Lonsdale Investments Pty Ltd v OM (Manganese) Ltd [No 2]

[2009] WASC 253

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   LONDSDALE INVESTMENTS PTY LTD -v- OM (MANGANESE) LTD  [No 2] [2009] WASC 253

CORAM:   BEECH J

HEARD:   ON THE PAPERS

DELIVERED          :   9 SEPTEMBER 2009

FILE NO/S:   CIV 1830 of 2006

Consolidated by Order dated 1 May 2007

BETWEEN:   LONDSDALE INVESTMENTS PTY LTD (ACN 091 245 144)

First Plaintiff

PROMET ENGINEERS PTY LTD (ACN 115 687 057)
Second Plaintiff

AND

OM (MANGANESE) LTD  (ABN 60 097 091 506)
Defendant

FILE NO/S              :CIV 2283 of 2006

BETWEEN             :OM (MANGANESE) LTD (ABN 60 097 091 506)

Plaintiff (by Counterclaim)

AND

LONDSDALE INVESTMENTS PTY LTD (ACN 091 245 144)
First Defendant (by Counterclaim)

PROMET ENGINEERS PTY LTD (ACN 115 687 057)
Second Defendant (by Counterclaim)

JAMES DINSDALE CRIBBES
Third Defendant (by Counterclaim)

DEREK MACAULEY
Fourth Defendant (by Counterclaim)

Catchwords:

Practice and procedure - Application for discovery - Discovery of particular categories of documents previously ordered - Whether additional categories of documents sought to be discovered relate to a matter in question - Relevance of expert report to matters in question - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 26 r 6

Result:

Application dismissed

Category:    B

Representation:

CIV 1830 of 2006

Counsel:

First Plaintiff  :      No appearance

Second Plaintiff  :      No appearance

Defendant:      No appearance

Solicitors:

First Plaintiff  :     Sparke Helmore

Second Plaintiff  :     Sparke Helmore

Defendant:     Middletons

CIV 2283 of 2006

Counsel:

Plaintiff (by Counterclaim)                  :     No appearance

First Defendant (by Counterclaim)       :     No appearance

Second Defendant (by Counterclaim)   :     No appearance

Third Defendant (by Counterclaim)     :     No appearance

Fourth Defendant (by Counterclaim)    :     No appearance

Solicitors:

Plaintiff (by Counterclaim)                  :     Middletons

First Defendant (by Counterclaim)       :     Sparke Helmore

Second Defendant (by Counterclaim)   :     Sparke Helmore

Third Defendant (by Counterclaim)     :     Sparke Helmore

Fourth Defendant (by Counterclaim)    :     Sparke Helmore

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

Westraint Resources Pty Ltd v BHP Iron Ore Pty Ltd [No 4] [2009] WASC 17

Youlden Enterprises Pty Ltd v Health Solutions Pty Ltd [2005] WASC 60

BEECH J: 

Introduction

1. The plaintiff by counterclaim (OMM) seeks an order that the defendants to counterclaim (the Promet parties) give discovery of four categories of documents.  OMM filed written submissions in support of its application and the parties agreed that the application be determined on the papers.

2. For the reasons that follow, I would dismiss OMM's application.  In summary, I am not persuaded that the categories the subject of the application relate to a matter in question in the action.

Legal principles

1. In this action there has not been an order for general discovery. Rather, discovery has been given by reference to categories of documents. It was made clear, when the orders for discovery by categories were made, that the first list of categories of documents to be discovered was not intended to be exhaustive. Consequently, OMM's application is not an application for discovery of particular documents under O 26 r 6 of the Rules of the Supreme Court 1971 (WA).

2. In Youlden Enterprises Pty Ltd v Health Solutions Pty Ltd [2005] WASC 60 Master Newnes stated the principles relevant to discovery in the context of an application under O 26 r 6. The principles he stated about whether a document relates to a matter in question and about the discretion in relation to discovery seem to me to be of general application. I adopt the following principles stated by Master Newnes:

   In determining whether a document relates to a matter in question, and, therefore, whether it ought to have been discovered, the test is that set out in Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co [[1882] 11 QBD 55] as follows:

   'It seems to me that every document relates to matters in question in the action which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may - not which must - either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary.  I have put in words 'either directly or indirectly' because it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance its own case or to damage the case of its adversary, if it is a document which may fairly lead to a chain of inquiry, which may have either of those two consequences.'

   The matters in issue are to be determined by reference to the pleadings: Mulley v Manifold (1959) 103 CLR 341 per Menzies J at 345. But regard must also be had to the conduct and admissions of the parties and the nature of the action: Schlam v WA Trustee Executor & Agency Co Ltd [1964] WAR 178 at 186.

   It is also important to bear in mind that there is not a strict entitlement to an order for discovery, including an order for further discovery: Kent Coal Concessions Ltd v Duguid [[1910] 1 KB 904] at 910. Moreover, amendments to the Rules in more recent times, including the introduction of O 1 r 4B and O 26 r 7, emphasise the need to have regard to the timely and cost effective disposal of the action in the exercise of the discretion to order discovery [4] – [6].

3. In the exercise of the discretion to 'grant discovery, or discovery of particular documents, the court should have regard, amongst other things, to the likely relevance and importance, in relation to the issues in the proceeding, of the documents and the likely time, cost and inconvenience of searching for and disclosing the documents':  Westraint Resources Pty Ltd v BHP Iron Ore Pty Ltd [No 4] [2009] WASC 17 [13].

4. It is evident from these principles that two main questions arise in relation to OMM's application.  In relation to each category in respect of which discovery is sought:

   1.does the category relate to a matter in question; and

   2.if so, should the court exercise its discretion to order discovery of that category?

   I will deal with each of the four categories in turn.

Category 1

1. Category 1 is in these terms:

   1.Insurance Policy

   Copies of:

   a.answer to paragraph 23 of the insurance proposal form dated 20 January 2006 forming part of that policy;

   b.insurance policies held by ProMet 1 and/or ProMet 2 in the period 2 February 2005 to 26 August 2005;

   c.any relevant insurance policies held by ProMet 1 and/or ProMet 2 in the period 26 August 2005 to 6 July 2006; and

   d.letter or document of confirmation that ACE Insurance Limited has extended coverage to ProMet 1 and ProMet 2 under the Professional Indemnity Insurance policy dated 6 July 2006.

2. In support of its submission that category 1 comprises documents relating to matters in question, OMM points to pars 22.4 – 22.6 of the Promet parties' amended defence to counterclaim.

3. Those paragraphs respond to par 34 of OMM's counterclaim.  Paragraph 34 of OMM's counterclaim pleads as follows:

   34There were further express terms of the Agreement that:

   (a)Promet 1 was capable of delivering the further design work, the supervision work and the electrical work (clause 1.1 of [Contract] E1184 Rev P7);

   (b)in performing the further design work, the supervision work and the electrical work, Promet 1 would exercise the degree of skill, care and diligence which could reasonably be expected of it as an experienced and professional consulting engineer and in the circumstances (clause 3.2.6 of [Contract] E1184 Rev P7, clause 2 (Terms and Conditions for Consultancy Services));

   (c)Promet 1 warranted that the Plant would be capable of operating at the capacity specified in the Design Criteria (clause 3.2.15 of [Contract] E1184 Rev P7).

4. Paragraphs 22.4 – 22.6 of the Promet parties' amended defence to counterclaim are in the following terms:

   22.4Clause 3.2.15 of [Contract] E1184 Rev P7:

   22.4.1Contained a warranty that the Plant will be capable of operating at the capacity specified in the 'Process Design Criteria Revision 1' document attached as Appendix B provided that the Plant had been supplied to ProMet 1's designs and specifications and was operated under the process and design conditions as listed in Appendix B;

   22.4.2Limited the liability of ProMet 1 for costs of remedial work attributable to defects in ProMet 1's services to an aggregate of $100,000 and any payment from claims against ProMet 1's Professional Indemnity Insurance Policy;

   22.4.322.4.2  Excluded from the warranty defects in performance of individual items of equipment or equipment supplied by DRA (Dowding Reynard Associates Pacific Pty Ltd), the performance of crushers, the performance of a second hand scrubber selected and purchased by OMM, and Dense Media Separation (DMS) plant and equipment;

   22.5By clause 10 of the Terms and Conditions for Consultancy Services contained within [Contract] E1184 Rev P7 ProMet 1:

   22.5.1Excluded liability to OMM or any other party in contract, tort or otherwise for all delays, losses, damages and liabilities whatsoever and howsoever arising which were suffered or incurred in connection with the contract and services;

   22.5.2Limited any liability to the cost of ProMet 1 of re‑performing the services; and

   22.5.3Disclaimed liability for any claims whatsoever unless within 6 months from the date of completion of the Services the claims, with reasonable detail, were notified by OMM to ProMet 1;

   22.6Clause 11 of the Terms and Conditions for Consultancy Services within [Contract] E1184 Rev P7 excluded liability to OMM for any kind of indirect or consequential loss or damage including but not limited to loss of use, loss of profits, loss of production or business interruption which was connected with the Services or the contract.

5. OMM submits that:

   (1)clause 3.2.15 of Contract E1184 Rev P7 'in part limits the liability of Promet 1 for the costs of remedial work to an aggregate of $100,000 and any payment from claims against Promet 1's professional indemnity insurance policy';

   (2)Contract E1184 Rev P7 further specifies that Promet 1 will maintain a policy of professional indemnity insurance with a limit of at least $5 million; and

   (3)consequently, disclosure of the professional indemnity policy for the term of the contract is a relevant matter for OMM because:

   (a)failure to maintain a policy of insurance as required under the terms of the contract will likely invalidate the exclusion of liability clause contained within cl 10, given that the terms of cl 10 are subject to cl 3.2.15; and

   (b)failure to maintain a policy of insurance as required under Contract E1184 Rev P7 will give rise to an additional breach of contract claim and hence a new cause of action for OMM in that, but for this breach, OMM could have claimed up to $5.1 million for defects or remedial works under the insurance policy.

6. OMM's submissions take issue in relation to the proper construction of these parts of Contract E1184 Rev P7.  However, to my mind, the short answer to OMM's submission is that the matters set out in pars (1), (2) and (3) above are not pleaded.  The part of cl 3.2.15 that limits the liability of Promet 1 on the basis set out in par (1) above is not pleaded, although it was pleaded in a previous version of par 22.4.2 of the Promet parties' defence to counterclaim.  There is no pleading of the matters stated in par (2) above.  There is no plea to the effect of what is contemplated in par (3)(a) above.  As is accepted in what is stated in par (3)(b) above, the claim there contemplated is a new cause of action, not one which arises on the pleadings.

7. For these reasons I decline to make an order for discovery in relation to category 1.

Category 2

1. Category 2 is in these terms:

   2.Requests for Information – Process Design Criteria

   All documentation, letters, emails and minutes of meeting where ProMet has requested from OMM the documentation which OMM used to prepare the Process Design Criteria issued on 9 April 2004 with reference 'J285/Enquiry 0404105 ProMet' and the updated Process Design Criteria dated 11 August 2004.

2. OMM points to its pleas in the counterclaim that there were terms of Contract E1184 Rev P7 and Contract E1151 Rev P3 (pars 33 and 34(b)), that Promet 1 owed a duty of care that it would exercise the degree of skill, care and diligence which could reasonably be expected of an experienced professional consulting engineer.

3. OMM states, in its submissions, that it pleads that this standard was breached, referring to pars 35, 36 and 42 of the counterclaim.  I assume that OMM may have intended also to refer to par 37.  OMM's submissions do not detail what part of these paragraphs are said to make category 2 relevant to a matter in issue.

4. In substance, those paragraphs of OMM's counterclaim complain relevantly of four things:

   (1)The HWE design work did not meet or exceed the plant design specifications set out in appendix 1 to the deed of release and novation (pars 35 and 42(c)).

   (2)The plant was incapable of operating at the capacity specified in the design criteria between 26 May 2006 and 30 November 2006 (pars 36 and 42(d)).

   (3)The HWE design work and the further design work was defective, particulars of the defective work being set out in sch 1 part A (pars 37(a) and 42(a)).

   (4)The Promet parties delayed in completing the design work (pars 37(b) and 42(b)), referring to the particulars of par 28(d).

5. I am unable to discern from these pleas, the particulars in support of them, and sch 1 part A, anything which makes the documents in category 2 relevant to a matter in question in these proceedings.

6. OMM's submissions in support of an order for discovery of category 2 also refer to particular paragraphs of an expert report of Mr Phillip Hearse.  The substance of those paragraphs is that it is reasonable engineering practice for an engineer to use all relevant information and, if the information provided is not adequate, to seek additional information.  The matters in question in an action are to be determined by reference to pleadings, not by reference to statements made in a report prepared by an expert proposed to be called by a party.  Apart from anything else, there may be a question as to the admissibility of a statement in an expert report, and any question of admissibility will be determined by reference to the pleadings and particulars.  OMM's submissions do not identify any pleading or particular by which OMM alleges that Promet failed to exercise the degree of skill, care and diligence which could be reasonably expected of an experienced professional engineer in that Promet 1 failed to use all relevant available information and obtain adequate additional information.  So far as I can see, there is no pleading or particular to that effect.

7. For these reasons I am not satisfied the documents in category 2 relate to a matter in question and, consequently, I would decline to order discovery of that category.

8. If I were wrong in that conclusion, I would, in any event, have declined to order discovery of documents in this category on discretionary grounds.  The category is drafted in a way which would make compliance with an order for discovery very difficult.  The category would appear to require identification of the documentation which OMM used to prepare the process design criteria issued on 9 April 2004.  From the Promet parties' perspective, those documents have not been identified:  see the affidavit of Mr Jonathan Wyatt sworn 28 August 2009 par 22.

Category 3

1. Category 3 is in these terms:

   3.Stockpile Withdrawal Feeders

   All documentation, internal review work, notes of discussions, calculations, working notes and documents regarding the design and selection of the stockpile feeders.

2. In its submissions in support of an order for discovery of documents in this category, OMM does not point to any part of the pleadings.  I note that item 6 of sch 1 to OMM's counterclaim related to the stockpile withdrawal feeders but was deleted by the amendments made on 13 March 2009.

3. OMM refers to paragraphs 297 and 396 in the report of Mr Hearse.  OMM submits that in those paragraphs Mr Hearse states that the stockpile feeders were unable to reclaim ore from the stockpile.

4. As I have said, in my opinion, whether a document or category of documents relates to a matter in question is to be assessed by reference to the pleadings and particulars, not by reference to a statement in an expert report where that statement is not shown to be based on a pleaded or particularised allegation.  Consequently, I decline to make an order for discovery in relation to category 3.

Category 4

1. Category 4 comprises documents 'relating to any requests to OMM by [the Promet parties] for visits to the Bootu Creek site during 2004 and 2005'.

2. In support of an order for discovery of documents in this category, OMM submits that the requested documents are relevant to:

   (a)a determination of the steps taken by the ProMet parties in order to ascertain the conditions and properties of the ore at the Bootu Creek mine site;

   (b)the statement made in [Contract E1151 Rev P3] page 23 of 31 where it is stated 'this period would also involve site visits to assess the ore as well as provide geotechnical data and data specific to the site'; and

   (c)the standard of reasonable engineering practice described in the expert report of [Mr Hearse] where he states that a site visit should occur (paragraphs 171(d), 240(e), 290(g)), and OMM counterclaim paragraphs 21, 35, 36 and 41.

3. As I have said, in determining the matters in question attention must be directed to the pleadings and particulars.

4. I am unable to discern in any of the paragraphs of OMM's counterclaim to which OMM refers (or in par 42) any allegation to the effect that Promet 1 failed to comply with its contractual promise or duty of care to exercise the degree of skill, care and diligence which could reasonably be expected of an experienced professional consulting engineer by failing to conduct site visits.  In determining whether the category relates to a matter in question, that conclusion is not affected by an unpleaded statement said to have been made in a contract or by statements made in the expert report of Mr Hearse.

5. I am not persuaded that the documents in category 4 relate to any matter in question.  Accordingly, I decline to make any order for discovery of documents in this category.

Conclusion

1. For the reasons I have given, I dismiss OMM's application for discovery of documents in categories 1 – 4.  It would seem that costs should follow the event.  I would hope that the parties can agree the costs order in relation to this application.  In the event that the parties do not agree, competing costs orders should be filed within 10 days of the date of delivery of these reasons.