Noble Resources International Pte Ltd v Gloucester Coal Ltd

[2021] NSWSC 346

Supreme Court

New South Wales

Medium Neutral Citation:	Noble Resources International Pte Ltd v Gloucester Coal Ltd & Anor [2021] NSWSC 346
Hearing dates:	01 April 2021
Date of orders:	07 April 2021
Decision date:	07 April 2021
Jurisdiction:	Equity - Commercial List
Before:	Stevenson J
Decision:	Further disclosure of documents ordered
Catchwords:	PRACTICE AND PROCEDURE – disclosure of documents – whether plaintiff should make further disclosure of documents
Category:	Procedural rulings
Parties:	Noble Resources International Pte Ltd (Plaintiff) Gloucester Coal Ltd (First Defendant) Yancoal Australia Ltd (Second Defendant)
Representation:	Counsel: Mr D A Hughes Mr J Hutton Solicitors: Clayton Utz (Plaintiff) Ashurst Australia (Defendants)
File Number(s):	2018/238975

Judgment

1. The plaintiff, Noble Resources International Pte Ltd (“Noble”) is a commodities trader, including in coal.

2. The defendants, Gloucester Coal Ltd (“Gloucester”) and Yancoal Australia Ltd (“Yancoal”), are coal miners.

3. Noble, its parent Noble Group Ltd (“Noble Group”), and Gloucester are parties to a Marketing Services Agreement (“the Agreement”) made in or about July 2011. Pursuant to the Agreement, Gloucester agreed to pay Noble a “marketing fee” calculated as a percentage of the volume weighted price of certain coal described as “Export Coal”.

4. The term of the Agreement continues until 31 December 2040.

5. Noble claims that Gloucester has breached the Agreement in that:

1. it has failed to make a marketing fee payment for 2014 of some US$1.5 million;

2. it has failed to make marketing fee payments or give necessary disclosures for the years 2015, 2016 and 2017, which Noble estimates ought to have approximated some US$44 million; and

3. by reason of these breaches, Gloucester has evinced an intention not to be bound by the agreement, justifying its termination and a claim by Noble for loss of bargain damages of some US$127 million.

6. The proceedings are set down for 15 days commencing 18 October 2021.

7. There has been a first round of discovery. I am dealing with the dispute concerning a second round of discovery.

8. The dispute focuses on two issues raised by Gloucester/Yancoal:

1. Gloucester’s estoppel and waiver defences to Noble’s claim; and

2. Gloucester’s claim that an “insolvency event” has occurred concerning Noble and Noble Group such as has given rise to an entitlement for Gloucester to terminate the Agreement.

9. The parties have set out their positions concerning each disputed category in a “Redfern Schedule”. In the course of argument, certain categories were agreed.

Gloucester’s estoppel and waiver defences

10. Under the Agreement, Export Coal was defined to include:

“Coal exported from the Port of Newcastle by ship during the Term by any third party using infrastructure facilities (but excluding any infrastructure facilities up to (and including) loading of coal into trucks or trains for export) provided, made available, vacated or foregone by … a member of the Gloucester Group; ...”

11. The definition thus captures coal shipped by a third party from the Port of Newcastle using “infrastructure facilities” (in effect, port capacity at the coal export terminals at the Port of Newcastle) assigned to that third party by Gloucester.

12. An issue in the proceedings is whether those assigned “infrastructure facilities” also include any “rail capacity” entitlements that Gloucester assigned to a third party, so that the Marketing Fee is also to be calculated by reference to “Export Coal” delivered to the Port of Newcastle by such third parties using such rail capacity.

13. This issue involves the proper construction of this aspect of the definition of “Export Coal”. Gloucester also seeks rectification of the definition.

14. Relevantly to the discovery dispute, Gloucester also contends that Noble is estopped from asserting “infrastructure facilities” extends to any dealings “other than those concerning the coal export terminals at the Port of Newcastle” and thus from asserting that “infrastructure facilities” includes rail capacity.

15. Gloucester contends that Noble’s knowledge of Gloucester’s assignment of such rail capacity during the term of the agreement is relevant to this question.

16. Gloucester contends that, from the execution of the Agreement until June 2019 (after the commencement of these proceedings), the parties conducted themselves on the basis that the Marketing Fee did not include transfers of rail capacity. Gloucester alleges that by communications and conduct (including silence and omission) Noble and Noble Group represented to Gloucester that the transfers of rail capacity did not give rise to “Export Coal” under the Agreement.

17. Gloucester has served evidence that, if it had been aware that Noble or Noble Group would, or might, contend that rail transfers were to be included, it would and could have arranged its use of infrastructure capacity differently so as to avoid or minimise any Marketing Fee payable on coal exported using transferred rail capacity.

18. It is in that context that the dispute concerning two of the categories of discovery sought by Gloucester arises.

Category 17

19. By this category, Gloucester seeks the following documents:

1. All documents in the period 1 March 2013 to 3 August 2018 which record that Yancoal Group entities (including the Gloucester Group entities) were transferring rail infrastructure capacity, where those documents were created, sent or received by one or more of the following:

1. Will Randall;

2. Chris Thoroughgood; and/or

3. Daniel Hunt.

20. This category concerns the knowledge of the guiding minds of Noble and Noble Group, Messrs Randall, Thoroughgood and Hunt, in respect of rail transfers by the Gloucester Group, and/or entities in the broader Yancoal Group.

21. Noble resists on a number of bases.

22. Firstly, it is said that the discovery already given is adequate to meet resolution of the issues concerning transfer of rail capacity.

23. In affidavits served since the initial discovery categories were agreed and ordered, Noble has served evidence from Messrs Randall (its Chief Executive Officer and Executive Director) and Hunt (its Operations Manager) to the effect that they were not aware that Gloucester was transferring rail capacity and that, had they known, they would have asserted that the Marketing Services Fee applied to colleagues for deducing transferred rail capacity.

24. As Messrs Hunt and Randall have by their evidence put their, and thus Noble’s, knowledge of rail transfer capacity in issue, I think it reasonable that Gloucester seek to test this by the further documents sought in this category.

25. The category does refer to the “Yancoal Group” rather than entities within the Gloucester Group. I think that is justified by the fact that Mr Hunt gives evidence that he treated Yancoal and Gloucester as though they were one entity.

26. There is evidence that a good deal of work will be required to comply with disclosure of items in category 17. However, this is complex litigation in which Noble is claiming a considerable sum. Noble’s estimate of the cost of further discovery is in the order of between $266,000 and $294,000. That is, of course, a large amount of money but is proportionate to the claim made and the complexity of the issues in the proceedings.

27. It is also true that the category overlaps, to some extent, with discovery already given. However, it was Noble that sought discovery prior to the service of evidence, I am satisfied that, now that Noble’s evidence on this question is to hand, the further categories of discovery are reasonable.

28. I propose to allow discovery in this category.

Category 18

29. In category 18, Gloucester seeks the following documents:

1. All Documents communicated by or to one or more of Daniel Hunt, Will Randall, Ben Stewart and/or Chris Thoroughgood in the period 1 March 2013 to 3 August 2018:

1. referring to or attaching, annexing or enclosing the 2013 HVCCC Capacity Transfer System Protocol (2013 Protocol) (and any later documents amending or superseding the 2013 Protocol);

2. referring to or attaching, annexing or enclosing any Below Rail Capacity Transfer Form (draft or final) relating to the proposed or actual transfer of Below Rail capacity by [any] Yancoal Group entities (including Gloucester Group entities); and/or

3. referring to the consultation process by which the 2013 Protocol was prepared by the HVCCC (as described in paragraphs 86 to 98 of the affidavit of Pauline Ahern dated 20 February 2020).

30. This category is also directed to the transfer of rail capacity issue.

31. I am satisfied that these documents are relevant to the estoppel and waiver defences Gloucester seeks to establish.

32. In particular, Noble’s knowledge of the 2013 Protocol referred to in this category is relevant to that issue.

33. My attention has not been drawn to any evidence that supports a finding that disclosure of these documents would be oppressive.

Financial position of Noble and Noble Group

34. Clause 13.2 of the Agreement provides that either party could terminate the agreement if the other “ceases to be able to pay its debts as they become due” or that “any arrangement between that party and its creditors [was] entered into”.

35. Noble Group has admitted that, from 14 March 2018, it had ceased to be able to pay its debts as they became due and that it had not notified Gloucester of that fact.

36. Gloucester/Yancoal served evidence to the effect that had such a notice been given, Gloucester would have terminated the Agreement on the basis that it was an unprofitable contract for Gloucester as it did not, in practice, require or make use of any marketing services from Noble or Noble Group.

37. Noble has consented to Gloucester having leave to amend its pleadings to allege that insolvency events occurred by 20 September 2017, whereas it had previously pleaded that insolvency events had not occurred until early 2018. There is no dispute that Gloucester should have disclosure of documents relevant to this earlier period.

38. Gloucester’s expert has identified and requested further documents. Gloucester’s expert also reviewed Noble’s documents, discovered for the preparation of expert evidence.

39. One category of discovery remains in dispute in relation to this issue.

40. In category 30, Gloucester seeks disclosure of the following documents:

1. All demands, contractual notices or other legal notices issued in the period 1 August 2017 to 3 August 2018:

1. by one or more creditors of Noble and/or NRIPL (and/or creditors’ representatives) to Noble and/or NRIPL; and/or

2. by Noble and/or NRIPL to one or more of their creditors,

and all responses thereto where Noble and/or NRIPL had, at the relevant time, a debt to the relevant creditor of US$10 million or greater.

41. Noble resists this category on the basis that, in substance, it overlaps with a category of documents earlier discovered and that the documents now sought could have been sought earlier.

42. The earlier discovery was directed to internal Noble documents recording Noble’s consideration of whether it was insolvent and required to give notice to Gloucester under the relevant provision in the Agreement.

43. Category 30 seeks external creditor documents which will enable an objective assessment of whether Noble or Noble Group were able to pay their debts as they became due.

44. As Noble Group has admitted that, from 14 March 2018, it was unable to pay its debts as they fell due, a question arises as to the relevance of Noble Group’s disclosure of documents relating to that issue after that date.

45. I am persuaded that such documents may be relevant to Noble’s financial position, particularly as Noble was a wholly owned subsidiary of Noble Group and that there were overlapping directorships and executive appointments between the two companies.

46. I propose to allow this category.

The remaining categories

47. I am able to deal briefly with the remaining categories.

48. Category 19 is not pressed.

49. Category 20(k) is not pressed. Noble agrees to provide the balance of the documents called for by Category 20 by July 2021. Gloucester sought earlier disclosure but I am not persuaded this is necessary.

50. The documents called for by category 21 will be included in Noble’s expert evidence, due on 14 May 2021.

51. Category 22 is not pressed.

52. Category 23 is agreed.

53. Category 24 is not pressed.

54. Category 25 is not pressed.

55. Category 26 is agreed.

56. Category 27(a) to (d) is agreed. There is a minor dispute as to the period during which Noble and Noble Group should provide the “Board Papers” called for by this category. I am unable to understand upon what basis that dispute exists and propose to allow the category as sought.

57. Category 28 is agreed.

58. As to category 29, it is agreed that this will now be dealt with by a letter of request in the nature of an interrogatory.

59. Categories 31 and 32 are agreed.

Conclusion

60. I invite the parties to bring in short minutes to give effect to these reasons.

61. As to costs, my preliminary view is that the appropriate order is that the costs of this dispute be costs in the cause.

62. If either party contends for a different order, they should provide my Associate with brief submissions, not exceeding two pages. I will deal with any dispute on the papers.

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Decision last updated: 07 April 2021