Material;

(ii) says that Excavated Material is material excavated from the Kemira Mine Site Rehabilitation Project and is not extracted from the plaintiff's coal washery;

(iii) further says that Excavated Material was subjected to a separation process on site at the Kemira Mine Site Rehabilitation Project prior to delivery to ensure that only that part of the Excavated Material which was suitable was made available for delivery to the defendant;

(iv) denies that such a representation was made in relation to Coal Wash;

(v) says that Coal Wash is material that remains after the beneficiation of mine coal and is not subjected to a separation process prior to being made available for delivery;

(vi) further says that the defendant was advised by Keith Grimson that there was no process available to prevent unsuitable Coal Wash from being delivered other than for the defendant to request that such deliveries cease when the defendant became aware that unsuitable Coal Wash was being delivered and to seek a meeting to discuss in good faith a mutually agreeable solution; and

(vii) otherwise denies the allegations.

The evidence already adduced by Winten in support of its case that it suffered loss and damage in entering into the supply agreement: that is to say the evidence supporting the particulars to paragraph 19 of the defence

8 In his affidavit of 5 April 2007 Mr Chapman had deposed inter alia as follows:

I recall that sometime after sending this facsimile, but before 28 October 2002, I had a telephone conversation with Mr Grimson in which words were said to the following effect:

Mr Grimson: “Our legal people won’t accept your wording on the definition of coal wash. They will not accept a nominated percentage of moisture of 3% and they won’t accept it being material only acceptable to Winten”.

Mr Chapman: “It is no good to us having product that is not acceptable to us. We have to meet standards required of residential construction. We need to be assured of what we are going to get”.

Mr Grimson: “There is no reason why we would supply you with inferior product. We are not in the business of doing so. We have in the past supplied acceptable product to Haywards Bay and we are supplying acceptable material out to Wongawilli. We have procedures in place to ensure that acceptable material will come to Haywards Bay. That is part of our process. BHP just can’t agree to put it in the document”.

Mr Chapman: “We would still like to have something in the document.”

Mr Grimson: “My people won’t agree to it”.

Mr Chapman: “You have to give me something so I can put the document back to my people. If we could have some inclusion of words along the lines that BHP would use their best endeavours that would give me some comfort”.

Mr Grimson: “I’ll see if I can get the document amended and will send it off to you”.

The content of the proposed further statement of Mr Chapman

9 The proposed further statement is in the following terms:

“1. I refer to paragraph 16 of my affidavit sworn 5 April 2007.

2. If instead of Mr Grimson saying to me:

There is no reason why we would supply you with inferior product. We are not in the business of doing so. We have in the past supplied acceptable product to Haywards Bay and we are supplying acceptable material out to Wongawilli. We have procedures in place to ensure that acceptable material will come to Haywards Bay. That is part of our process. BHP just can’t agree to put it in the document.
he had informed me that:

(a) Endeavour had no procedures in place which could reliably determine whether the coal wash, as supplied would, or would not, have excessive fines and/or moisture;

(b) the suitability of the coal wash depended on the extent to which the material from the mines being washed contained clays and silts;

(c) the washery could be required to process material that ran through dykes and faults which contained large quantities of clay and silts;

(d) the washery had no control over the extent to which the coal processed contained clay and silt materials so that the quantities of fines produces was unpredictable.
(e) BHP had undertaken no testing and had no procedures to determine whether any particular quantity of coal wash had contained fines which would render the coal wash unsuitable for use as residential fill,
my approach to continuing the negotiation for the supply of Endeavour coal wash with him would have changed.


3. At that point of the negotiation I had no knowledge of potential problems with the use of coal wash as structural fill at all. I had a general understanding that the Port Kembla washery has supplied material used successfully to residential standards years earlier on the Haywards Bay site. I then had no personal experience of using coal wash as structural fill in residential development.

4. If Mr Grimson had informed me of the matters referred to in paragraph 2 above, I would have stopped the negotiations and I would have had discussions with Russ Gabbe, the former project manager, Rob Linnehan, and persons at Forbes Rigby and Coffey Engineering. Subject to the outcome of these discussions I would have had further dialogue with BHP. If there was no change to the circumstances referred to in paragraph 2 above I would have informed Winten’s management and sought their instructions.

5. Without instruction from Winten management, I would have made further investigation of alternative sources of suitable fill. The only source of supply of coalwash to which I am aware would have been from Huntley Heritage, who supplied coarser fill for the Haywards Bay site from time to time thereafter. That would have been the most likely source of supply that I would have recommended to Winten management.

6. I would never have agreed to accept material onto the Haywards Bay site if it was simply suitable for use in a pre-load operation and not for eventual use as structural fill. To my mind then pre-load was simply a preliminary, although vital use for material. Winten’s requirement was for material that could be utilised as structural fill and I would have sourced this material. For the Haywards Bay project, that was fill that was suitable to be compacted to a residential standard.”

The evidence given by Ms Maybury

10 Ms Maybury is a solicitor for Endeavour who, under the supervision of Mr Keller, is responsible for the conduct of these proceedings on behalf of Endeavour. She made an affidavit on 21 February 2008 in which she deposed that if Winten was granted leave to file the proposed further evidence, she anticipated that a number of steps would be required to be taken by Endeavour, which included:

(i) the seeking of further discovery from Winten,

(ii) the issue of a number of particular subpoenas which were identified,

(iii) Endeavour seeking to interview the relevant personnel of particular companies,

(iv) that the personnel so identified would be interviewed in relation to the knowledge of Winten and/or its group regarding the properties of coal wash and its suitability for use as landfill;

(v) the availability of alternative landfill for use at the site;

(vi) the financial, programming or imperatives on Winten and its group to take the coal wash supplied by the plaintiff.

11 She gave evidence that Endeavour would also interview and engage property development and/or financial experts to provide expert opinion on the potential costs associated with the availability or lack thereof, of land fill for use at the development other than coal wash supplied by the plaintiff.

12 She gave evidence that she had begun to make enquiries of third parties in relation to the matters set out in the proposed further evidence and additionally going to the financial position of Endeavour.

The cross examination of Ms Maybury

13 Pursuant to a limited grant of leave to cross-examine Ms Maybury, Mr Smith SC for Winten elicited the following [some of which questions and answers overlapped]:

i. that she had understood that Winten’s case was that but for the alleged representations being made, it would not have entered into the contract with Endeavour and in those circumstances would not have taken supply of coal wash from Endeavour but would have sought supply from an alternative supplier namely Huntley;

ii. that she also understood the particulars to contain an allegation that if Winten had entered into an agreement with Huntley for the supply of coal wash, that coal wash would have been available at a particular price;

iii. that Winten had not served any evidence to support the remaining aspects of the Trade Practices Act claim [by which I understood her to mean evidence in support of its pleaded case as to what it would have done if it had not entered into the supply agreement with Endeavour];

iv. that after she had read the defence, discovery of documents had been sought by Endeavour relevant to the issues as she understood them, as raised by the defence;

v. that those issues included [and she had sought discovery in relation to] the question of whether Winten would not have entered into the supply agreement with Endeavour, but would have obtained supply from Huntley if the allegations relied upon had not been made;

vi. that her firm had sought discovery on the price at which Huntley was able to supply that material;

vii. that Endeavour had sought discovery of documents which related to whether or not, but for the misconduct or misrepresentation alleged, Winten would have purchased coal wash from Endeavour or would have obtained supply from Huntley;

viii. that the discovery which had been sought by Endeavour in relation to the allegations in paragraph 19 of the defence had been in relation to the facts and support evidencing the allegations made in that paragraph;

ix. that the discovery was sought prior to Mr Chapman's statement being provided;

x. that she knew that Winten’s case was that had it known the true position, it would have sought supply from Huntley and that she had sought discovery on all of those issues;

xi. that amongst the categories which she identified in paragraphs (a), (b), and (c) [of paragraph 6 to her affidavit] were categories which sought to investigate the availability of supply of coal wash, whether from Huntley or third parties;

xii. that the issue of the availability of supply of coal wash, whether from Huntley or third parties, was something on which Endeavour had sought discovery in 2006 and thereabouts; her perception being that the discovery was inadequate on those aspects for the reason that there were very few documents in support of those aspects produced by Winten;

xiii. she also appeared to agree with the proposition that she was aware that Endeavour's reply to Winten's defence contained an allegation that Winten was advised by Mr Grimson and Mr Beale of Endeavour that there was no process available to prevent unsuitable coal wash from being delivered, other than for Winten to request that such delivery cease when Winten became aware that unsuitable coal wash was being delivered.

The respective contentions on the application

Endeavour's contentions

14 Endeavour's submissions included the following:

i. that the circumstances in which Mr Chapman's further statement had come forward mandated an inference that Winten chose consciously to allow the matter to go to trial without filing any evidence on the "could and would" question;

ii. that this inference was mandated by the fact that no explanation or evidence explanatory of the lateness of the new evidence had been offered to the court by Winten;

iii. that the purported evidence of what Winten could and would have done but for the misrepresentation goes to the question of alternative sources of supply, which raises the prospect of an extensive factual enquiry;

iv. that Endeavour could not possibly be required to meet the Winten case if Mr Chapman's further statement was allowed because it could not ready itself to meet that case, so that the only basis upon which the additional evidence could be permitted would involve a vacated hearing on terms including indemnity costs in favour of Endeavour for costs thrown away by reason of the adjournment and an enquiry into whether or not Winten could satisfy the court that the prejudice to Endeavour was capable of being cured by a costs order and that it was able to satisfy any judgment against it.

Dealing with the issue

15 Clearly the principles applicable are those set out in sections 56, 57, 58 and 60 of the Civil Procedure Act 2005. Ultimately the question is whether or not to allow all or part of the proposed additional statement of Mr Chapman would so prejudice Endeavour as to require the court to deny leave to adduce this evidence, save under a regime whereby the hearing date be vacated.

16 There is little doubt but that, as Ms Maybury's evidence confirmed, and as the materials in evidence established, case management procedures involving extensive discovery were followed. Clearly discovery was sought on the question of whether or not Winten would have obtained supply from Huntley. Clearly that matter and the taking of appropriate enquiries and the making of appropriate enquiries in relation to that would have risen squarely from the particulars supporting paragraph 19 of the defence.

17 Clearly also there is a particular awkwardness where a party, here Winten, simply fails to adduce any affidavit or statement evidence in support of proving an element of its Trade Practices Act case.

18 To my mind the principled the exercise of the relevant discretion requires the Court to deal very closely with the precise matters which the further statement seeks to include.

19 I do not see that there is any irremediable prejudice to Endeavour by reason of the matters to which Mr Chapman seeks to depose in paragraphs 1, 2, 3 or 6 of the proposed statement.

20 It seems to me that the only real prejudice to Endeavour is first seen to inhere in paragraph 4, and this for the reason that Endeavour cannot be expected in the time available to carry out proper enquiries of and from the particular named persons and companies with whom Mr Chapman would have the Court accept, he would have communicated, had the subject negotiations stopped. These matters require to be tested and Endeavour cannot necessarily be expected, at the same time as continuing this litigation, to be able to put itself in a position to fully test those matters [noting that Ms Maybury has commenced to make such enquiries].

21 Likewise it seems to me that the first and last sentences of paragraph 5 should be rejected as they import the evidence sought to be given concerning approaches to Winten’s management.

22 Outside of these sentences it seems to me that, albeit regrettable, that the statement is so late and is unexplained,

i. the fact that the Trade Practices Act issue was so clearly pleaded and the subject of the detailed reply; and

ii. the fact that discovery was squarely sought [in relation to the allegation that Winten would not have entered into a supply agreement with Endeavour but would have obtained supply from Huntley had the allegations not been made]

combine to mean that Endeavour has not shown the type of irremediable prejudice which would require to be shown in order for the hearing date to be vacated.

23 I do not accept as of substance, the proposition put by Mr Hutley SC, for Endeavour, that to permit part only of Mr Chapman's proposed additional statement would inevitably require the cross examiner to 'cross examine back in' the material now rejected.

24 To put the matter shortly: the matters always in issue and the subject of the pleaded cases and the discovery show that to allow the above sections of the new statement would not be so unfair to Endeavour as to warrant the trial aborting.

Conclusion

25 For those reasons save for paragraphs 4 and the first and last sentences of paragraph 5, the balance of the proposed further evidence of Mr Chapman will be allowed. If and when Endeavour, having made further enquiries, seeks to add to its evidentiary case matters which go to the particular issues raised by Mr Chapman's statement, that will be permitted, as will any application to recall Mr Chapman, even following his cross-examination.

26 The appropriate order is to require Winten to pay the costs of and occasioned to Endeavour by reason of the late adducing of the additional statement.