Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 7)
[2019] QSC 241
•27 September 2019
SUPREME COURT OF QUEENSLAND
CITATION:
Sanrus Pty Ltd & Ors v Monto Coal 2 Pty Ltd & Ors (No 7) [2019] QSC 241
PARTIES:
First Plaintiff: SANRUS PTY LTD AS TRUSTEE OF THE QC TRUST ACN 097 049 315
AND
Second Plaintiff: EDGE DEVELOPMENTS PTY LTD AS TRUSTEE OF THE KOWHAI TRUST ABN 26 010 309 529
AND
Third Plaintiff: H&J ENTERPRISES (QLD) PTY LTD AS TRUSTEE OF THE H&J TRUST ACN 077 333 736
AND
First Defendant: MONTO COAL 2 PTY LTD ACN 098 919 414
AND
Second Defendant: MONTO COAL PTY LTD ACN 098 393 072
AND
Third Defendant: MACARTHUR COAL LIMITED ACN 096 001 955
FILE NO/S:
SC No 8609 of 2007
DIVISION:
Trial Division
PROCEEDING:
Application
DELIVERED ON:
27 September 2019
DELIVERED AT:
Brisbane
HEARING DATE:
9 September 2019; 10 September 2019; 12 September 2019
JUDGE:
Bond J
ORDER:
1. The plaintiffs are granted leave to rely on the further supplementary report of Mr Freeman dated 8 September 2019 [EXP.010.111.0001].
2. In relation to the defendants’ objections to –
(a) Expert Report of Mr Freeman dated 2 November 2018 [EXP.010.005.0001];
(b) Expert Report of Mr Freeman dated 22 November 2018 [EXP.010.007.0001]
(c) Joint Expert Report on Offsite Water Supply of Mr Freeman and Mr Harradine (D), with contributions from Mr Smith (D), Mr Cavanagh (D), Mr Simpson (P) and Ms Power (D), dated 15 July 2019 [EXP.500.004.0001_2];
(d) Joint Expert Report on Offsite Power Supply of Mr Freeman and Mr Harradine, with contributions from Mr Smith (D), Mr Cavanagh (D) and Mr Simpson (P), dated 15 July 2019 [EXP.500.011.0001_2]; and
(e) Joint Expert Report on Port of Mr Freeman and Mr Morton (D) [EXP.500.026.0001_2]; and
(f) Further Supplementary Report of Mr Freeman dated 8 September 2019 [EXP.010.111.0001]
I make the rulings set out in Schedules 1, 2 and 3 to these reasons.
CATCHWORDS:
EVIDENCE – ADMISSIBILITY – OPINION EVIDENCE – EXPERT OPINION – GENERALLY – where the plaintiffs sought to adduce expert evidence in the form of a report from an expert in rail and other infrastructure as it relates to the development of a mine – where the defendants objected to extensive parts of the reports produced by the expert and some portions of the joint expert reports for which he was responsible – where the bases of the objections included that the matters contained in the report are not properly the subject of expert opinion, that the expert is not adequately qualified to make the impugned statements and that the opinions stated are not based wholly or substantially on the expert’s expertise – whether the objections to the expert reports should be upheld
Uniform Civil Procedure Rules 1999 (Qld), r 149
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588, considered
Holdway v Arcuri Lawyers (A Firm) [2009] 2 Qd R 18, considered
Lee v Abedian [2017] 1 Qd R 549, considered
Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, considered
HG v The Queen (1999) 197 CLR 414, considered
Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705, considered
Oztech Pty Ltd v Public Trustee of Queensland [2019] FCAFC 102, considered
R v Naidu [2008] QCA 130, considered
Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 1) [2018] QSC 308, considered
Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 4) [2019] QSC 199, considered
Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 5) [2019] QSC 210, considered
COUNSEL:
K E Downes QC with D B O’Sullivan QC, J P O’Regan and D M Turner for the plaintiffs
D Clothier QC with A M Pomerenke QC, A C Stumer, E L Hoiberg and M J Hafeez-Baig for the defendants
SOLICITORS:
Holding Redlich for the plaintiffs
Allens for the defendants
Introduction
This judgment is a sequel to Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 5) [2019] QSC 210 (Sanrus No. 5), which was a decision in which I provisionally dealt with some of the extensive objections which had been made during the trial of the present proceeding to expert opinion evidence which the plaintiffs sought to adduce from Mr Freeman (P).[1]
[1] In this proceeding, because there are so many expert witnesses, I have usually adopted the convention of distinguishing between expert witnesses called by the plaintiffs and those called by the defendants by inserting post-nominals “P” and “D”, respectively. Because Mr Freeman is mentioned so often in these reasons, I will not repeat the post-nominal for him, but will continue to do so in relation to other expert witnesses.
Mr Freeman had produced three expert reports for the purpose of this proceeding –
(a)Report dated 2 November 2018 [EXP.010.005.0001];[2]
(b)Supplementary Report dated 15 November 2018 [EXP.010.006.0001]; and
(c)Report (Actual Costs) dated 22 November 2018 [EXP.010.007.0001].
[2] The trial is being conducted as an electronic trial. Numerical references in this format identify relevant documents with precision.
He also participated in four joint expert conclaves which led to the production of the following four joint expert reports –
(a)Joint Expert Report for Offsite Water Supply dated 15 July 2019 by Mr Freeman, Mr Simpson (P), Mr Harradine (D), Mr Smith (D), Mr Cavanagh (D) and Ms Power (D) [EXP.500.004.0001_2];
(b)Joint Expert Report for Offsite Power Supply dated 15 July 2019 by Mr Freeman, Mr Simpson (P), Mr Harradine (D), Mr Smith (D) and Mr Cavanagh (D) [EXP.500.011.0001_2];
(c)Joint Expert Report for Port dated 22 July 2019 by Mr Freeman and Mr Morton (D) [EXP.500.026.0001_2]; and
(d)Joint Expert Report for Rail dated 24 July 2019 by Mr Freeman, Mr Hunter (D), Mr Morton (D) and Mr Cavanagh (D) [EXP.500.027.0001_2].
In Sanrus No. 5, I identified the stage at which the trial had reached and the procedural context in which the objections had been advanced. I also identified and explained the decisions which I had reached by the application of general legal principle to parts of Mr Freeman’s reports to which objection had been taken and which I had time to consider. I had only ruled specifically on 25 of the 120 objections which had been pressed. But I also stated that those rulings were provisional only, because I required some further submissions on an alternative argument presented by the plaintiffs. I published Sanrus No. 5 before having received those submissions and before having finalised my ruling on all the objections, because it was my expressed hope[3] that ruling on some of the objections would lead to agreement on the remainder of the objections. That hope proved misplaced. Having now received further submissions, this judgment finalises the rulings which I make in relation to the objections dealt with in Sanrus No. 5.
[3] Sanrus No. 5 at [6].
I also recorded in Sanrus No. 5 that: (1) a pleading objection had been advanced by the defendants, and (2) objections had been advanced to other parts of the reports of Mr Freeman, but that I had not then required the plaintiffs to respond to those issues.[4] Those matters were not ruled upon in Sanrus No. 5. After I allowed the plaintiffs sufficient time to respond to them, the plaintiffs determined not to press a previous complaint about late notice. Having now received submissions from both sides on the merits of those further objections, this judgment will now express rulings in relation to them.
[4] Sanrus No. 5 at [31].
I received extensive oral and written submissions before I published my decision in Sanrus No. 5. Since then I have received further extensive oral and written submissions, including submissions which relied to some extent on arguments earlier put. All up I received some 12 separate written submissions, not counting the schedules which recorded the particular objections and responses thereto.
Amongst other things, the pleading objection changed shape somewhat. The defendants contended (and I agree) that it had become apparent for the first time during the course of the submissions that the plaintiffs sought to advance a case in reliance on the proposed evidence of Mr Freeman, which suggested that it was part of their counterfactual case to contend that expert advice would have been given and acted on from time to time during the 3 years prior to the time the Stage 2 Feasibility Study would have been prepared, not just in the form of the Stage 2 Feasibility Study itself. The defendants contended that the plaintiffs could not be permitted to advance such an unpleaded case and that the evidence of Mr Freeman could not be received for that purpose. It will be necessary to address this pleading objection, first.
Just prior to the commencement of the oral argument in respect of these final rulings, the plaintiffs delivered for the first time yet another report of Mr Freeman (the further supplementary Freeman report). They sought leave to rely on it in the first instance only in support of their resistance to the objections to the other reports of Mr Freeman. They proposed that they would in due course apply for leave to rely on that new report in the trial, because it was in part a response to the rulings I had made, and to those which I might make if objections were successful. After it became apparent during the course of argument that that course would create analytical difficulties, they determined that they should bring their application for leave. The application was resisted and I heard argument on the question of leave; on the admissibility of the report in any event; and on its utility in relation to the other admissibility questions, if I gave leave to rely on it and if it were otherwise admissible. It will be necessary to address the question of leave in relation to the further supplementary Freeman report, second.
Thereafter the body of this judgment will identify the general principles which inform the disposition of the various objections to Mr Freeman’s evidence. Schedules to the judgment (the structure of which I will explain) will set out the particular rulings which I make. Although the Schedules often contain brief reasons, the reasons there expressed should be read with the reasons expressed in the body of the judgment. All up, I am required to rule in respect of 148 objections in respect of the existing evidence of Mr Freeman, 25 of which I have already provisionally ruled upon.
Because of the extent of the issues on which my ruling is required I adjourned the further conduct of the trial (the next witness being Mr Freeman) until I could finalise my judgment.
The defendants’ objection to the plaintiffs’ attempt to advance a new unpleaded case
Overview of the nature of the plaintiffs’ case
The trial of this proceeding concerns complaints made by junior joint venture partners (the plaintiffs) about the conduct of the senior joint venture partner (the first defendant, Monto Coal 2) in relation to decisions made in the course of performing a Joint Venture for the exploitation of a coal deposit at Monto in Queensland. For present purposes it is not necessary to describe the bases on which liability is sought to be attributed to the second and third defendants.[5]
[5] Because it will make this judgment more intelligible as a coherent piece of analysis, I will repeat parts of what I wrote in Sanrus No. 5 in the body of this judgment. This and the following 4 paragraphs are repetitions of Sanrus No. 5 at [7] to [11].
The two sides of the Joint Venture had entered into a written Joint Venture Agreement in May 2002 which expressed various obligations in relation to the following two stages in the possible exploitation of the subject coal resource:
(a)Stage 1, namely “Mining Operations producing between 1,000,000 and 1,500,000 tonnes of saleable coal per annum”; and
(b)Stage 2, namely “the Mine Development and Mining Operations beyond Stage 1 with the expectations of production being 10,000,000 tonnes or more of saleable coal per annum”.
In brief summary, in this proceeding the plaintiffs contend that Monto Coal 2 breached the Joint Venture Agreement by deciding to suspend all work on the Monto Coal Project in July 2003 and, accordingly, by failing to develop Stage 1 of the Project by 16 May 2005 and by failing to undertake a Stage 2 feasibility study in that time (or, indeed, at any time up to 31 December 2008). The plaintiffs allege Monto Coal 2’s decision-makers made relevant decisions in the absence of good faith and for contractually impermissible purposes.
The plaintiffs claim that by reason of the impugned conduct of Monto Coal 2 they –
(a)lost the opportunity to earn a profit from the sale of coal from Stage 2 of the project and to receive royalties therefrom and also lost the value of free carried interest in Stage 1 capital costs; and
(b)further or alternatively, lost the opportunity to sell their interests in the Joint Venture at a value which would reflect the stage to which the Monto Coal Project would have advanced had the impugned conduct not occurred.
Because this is a loss of opportunity case, the plaintiffs rely on Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 and Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2018] 2 Qd R 584 to contend that there are two stages of analysis. The first, they contend, is concerned with proof of causation of an identifiable loss of some kind and the second, they contend, involves assessing the quantum of the loss. The plaintiffs contend that the first stage is to be assessed on the basis of proof on the balance of probabilities and the second, by reference to the Court’s assessment of the possibilities and probabilities of occurrence of the relevant hypothetical scenario or scenarios.
The plaintiffs’ causation hypothesis
Rule 149 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) requires plaintiffs to set out a statement of all the material facts on which they rely, including by stating specifically any matter that if not stated specifically might take another party by surprise. Of course, the purpose of pleading material facts is not just to avoid surprise: it is to enable the pleader’s case to be defined and confined and to enable the defendants to plead to that case, thereby defining and confining the issues for decision. That is reinforced by the terms of r 157 UCPR.
It is a trite proposition of law that defendants are entitled to a direct and unambiguous identification of the material facts relied on to establish the causal link between the conduct which plaintiffs impugn and the loss they allegedly suffered, and which identification at least arguably establishes that link.
I made this point in Lee v Abedian [2017] 1 Qd R 549 at [81] and in Chan v Macarthur Minerals Ltd [2017] QSC 13 at [39]. The defendants particularly sought comfort from my observation in Lee v Abedian (at [81](f)) that:
The defendants are entitled to have the plaintiff pinned down to a causation hypothesis which is not characterised by imprecision and ambiguity and which, at least arguably, establishes the requisite causal connection between the implementation of the conspiracy and the suffering of loss. If there is more than one causation hypothesis, then the statement just made must apply to each one. The pleading device of merely cross-referring back to events alleged to have happened is unlikely to be a satisfactory way of addressing a proper plea of causation. There must be a direct and unambiguous identification of the material facts relied on to establish the causal link which the law requires. And it must be something which makes narrative sense. The defendants should not be required to cherry pick through the pleading to work out what the case is that they have to meet in this regard.
In Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, Jackson J collected some further general statements of principle, to similar effect. His Honour made it clear that he was doing so to demonstrate that there was no shortage of case law for the proposition that the plaintiff must plead a relevant counterfactual scenario to establish the alleged causal link between breaches of contract or negligence and the loss. His Honour observed (footnotes omitted, emphasis added):
[26]However, there is no shortage of relevant case law [which stands as such authority]. In Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd, Chesterman J said:
“In any cause of action in respect of which causation is an essential element it is necessary to plead the material facts which are said to give rise to the causal connection. In particular it is necessary to plead the facts which lead to a reasonable inference that the acts complained of (here the relevant non-disclosure) and the alleged later event (here the making of the dragline agreement) stand to each other in the relation of cause and effect. […]”
[27] Another well-known judgment in this area is Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd, where French J said:
“The material facts establishing the necessary causal link should be pleaded. In cases of contravention of s 52 said to be constituted by misrepresentation this will generally require more than appears in the opening words of par 50: ‘by reason of such conduct ...’.
Some guidance to the proper approach may be derived from the ordinary rule of pleading applicable in cases of fraud of which Lord Watson said in Dow Hager Lawrance v Lord Norreys (1890) 15 App Cas 210 at 221:
‘... The ordinary rule of pleading applicable to cases of fraud, ... was thus expressed by Earle Selborne in Wallingford v Mutual Society (1880) 5 App Cas 685 at 697: “General allegations, however strong may be the words in which they are stated, are insufficient to amount to an averment of fraud of which any court ought to take notice.” It is not a sufficient compliance with the rule to state facts and circumstances which merely imply that the defendant, or someone for whose action he is responsible, did commit a fraud of some kind. There must be a probable, if not necessary, connection between the fraud averred and the injurious consequences which the plaintiff attributes to it; and if that connection is not sufficiently apparent from the particulars stated, it cannot be supplied by general averments. Facts and circumstances must in that case be set forth, and in every genuine claim are capable of being stated, leading to a reasonable inference that the fraud and the injuries complained of stood to each other in the relation of cause and effect.’
A perusal of the relevant precedents in [Bullen, Leake & Jacob’s Precedents of Pleadings 12th ed, pp 702–7] supports the view that the approach enunciated by Lord Watson is equally applicable to actions for negligent misstatement.”’”
As the Full Court of the Federal Court said in Oztech Pty Ltd v Public Trustee of Queensland [2019] FCAFC 102 at [30]:
There should be no doubt about whether any particular cause of action is relied upon. At a minimum, the pleading should be pellucidly clear about the causes of action, or claims, relied upon by the applicant, including any claims made upon an alternative hypothesis. The explicit clarity with which a claim is expressed should ensure that there be no need for the opposite party to closely scrutinise the pleading in a process of textual construction to determine whether a particular fact is relied upon, or the purpose for which it is alleged, much less to decide whether a particular cause of action is raised. The same basic requirement applies to any defence raised in answer to a claim.
The result is that where a party’s causation hypothesis depends on establishing a particular counterfactual scenario to establish the alleged causal link between breaches of contract and the loss which it is said would have eventuated if the conduct which the party impugns had not occurred, that counterfactual scenario must be pleaded and particularised in accordance with the rules of pleading. This should be done with the degree of clarity referred to in Oztech Pty Ltd v Public Trustee of Queensland. The pleading so framed must at least arguably establish a reasonable inference that the impugned conduct and the claimed loss stand to each other in the relation of cause and effect.
In Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 1) [2018] QSC 308 (Sanrus No. 1), I explained that significant changes were made to the plaintiffs’ case by the delivery of new expert reports in reply towards the end of 2018. I permitted the plaintiffs to amend their pleading to accord with the case identified in the reports so delivered. The causation hypothesis contained in that pleading was set out in their statement of claim at [23]. It is in now the following terms, having been slightly modified since I permitted the amendments recorded in Sanrus No. 1 so as to articulate alternative net present value (NPV) calculations as set out in subsequently delivered expert reports (emphasis added):
23. By reason of Monto Coal 2's breaches of the Joint Venture Agreement:
(a) the development of Stage 1 has not been achieved;
(b) the Stage 2 Feasibility Study has not been undertaken;
(c)the plaintiffs have lost the opportunity to earn a profit from the sale of coal from Stage 1 and Stage 2, to earn Royalties under the Monto Coal Royalty Deed, and the value of free carried interest in Stage 1 capital costs;
Particulars
(a) Stage 1 would have been completed.
(b)The Stage 2 Feasibility Study (as that term is defined in clause 1 of the Joint Venture Agreement) would have been prepared by about May 2005;
(c)Coal produced from Stage 1 would have obtained market acceptance and would have been sold during Stage 1;
(d)The Stage 2 Feasibility Study would have demonstrated that Mine Development of Stage 2 would have been profitable with a Net Present Value of $518 million as set out in paragraphs 9 to 31 of the report of Mr Hall dated 21 November 2018 or alternatively $501 million as set out in paragraphs 14 and 15 and “Hall Attachment 1” to the Supplementary Joint Report on Financial Modelling of Mr Hall and Ms Power dated 29 July 2019 [EXP.500.036.0001].
(da) In the alternative to sub-paragraph (d), The Stage 2 Feasibility Study would have demonstrated that Mine Development of Stage 2 would have been profitable with a Net Present Value of $408 million as set out in paragraphs 20 to 29 and “Hall Attachment 7” to the Supplementary Joint Report on Financial [Modelling] of Mr Jeffrey Hall and Ms Lucy Power dated 29 July 2019 [EXP.500.036.0001].
(e) The Joint Venture Participants or the Manager would have convened a Meeting of the Management Committee to vote on whether Mine Development of Stage 2 should be undertaken. [The meeting of the management committee would have been convened in about May or June 2005.[6]];
(f)Each of the Participants' Representatives, would have attended that meeting and, acting in the best interests of the Joint Venture in accordance with clause 7.5 and 7.6 of the Joint Venture Agreement, would have exercised their vote in favour of undertaking the Mine Development of Stage 2. [The parties’ representatives would have attended the management committee meeting to vote in favour of undertaking the mine development of Stage 2 in about May or June 2005.];
(g)Coal would have been produced and sold from Stage 1 and Stage 2 at a profit with a net present value of $2,569m, the plaintiffs’ share of which is $1,002m, as calculated in paragraph 13 of, and Annexure B to, the report of Mr Hall dated 30 November 2018 or alternatively with a net present value of $2,481m, the plaintiffs’ share of which is $968m, as calculated in paragraphs 14 and 21 of the Supplementary Joint Report on Loss and Damage of Mr Jeffrey Hall and Mr Tony Samuel [EXP.500.048.0001];
(ga) In the alternative to sub-paragraph (g), coal would have been produced and sold from Stage 1 and Stage 2 at a profit with a new present value of $2,481m, the plaintiffs’ share of which is $943m, as calculated in paragraphs 22 and 29 of the Supplementary Joint Report on Loss and Damage of Mr Hall and Mr Samuel [EXP.500.048.0001]
[6] The sentence in square brackets in this and the next subparagraph are taken from particulars separately delivered, and recorded a little later in the consolidated statement of claim, but recorded here for sense. Other particulars applicable to this paragraph but not presently relevant are not included.
(h) [Previously deleted]
(i) [Previously deleted]
(j) [Previously deleted]
(k)Monto Coal 2 would have paid its Respective Proportion (being 51%) of the Royalty payable to the plaintiffs quarterly at a rate of 1% of the FOBT price at which export Coal was sold, such royalty having a net present value of $47m as calculated in paragraph 13 of, and Annexure B to, the report of Mr Hall dated 30 November 2018 or, in the alternative, as calculated in paragraphs 14 and 21 of the Supplementary Joint Report on Loss and Damage of Mr Hall and Mr Samuel [EXP.500.048.0001], or in the further alternative, as calculated in paragraphs 22 and 29 of the Supplementary Joint Report on Loss and Damage of Mr Hall and Mr Samuel [EXP.500.048.0001].
(l) The plaintiffs would have received a free carried interest in Stage 1 capital costs, such interest having a net present value of $16m as calculated in paragraph 13 of, and Annexure B to, the report of Mr Hall dated 30 November 2018.
The following observations may be made about the causation hypothesis as pleaded:
(a)The counterfactual propositions are pleaded as particulars, when they should be pleaded as material facts. For present purposes that deficiency may be put to one side, as the defendants did not take that point before me.
(b)It is evident that the plaintiffs’ causation hypothesis does depend on establishing a particular counterfactual scenario. The plaintiffs’ case is that no decision to suspend Stage 1 would have been made and Stage 1 would have been completed and –
(i) there would have been prepared by about May 2005 a particular document (namely “The Stage 2 Feasibility Study”); and
(ii) the Stage 2 Feasibility Study document would have had a particular content (namely in specified alternative ways it would have demonstrated that Stage 2 would have been profitable with a particular NPV as set out in identified parts of an expert report).
(c)The former proposition is apparent from the use of the definite article and the phrase “would have been prepared” in particular (b) and the repetition of the definite article in particulars (d) and (da). And the latter proposition is evident from particulars (d) and (da), where three alternative NPV propositions are set out, each by reference to particular aspects of an identified expert report.
(d)The plaintiffs accepted in oral argument before me that it was absolutely clear that although the particular stated that the Stage 2 Feasibility Study would have been prepared “by May 2005” (which, I observe, at first blush might be thought to contemplate the possibility that it might form part of the plaintiffs’ case that the document would have been prepared at some earlier unspecified time between May 2002 and May 2005), in fact the plaintiffs’ case was based on the document being prepared (in the sense of finalised) in about May 2005.[7]
(e)The concession was appropriate. There are multiple confirmations of that proposition to be found in the terms of the expert reports cross-referenced in particulars (d) and (da), including in the fact that, amongst other things, the expert analysis relies on information which could not have existed in earlier years. For example:
(i) In the report of Mr Hall dated 21 December 2018, there references to the NPV calculation being done “as at May 2005”: see at [9], [13], [23], [26] and [31]. The calculation is based on coal price forecast scenarios as at that date, including a scenario which was based on information available in May 2005 and one based on coal prices that approximated the trend of actual prices from 2005 to 2018: see at [13] et seq. The calculation says that it use best academic practice from 2005: see at [28].
(ii) The NPV calculation in the referenced parts of the Supplementary Joint Expert Report for Financial Modelling dated 29 July 2019 [EXP.500.036.0001] also expresses NPV calculations “as at May 2005”. Further, at [15] the report states that the NPV was calculated using the differential between the spot coal price and the benchmark coal price set at the actual discount or premium observed for the years 2004 and 2005, and then set at a 1% discount for the years beyond 2005. The actual discount observed in 2004 and 2005 would not have been used had the Stage 2 Feasibility Study been prepared at a time prior to 2005.
(iii) Paragraph 24 of the Supplementary Joint Expert Report for Financial Modelling [EXP.500.036.0001] referred to at particular (da) refers to the benchmark coal price being set at US$45 from April 2004 to March 2005. This information similarly would not have been available to be included when assessing the probability of the IM Scenario for the purpose of the Financial Modelling Report if the Stage 2 Feasibility Study been prepared for a time prior to 2005.
(f)That a Stage 2 Feasibility Study having one or other of the pleaded alternative contents would have been prepared in about May 2005 is a critical part of the counterfactual scenario. That much is made clear by particulars (e) and (f) which reveal that it is the plaintiffs’ case that shortly after that document would have been prepared, a Joint Venture Management Committee meeting would have been convened at which there would have been a vote in favour of undertaking the mine development of Stage 2. It is obvious that it is the decision at that meeting which would necessarily have taken account of the Stage 2 Feasibility Study which it is alleged would have been available, which is the gateway to the proposition that profits would have been earned during Stage 2.
(g)The result is that, in terms of counterfactual decisions by or on behalf of the Joint Venture, the statement of claim plainly directs the reader to the content of the Stage 2 Feasibility Study prepared in the time frame I have identified and to the decision of the Joint Venture Management Committee which would have been made shortly after the document was received.
[7] Transcript day 72, T72-8 lines 17 – 32.
The problem is that the identification of the date of production and of the content of the Stage 2 Feasibility Study and the decision made at the Joint Venture Management Committee meeting is only an incomplete statement of the counterfactual scenario on which the plaintiffs’ case is based. It was common ground before me that it is now and was at the time of Sanrus No. 1 implicit in the plaintiffs’ case that in order for the Stage 2 Feasibility Study to have been produced in about May 2005 having the content alleged, over the previous 3 years a whole raft of other counterfactual propositions concerning decisions, agreements and acts made by the Joint Venture but also by various third parties (land-holders, statutory bodies and regulators, corporate infrastructure providers and the like) –
(a)would have had to come to pass; and
(b)would have had to come to pass in a particular time frame.
None of those counterfactual propositions have been pleaded. It is convenient to refer to these as the plaintiffs’ unpleaded counterfactual case.
An idea of the nature of the plaintiffs’ unpleaded counterfactual case may be obtained from the following submissions advanced by the defendants as part of their written opening submissions on causation and damages (footnotes omitted, emphasis original):
39. […] the plaintiffs’ expert evidence proceeds on numerous assumptions as to decisions, agreements and acts by the joint venture and third parties between mid-2002 and May 2005. These assumptions are essential to the plaintiffs’ causation case. Most notably:
(a) It is alleged that the mining lease application for Stage 2, environmental impact statement process for Stage 2 and the processes for land compensation agreements for Stage 2 (and all associated expenditure) would have commenced in mid-2002 and been successfully concluded at particular times. This assumes, on the plaintiffs’ case, that these steps would have commenced within months of the execution of the Joint Venture Agreement and been progressed before the grant of the Stage 1 mining lease, which on the plaintiffs’ case would have been granted in March 2003.
(b) It is assumed that early works arrangements and associated approval processes would have been entered into with third parties prior to the completion of the Stage 2 Feasibility Study and any final investment decision for Stage 2. The early works arrangements and associated approval processes include (without being exhaustive):
(i) (Rail) rail design and approvals commencing in January 2003, a conditional contract for rail infrastructure executed in early 2004 and a commitment to an arrangement for $20 million in long lead procurement items (sleepers and rails) in January 2005.
(ii) (Water) entry into an Early Works Reimbursement Deed with SunWater in July 2004, with detailed design from September 2004 to March 2005 and relevant approvals commencing in December 2004;
(iii) (Power) entry into an early works arrangement with Powerlink for power supply in July 2004, with design and procurement processes commencing in November 2004;
(iv) (Road) engineering and approvals for the Burnett Highway diversion by Main Roads commencing in May 2002, with construction commencing in June 2005;
(v) (Accommodation Village) purchase of the necessary land, development approval, and the design and construction of an Accommodation Village to support the Stage 2 mine workforce between May 2002 and May 2005.
(c) It is assumed that an agreement for port capacity would have been executed between mid-2004 and mid-2006 and a conditional agreement may have been executed prior to an investment decision for Stage 2.
(d) It is assumed that the engineering and procurement for the Stage 2 mine and CHPP would have commenced in May 2004.
40. Those matters of timing are critical to the plaintiffs’ case on causation. That is because, on the plaintiffs’ case, those steps would have been taken prior to the Stage 2 Feasibility Study being completed and prior to the joint venture making a decision on whether to proceed with Stage 2 development. If those steps had not been taken, Stage 2 of the Monto Coal Project could not have proceeded in the manner which the plaintiffs allege in their expert reports. […]
Until the ground shifted during the course of argument (in the manner I will shortly explain), it seemed to be common ground that the foregoing passage could be regarded as broadly representative of the nature of the relevant unpleaded counterfactual propositions forming part of the plaintiffs’ case.
Compliance with the rules of pleading required the plaintiffs to frame their pleading in such a way that the plaintiffs’ unpleaded counterfactual case was identified at an appropriate level of detail in the pleading. If it was critical to the counterfactual proposition that a decision would have been made in May or June 2005 based on a Stage 2 Feasibility Study having a particular content prepared in May 2005, that there would have been, for example, antecedent decisions to enter into particular contracts in a particular form and that such contracts would have been entered into by a particular time, then those matters were material parts of the counterfactual case and should have been pleaded. The plaintiffs’ failure to do so was a major deficiency in their pleading.
It must be acknowledged that that deficiency and its significance has been ameliorated to some extent by the fact that the pleading was delivered in the context of a proceeding which was case managed, including by orders which –
(a)required the parties to deliver witness summaries in respect of their lay witness evidence;
(b)required the parties to deliver the expert opinion evidence on which they intended to rely in the form of written expert reports;
(c)constrained the parties from adducing evidence in chief from a lay witness about a topic not identified in a summary of evidence filed in accordance with the orders, except with the leave of the Court; and
(d)constrained the parties from adducing any expert evidence at the hearing other than in the form of a report filed in accordance with the orders, except with the leave of the Court.
As I explained in Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 4) [2019] QSC 199, the purpose of the superimposition on a case conducted by pleadings, of orders requiring the parties to identify to their opponents during the pre-trial process the evidence by which they intend to prove their pleaded cases, is also grounded in a desire to require the parties to define and confine their cases. I wrote (at [15], emphasis added):
It is axiomatic that if case management orders have required the parties to disclose to their opponents the way they intend to prove their respective pleaded cases, that course was required because the Court determined that it would serve to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense. But recitation of that sort of motherhood statement is not a sufficient articulation of the purpose of requiring such a course. The underlying purpose is to avoid surprise to the other party and to allow the issues to be narrowed, albeit at a more granular level than is achieved by the delivery of pleadings. It is to allow any eventual trial to proceed in a more efficient manner than it might otherwise have proceeded. In order to fulfil that purpose, it must follow that there is some degree to which the parties are confined to the manner of proving their case which they have flagged by the material which they have delivered in compliance with such case management orders. That is why such orders conventionally also specify that the parties may not deliver evidence outside the constraints of the orders concerned, except with leave of the Court. The extent of confinement which must be regarded as having been achieved by such orders and the attitude which must be taken to applications for leave will be very much a question of fact and degree, and will vary from case to case. The considerations which would be relevant to the exercise of a discretion to permit evidence to be adduced outside the constraints imposed by the case management orders of the type under discussion are similar to those applicable to pleading amendment: see Sanrus No. 2 at [12] to [15].
It must also be recognised that the extent of the amelioration of any pleading deficiencies achieved by such orders is not complete, for a number of reasons.
First, the evidential material which each side provides to their opponent consequent upon such directions is proposed evidence. It is not a pleading. It does not actually bind the party providing it in the same way as does a pleading. If a pleaded allegation is admitted on the pleadings, no evidence is required on the admitted fact and the admission may not be withdrawn without leave. On the other hand, a plaintiff’s witness summary (or expert report) and a defendant’s witness summary (or expert report) delivered before trial might well suggest that the witnesses agree on a fact or on an opinion, but that does not bind either party in the same way as a pleaded admission.[8] Even if the proposed evidence is admitted into evidence at the trial, either party can still ask the trier of fact not to accept one aspect of the evidence it adduces at trial, or ask the trier of fact to prefer one aspect of the evidence it adduces at trial over another.
[8] The only constraint would be that leave would be required to adduce new or different evidence from the particular witness concerned.
A second and related point is that, for one reason or another, the proposed evidence may not actually find its way into evidence at the trial. A party may choose not to call the witness or to tender the expert report. Or, the proposed evidence might be held out because of successful objections as to its admissibility.
Third, in any event the extent of the clarity which a party obtains concerning the fact and nature of any unpleaded counterfactual propositions in an opposing party’s pleading would necessarily derive from their own analyses of the opposing party’s evidence rather than from the opposing party having committed to a statement in their pleading which defined and confined their case. Pleadings are required so that a party does not have to work out itself what is the opposing party’s case. As the Full Court of the Federal Court said in Oztech Pty Ltd v Public Trustee of Queensland in the passage I have earlier quoted, the pleading party should ensure that “there be no need for the opposite party to closely scrutinise the pleading in a process of textual construction to determine whether a particular fact is relied upon, or the purpose for which it is alleged”. A fortiori, when a party has left the definition of its case to be divined from its evidence, delivered in a case which has been managed in the way I have described.
Within those limitations, it is nevertheless true that a degree of clarity concerning the fact and nature of the plaintiffs’ unpleaded counterfactual case must be regarded as having been provided in the evidentiary material filed and served by the plaintiffs consequent upon the case management orders which were made. As I remarked in Sanrus No. 1 (at [33], emphasis added):
The form of the reply confirmed that which the defendants had already (and in my view, reasonably) concluded, namely that the plaintiffs’ case as to the critical counterfactual proposition and as to damages was confined to that set out in the expert opinions which the plaintiffs had obtained from Mr Hill, Mr Hall and Mr Freeman in 2017 and delivered to the defendants. As will appear, that judgment had informed the defendants’ preparation for trial, particularly in relation to the way in which they had sought and obtained expert opinion evidence.
The emphasised part of the quoted observations did not continue to be literally true after the events dealt with in Sanrus No. 1. Amongst other things, the plaintiffs had advised the defendants that they would not rely on some of the expert evidence they had previously delivered, and that included a report delivered by Mr Freeman in 2017. That abandonment of reliance on particular aspects of the expert evidence was formalised by my orders of 21 December 2018 which gave the plaintiffs leave to rely on the new reports and which provided (by order 6):
[6] The plaintiffs not be permitted at trial to rely upon the reports or the sections of the reports identified in the spreadsheet emailed from Holding Redlich to Allens on 30 November 2018, which appears at Exhibit RLM-9 to the affidavit of Robyn Morrison affirmed 10 December 2018. For the avoidance of doubt, this order is without prejudice to the defendants' right to object to any of the remaining sections of the reports at trial. [9]
[9] Mr Freeman’s 2017 report was one of the reports covered by the spreadsheet referred to in the order. The plaintiffs also specifically confirmed during oral argument that they did not intend to rely on that report: see Transcript day 60, T60-59 line 18 – T60-60 line 14 and Transcript day 70, T70-14 lines 1 – 12. In that exchange neither I nor counsel had evidently remembered order 6 of my orders of 21 December 2018 which rendered that confirmation unnecessary. Nevertheless, there was a time subsequent to that exchange when it appeared that the plaintiffs sought to change the status quo and sought to rely on the 2017 report, notwithstanding their earlier confirmation. However after I raised the point with them, they resiled from that course and informed me that they did not rely on that report and that I need have no regard to the relevant part of their written submissions: see Transcript day 72, T72-2 lines 1 – 26 and T72-4 lines 4 – 12.
Even though the defendants were now confronted with an altered suite of expert reports expressing the plaintiffs’ unpleaded counterfactual case and their case as to damages, the assumption by the defendants that the plaintiffs’ case as to the critical counterfactual proposition and as to damages was confined to that set out in the expert opinions necessarily had to continue once I permitted the case to continue to trial on the basis of a pleading amended to accord with the case articulated in the new raft of expert reports identified in Sanrus No. 1.
As will appear, the defendants in fact had conducted analyses of what the plaintiffs’ case was as disclosed by their expert reports. That is apparent from –
(a)the defendants’ own pleaded response to the plaintiffs’ causation hypothesis;
(b)the defendants’ own evidential material (including expert reports) delivered in response to case management orders;
(c)the tenor of some of the questioning which occurred during the lay witness evidence; and
(d)the terms of the defendants’ written opening on causation and damages, to which I have already referred.
It was not suggested in argument before me that there was any other aspect of the very extensive pleadings in this proceeding which should be regarded as a pleading of the plaintiffs’ unpleaded counterfactual case to which I have referred, or as remedying the pleading deficiency which I have identified. Nevertheless, for completeness, it is appropriate to identify some aspects of the pleadings other than the statement of claim.
It is appropriate to juxtapose the relevant parts of the defendants’ defence at [163] (which pleaded the traverse of the statement of claim at [23]) and the plaintiffs’ reply at [163] (which pleaded the traverse of the defence at [163]). I do so below (emphasis added):
| Fifth Further Amended Defence to the Second Further Amended Consolidated Statement of Claim filed 21 May 2019 | Fourth Further Amended Reply to the Fifth Further Amended Defence filed 21 August 2019 |
| [163] As to paragraph 23 of the statement of claim, the defendants: (a) admit that development of Stage 1 has not been achieved; (b) admit that the Stage 2 Feasibility Study has not been undertaken; (c) otherwise deny the allegations contained therein believing them to be untrue for the reasons pleaded in subparagraphs (d) to (n) below; (d) for the reasons pleaded in paragraph 162 above, Monto Coal 2 has not breached the Joint Venture Agreement; (e) if Monto Coal 2 has breached the Joint Venture Agreement (which is denied) any such breach or breaches were not causative of any loss to the plaintiffs because for the reasons pleaded in paragraphs 129A to 129D and 130B to 130E above, Monto Coal 2 was not obliged and in any event would not have taken steps to cause the Joint Venture Management Committee to make the decisions necessary to achieve development of Stage 1 and undertake the Stage 2 Feasibility Study by 16 May 2005; (f) if Stage 1 had been developed by 16 May 2005, no profits would have been earned by the plaintiffs because the costs of Stage 1 would have exceeded revenue; (g) had the Stage 2 Feasibility Study been undertaken and completed by 16 May 2005 it would not have shown the Monto Coal Project to be economically viable or feasible, so that Monto Coal 2 would not have caused or permitted its Representative on the Joint Venture Management Committee to vote in favour of development of Stage 2; (ga) if a Stage 2 Feasibility Study had been undertaken and completed by 16 May 2005 which adopted the assumptions and conclusions relied upon by the plaintiffs’ experts in this proceeding, Monto Coal 2 would not have caused or permitted its Representative on the Joint Venture Management Committee to vote in favour of development of Stage 2; […][10] (ha) further, if a Stage 2 Feasibility Study had been undertaken and completed by 16 May 2005 which adopted the assumptions and conclusions relied upon by the plaintiffs’ experts in this proceeding, Monto Coal 2 would not have been able to obtain finance for the development of Stage 2 because a financier would not have agreed to provide funding to Monto Coal 2 for the costs of Stage 2 development on the basis of a Stage 2 Feasibility Study adopting those assumptions and conclusions; [particulars omitted] (i) if the development of Stage 2 had been achieved (which is denied): (i) no profits would have been earned for the plaintiffs because the capital costs and operating costs would have exceeded revenue; (ii) the plaintiffs would have suffered losses due to the need to pay Cash Calls to fund the development of Stage 2. […] | [163] The Plaintiffs deny the allegations in paragraph 163 of the Amended Defence on the following basis: (a) the matters pleaded in this Amended Reply: (b) as to paragraph 163(e), the Plaintiffs deny the allegation on the basis of the matters set out in paragraphs 129A to 129D and 130B to 130E hereof (c) as to paragraph 163(f): (i) [omitted] (ii) [omitted] (iii) Stage 1 of the Monto Coal Project would have earnings before income tax, depreciation and amortisation of negative $3.655 million in 2004 and $10.835 million in 2005, as calculated in Annexure B to the report of Mr Hall dated 30 November 2018 or, in the alternative, negative $0.154 million in 2004 and $10.515 million in 2005, as calculated in “Hall Attachment 1” (Tab “Revised Browne Actual Spot”) to the Supplementary Joint Report on Loss and Damage of Mr Hall and Mr Samuel [EXP.500.048.0001]; (iv) [omitted] (d) as to paragraph 163(g), the Plaintiffs deny the allegations on the basis that, had a Stage 2 Feasibility Study been undertaken, it would have shown Stage 2 of the Monto Coal Project to be profitable, with a Net Present Value of $518 million as set out in paragraphs 9 to 31 of the report of Mr Hall dated 21 November 2018, or in the alternative $501 million as set out in paragraphs 14 and 15 and “Hall Attachment 1” to the Supplementary Joint Report on Financial Modelling of Mr Hall and Ms Power dated 29 July 2019 [EXP.500.036.0001] or in the further alternative, $408 million as set out in paragraphs 20 to 29 and “Hall Attachment 7” to the Supplementary Joint Report on Financial Modelling of Mr Jeffrey Hall and Ms Lucy Power dated 29 July 2019 [EXP.500.036.0001], and Monto Coal 2 would have caused its Representative on the Joint Venture Committee to vote in favour of development of Stage 2; [particulars omitted] (da) as to paragraph 163(ga), the Plaintiffs deny the allegations on the basis of the matters pleaded in paragraph 23 of the Amended Consolidated Statement of Claim and paragraph 163(d) of this Amended Reply; […] (ea) as to paragraph 163(ha), the Plaintiffs: (i) do not admit the allegation that Monto Coal 2 would not have been able to obtain finance for the development of Stage 2 because a financier would not have agreed to provide funding to Monto Coal 2 for the costs of Stage 2 development on the basis of a Stage 2 Feasibility Study which adopted the assumptions and conclusions relied upon by the Plaintiffs’ experts. The Plaintiffs have made reasonable inquiries and remain unaware of the truth or falsity of that allegation; (ii) otherwise deny the allegation that Monto Coal 2 would not have been able to obtain finance for the development of Stage 2 because Monto Coal 2 would have been able to obtain funding for the development of Stage 2 from Macarthur Coal, selling down equity in the Monto Coal Project or by a combination of both funding from Macarthur Coal and selling down equity in the Monto Coal Project; (f) as to paragraph 163(i), the Plaintiffs deny the allegations because: (i) the revenue from the Monto Coal Project would have exceeded the costs (and further particulars of which are set out in paragraph 13 of, and Annexure B to, the expert report of Mr Hall dated 30 November 2018), or in the alternative, in Hall Attachment 1 to the Supplementary Joint Report on Loss and Damage of Mr Hall and Mr Samuel [EXP.500.048.0001]. (ii) the Plaintiffs would not have suffered losses due to the need to pay Cash Calls to fund the development of Stage 2; […] |
[10] Subparagraph (h) was an allegation about an alleged inability of the plaintiffs to meet the cash calls which would have been requisite if stage 2 had proceeded. I have not reproduced it and the particulars associated with it (or the corresponding paragraph in the reply) for present purposes.
The following observations may be made:
(a)In defence [163](e) the defendants plead a positive counterfactual case, namely that the conduct which the plaintiffs impugn would not have caused any loss to the plaintiffs because for the reasons articulated in the cross-referenced paragraphs Monto Coal 2 was not obliged and in any event would not have taken steps to cause the Joint Venture Management Committee to make the decisions necessary to achieve development of Stage 1 and undertake the Stage 2 Feasibility Study by 16 May 2005.
(b)The cross-referenced paragraphs were the paragraphs of the defence which advanced the defendants’ case about the views which Monto Coal 2 had in fact formed over the years. Thus:
(i) Paragraphs 129A to 129D asserted that by 4 July 2003 Monto Coal 2 had formed the view that the Monto Coal Project was not then economically viable in light of the then current and predicted thermal coal prices; identified the factors to which it had had regard to form that view; and asserted that it had formed the intention to take no steps to cause the Joint Venture Management Committee to make the decisions which would be necessary to complete development of stage 1 by 16 May 2005.
(ii) Paragraphs 130B to 130E asserted that in the period from 4 July 2003 to 16 May 2005, Monto Coal 2 continued to hold the view that the Monto Coal Project in the form contemplated by the Joint Venture agreement was not economically viable in light of the then current and predicted thermal coal prices, identified the factors to which it had had regard to continue to hold that view and asserted that it continued to hold the intention to take no steps to cause the Joint Venture Management Committee to make the decisions which would be necessary to complete development of stage 1 by 16 May 2005.
(c)It follows that the positive case advanced by the defendants relied on the counterfactual proposition that Monto Coal 2 would have continued to hold the views asserted and would not have caused decisions to be made to achieve development of Stage 1 and undertake the Stage 2 Feasibility Study by 16 May 2005.
(d)Reply [163](b) traverses the defendants’ counterfactual case on the basis of the matters set out in reply [129A] to [129D] and [130B] to [130E]. The cross-referenced paragraphs are the paragraphs in the reply which grapple with the truth or falsity of the propositions which the defendants had advanced in relation to the views which say that, historically, they did have and why they had them, and, amongst other things, contend that if some of the alleged views were actually held then they were held in breach of contract because they were not held in good faith or reasonably. There is nothing in reply [163](b) or the cross-referenced paragraphs which pleads what I have described as the plaintiffs’ unpleaded counterfactual case as the reasons for the traverse of the defendants’ positive counterfactual case, or which contradicts the defendants’ proposition concerning the steps which they would not have taken by reference to a case concerning steps which they would have taken for particular reasons.
The defendants’ complaint about the plaintiffs’ attempt to advance a new case
Amongst other things, it is evident that, prior to my ruling in Sanrus No. 5, the plaintiffs had flagged that their intention was to conduct their case on the basis that it was possible to prove some of the plaintiffs’ unpleaded counterfactual case (namely the fact and timing of numerous decisions, agreements and acts by the Joint Venture and third parties between mid-2002 and May 2005) by eliciting Mr Freeman’s opinion that various decisions, agreements and acts would have occurred.
Thus it was that Mr Freeman’s reports contained multiple expressions of his opinion as to what the Joint Venture would have actually done in hypothetical circumstances prevailing up to and after 2005. Similarly, they contained multiple expressions of his opinion as to what third parties such as Queensland Rail (QR), Gladstone Ports Corporation (GPC) (also referred to as GPA), SunWater and Powerlink would have done in hypothetical circumstances prevailing up to and after 2005. In fact a substantial part of his reports related to the taking of steps by such third parties, including that the Joint Venture would have entered into particular contracts with particular terms prior to and after completion of the Stage 2 Feasibility Study.
For example, Mr Freeman opined –
(a)in relation to the joint venture that:
(i) the Joint Venture would have taken a calculated investment decision on the timing of a commitment to a port agreement to manage the risk that it may not have obtained port capacity;[11]
[11] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [231].
(ii) port capacity for Stage 2 tonnage would have been discussed and secured (by a port agreement) at the same time as Stage 1 tonnage or separately in the period 2003 to 2004;[12]
[12] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [245], [261] and [263].
(iii) the Joint Venture was well progressed with discussions with QR in late 2002 and if it had committed to further studies in late 2002 or early 2003, it would have been able to commit to conditional rail capacity from late 2003/early 2004;[13]
[13] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [66].
(iv) the Joint Venture would have opted for Powerlink to construct the necessary power infrastructure rather than Ergon Energy or doing the construction itself;[14]
[14] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [389](b).
(v) the Joint Venture would have entered into a Connection Agreement with Powerlink in mid-2004, which would have dealt with certain matters, including early-works prior to the completion of a bankable feasibility study;[15]
[15] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [367] and [390].
(vi) the Joint Venture would have entered an Early Works Reimbursement Deed with SunWater prior to the completion of the Stage 2 Feasibility Study and would later have executed a Water Transport and Supply Agreement with SunWater, an indicative schedule for both being July 2004 for the former and July 2005, for the latter;[16]
(b)in relation to the third parties that:
(i) QR would have determined that, although Mr Hunter’s (D) ‘New and Existing Monto Alignment’ was a valid option, QR would have preferred the ‘Rebuild Existing Monto Line’ solution to cater for trains with 86 wagons with a gross weight of 104t per wagon with a track loading of 26TAL;[17]
(ii) It is likely that QR would have paid for the upgrade of the Monto Branch Line;[18]
(iii) GPC would not have allocated capacity to other mining projects in preference to the Joint Venture;[19]
(iv) GPC would have entered a commercial agreement with the Joint Venture which was conditional upon mining lease approval or contained an option to ramp up tonnage from a nominated date, negotiated during 2003 and 2004;[20]
(v) GPC could have accelerated planned port expansions had there been sufficient demand for such capacity at an earlier stage than was contemplated;[21]
(vi) The Joint Venture and SunWater would have preferred an alternative water pipeline route to that proposed by Mr Harradine (D);[22]
(vii) SunWater would have been prepared to construct, own and operate the water pipeline, and the Joint Venture would likely have accepted this proposal;[23]
(viii) The Joint Venture would have entered into a Connection Agreement with Powerlink in mid-2004, which would have covered early works requirements and the scope of works.[24]
[16] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [313], [315] [316] and [329].
[17] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [18], [52], [56], [95], [104] and [205].
[18] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [199].
[19] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [220] and [221].
[20] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [261] and [262]
[21] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [24], [254] and [259].
[22] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [27] and [286].
[23] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [29].
[24] Expert Report of Jamie Freeman dated 2 November 2018 [EXP.010.005.0001] at [367], [389], [390] and [391].
In Sanrus No. 5, I ruled that Mr Freeman could not express an admissible expert opinion on what the Joint Venture would have done in hypothetical circumstances. Further, in relation to third parties, I ruled that in principle it was not a proper matter for expert opinion evidence that an expert qualified by having specialised knowledge of the industry in which a particular identified corporate person operated, could express an opinion as to what that corporate person would have done in hypothetical circumstances. In principle, the expression of expert opinion as to what the Joint Venture or corporate third parties would have done (or how they would have contracted) is not admissible to prove the fact of what they would have done (or the fact of how they would have contracted).[25] I will return to that issue later in this judgment.
[25] Sanrus No. 5 at [55] – [56].
At the time I wrote Sanrus No. 5, the plaintiffs’ submission was that the expert evidence of Mr Freeman was relevant to two overarching questions[26] which arose in the proceeding, namely –
(a)the content of the Stage 2 Feasibility Study; and
(b)the assessment of the quantum of the plaintiffs’ loss, in the event I determined that the plaintiffs have suffered some compensable loss.
[26] See Sanrus No. 5 at [21].
It was in the context of the possibility that I might rule as I ultimately did as identified at [45] above, that the plaintiffs advanced a fallback argument, namely that at the least the evidence to which the defendants had objected could be regarded as expressing Mr Freeman’s views as to matters which would have been considered by appropriately qualified and competent experts who were preparing a hypothetical bankable feasibility study for the Monto Coal Stage 2 Project, and as identifying what conclusions those experts, acting with reasonable care and skill, would have reached on those matters. As then advanced, the argument was expressed for the purpose of proving what the content of the Stage 2 Feasibility Study referred to in the statement of claim at [23] would have been. As I have explained in my analysis at [23] above, that meant proving what the content of a document prepared in about May 2005 would have been.
I recorded the fallback argument in this way in Sanrus No. 5:
[63] During the course of oral argument before me, and without abandoning resistance to the objections advanced by the defendants to the general admissibility of the evidence, the plaintiffs advanced a fall back argument. That argument was that at the least the evidence to which the defendants had objected could be regarded as expressing Mr Freeman’s views as to matters which would have been considered by appropriately qualified and competent experts who were preparing a hypothetical bankable feasibility study for the Monto Coal Stage 2 Project, and as identifying what conclusions those experts, acting with reasonable care and skill, would have reached on those matters.
[64] There is support – albeit retrospective support, because that is not how Mr Freeman’s underlying reports are in fact expressed – for reading the reports in that way to be found in the joint expert reports for offsite power supply; offsite water supply and rail. The following paragraphs appear in the joint expert report in respect of rail (and similar words appear in the other two reports):
2.2 The purpose of this JER is to set out what the experts to this report agree or disagree with respect to rail for the Monto Coal Stage 2 Project (the Project). It is important to note that this report has been prepared, as have our underlying individual reports, to address what matters relevant to rail would have been considered by appropriately qualified and competent people who were preparing a hypothetical bankable feasibility study (BFS) for the Monto Coal Stage 2 Project, and what conclusions those people, acting with reasonable care and skill, would have reached on those matters.
2.3. The plaintiffs' experts have been asked to assume that preparation of the hypothetical BFS occurred from 2002 to 2005. The defendants' experts have been asked to consider the preparation of that hypothetical BFS as at May 2005. This difference in instructions is the principal source of the differences of opinion noted in Section 4 of this JER.
2.4. When we say that something would or would not have been decided or done, or that something is or is not correct, or is or is not reasonable, that is to be read in each case as expressing a conclusion that in, our opinion, those notionally preparing the hypothetical BFS would have reached on that “something”.
Later the plaintiffs shifted their ground. From Mr Freeman’s statements being “admissible for the purpose of proving the content of the Stage 2 Feasibility Study”, the proposition became, effectively, “admissible for the purpose of proving the content of advice (or communications) which would have been available to the Joint Venture from expert consultants from time to time during the period 2002 to 2005 in the course of work done for the Stage 2 Feasibility Study”. The proposition seemed to be that if the reports were admissible for the latter purpose, that evidence would, in turn, provide a foundation from which I could be asked to infer that the Joint Venture would have acted on such advice or communications once it was given to them, and in turn, that the event advised upon or communicated about (namely the plaintiffs’ unpleaded counterfactual case) would have come to pass.
The plaintiffs’ argument was put in this way in written submissions before me (footnotes omitted):
11.As to the plaintiffs’ case, as identified at [13] to [23] of Sanrus No 5, it requires, amongst other things, a determination as to what the hypothetical Stage 2 Feasibility Study would have demonstrated.
12. To do so, it is important to appreciate of what the Stage 2 Feasibility Study consists.
13.The Stage 2 Feasibility Study required by the Joint Venture Agreement is a process of investigation and study, and not merely the final report that records the results of that process. It is a process that occurs over time.
14. This is apparent from:
(a)clause 6 of the JVA, which provides the Participants are “to undertake the Stage 2 Feasibility Study during the Stage 1 Mine Development” – the study is something undertaken during a period, not merely a report. Had the parties intended to refer only to the final report, the obligation would have been to produce or complete the study by the end of the Stage 1 Mine Development;
(b)the definition of “Stage 2 Feasibility Study” in clause 1, which includes tasks to be undertaken (exploration to prove up the Stage 2 resource and various studies), rather than defining it as a report which addresses certain topics;
(c)the obligation in clause 5.1 to use all reasonable efforts to develop Stage 1 with 3 years of the Commencement Date – indicating that the parties expected that Stage 1 Mine Development may take place over an extended period.
15.As such, it is not the plaintiffs’ case (as the defendants appear to argue) that the Stage 2 Feasibility Study is confined (temporally) to May 2005 and consists of just the final report. If that was the plaintiffs’ case, then the plaintiffs would have not instructed experts such as Mr Freeman to assume that a Stage 2 Feasibility Study would have been performed between 2002 and 2005.
16.The Stage 2 Feasibility Study includes, as well as the final report, the investigations that the persons undertaking the Stage 2 Feasibility Study would pursue and the conclusions they would form while undertaking that process.
17.These conclusions would be available to the Joint Venture as they were arrived at, and not only revealed for the first time in a final report in May 2005.
18.Accordingly, the defendants’ submission that evidence as to matters prior to May 2005 cannot be evidence of matters considered by experts undertaking the feasibility study is without substance.
The plaintiffs argued that they could seek to establish the facts pleaded in the statement of claim at [23] in whatever way they thought fit. They contended that the various counterfactual propositions contained in what I have defined as the plaintiffs’ unpleaded counterfactual case were to be regarded as evidence of the material facts pleaded and particularised in the statement of claim at [23] and not matters which were necessary to be pleaded.
The defendants objected that the plaintiffs –
(a)had not pleaded –
(i) that the Joint Venture/Monto Coal 2 would have received advice or information from consultants engaged by them in the period prior to May 2005 (when the Stage 2 Feasibility Study would have been completed) to the effect they could or should enter into contracts with third parties in respect of the construction or use of infrastructure for Stage 2 (Stage 2 infrastructure contracts); or
(ii) the timing, content or basis of any such advice or information; or
(iii) the timing or terms of any such contracts; and
(b)had not pleaded the Joint Venture/Monto Coal 2 would have entered into Stage 2 infrastructure contracts in the period prior to May 2005 either –
(i) in consequence of advice or information of the kind referred to in (a) above;
(ii) because the Joint Venture Agreement obliged them do so; or
(iii) because they would have voluntarily done so,
and contended that it was not now open to the plaintiffs to advance such a case.
The complaint about there not being a pleading that the Joint Venture Agreement obliged the defendants to bring about the Stage 2 infrastructure contracts became unnecessary to rule upon. That occurred because the plaintiffs by their written submissions stated (emphasis added):
[…] that in this case, clause 6 of the Joint Venture Agreement afforded to the parties a wide latitude as to the steps to be taken to discharge the obligation to undertake a bankable feasibility study during the period prescribed by the clause (viz. between 16 May 2002 and completion of the Stage 1 Mine Development). The relevant counterfactual inquiry is therefore not “what steps did the JVA require the parties to take” to undertake a bankable feasibility study. The relevant inquiry is simply “what would have happened in fact” if Monto Coal 2 had not breached (inter alia) clause 6 of the agreement, and instead caused a bankable feasibility study to be undertaken during the prescribed period. In undertaking that inquiry, the Court is to assume that Monto Coal 2 would have performed in its own interests having regard to the factors prevailing at the time, and acted in good faith, with its own commercial interests very much in mind (paragraph 27 above). That assessment is to be made having regard to all of the evidence. The Court is called upon to decide what, in all probability, would have happened, had the contract not been broken in the respects established, or (as the case may be) alleged.
Accordingly, it seems that the plaintiffs acknowledge that performance of the Joint Venture Agreement according to its terms would have permitted a range of discretionary choices, and it is not the plaintiffs’ case that the only discretionary choices consistent with performing it according to its terms were the choices which would have led to the occurrence of the unpleaded counterfactual case. Rather their case is that the choices which would have led to the occurrence of the unpleaded counterfactual case are the choices which, having regard to all the evidence, would nevertheless probably have been made. I agree that if it does not form part of the plaintiffs’ counterfactual case to assert the unpleaded counterfactual events would have occurred because performance of the Joint Venture Agreement according to its terms mandated the particular choices which would have led to the occurrence of those events (such that it would have been a breach of contract not to make those choices), then the plaintiffs would not have to plead that fact. But if the contrary had been the case, it would have been incumbent on the plaintiffs explicitly to plead that case. In any event, once the plaintiffs clarified that they did not advance a breach case in this way, the defendants did not pursue this aspect of their complaint.
The remaining issues raised by the defendants’ objection do require examination.
Discussion
Insofar as the plaintiffs’ argument suggests that the fair reading of the statement of claim at [23] was that it was a reference to things which would have been demonstrated from time to time during a 3 year process culminating in May 2005, rather than to a particular document prepared by about May 2005, I reject that proposition for the reasons expressed at [23] above. Particular (b) of the statement of claim at [23] was a reference to a particular document, namely the Stage 2 Feasibility Study which would have been prepared by about May 2005. A 3 year process is not “prepared by about May 2005”. And when particular (d) refers to what the Stage 2 Feasibility Study would have demonstrated, it was referring to the content of the particular document prepared as at about May 2005, which in turn would have been the subject of the meeting referred to in particular (e) and the vote referred to in particular (f).
I reject also the plaintiffs’ argument which I have recorded at [51] above concerning what was required of their pleading. For the reasons I have expressed at [16] to [21] above, where, as here, a party’s causation hypothesis depends on establishing a particular counterfactual scenario to establish the alleged causal link between breaches of contract and the loss which it is said would have eventuated if the conduct which the party impugns had not occurred, that counterfactual scenario must be pleaded and particularised in accordance with the rules of pleading.
The plaintiffs’ difficulty is that they have only pleaded and particularised part of the counterfactual case which they say that they should be permitted to advance.[27]
[27] Contrary to the plaintiffs’ submission, there is nothing in the decision of Boddice J in Sanrus Pty Ltd v Monto Coal 2 Pty Ltd [2014] QSC 23 at [40], inimical to this analysis. In any event, we are here concerned with the fairness of the conduct of a trial based on the pleading in the form which I permitted to be advanced by orders of 21 December 2019.
The first missing part is what I have defined as the plaintiffs’ unpleaded counterfactual case, namely that various decisions, agreements and acts by the Joint Venture but also by various third parties (land-holders, statutory bodies and regulators, corporate infrastructure providers and the like) would have occurred and that they would have occurred at or by particular times.
The second missing part is the added ingredient that not only would those events have come to pass, but the mechanism by which that would have occurred is what it is convenient to refer to as the unpleaded advice case, namely a case to the effect that –
(a)appropriately qualified and competent experts like Mr Freeman would have been engaged as consultants for the Joint Venture over the 3 year period before the completion of the Stage 2 Feasibility Study; and
(b)as and when they formed professional judgments from time to time during that 3 year period on matters referable to the various decisions, agreements and acts of the kind under discussion, they would have conveyed those professional judgments to the Joint Venture; and
(c)the Joint Venture would have acted on the professional judgments so communicated; and
(d)accordingly, that is why the various decisions, agreements and acts would have occurred at or by relevant times.
The plaintiffs argued that, first, because of the way that this case has been managed they must be permitted to advance the plaintiffs’ unpleaded counterfactual case, which means they must be able to point to any admissible evidence and inferences therefrom which support their argument that the various decisions, agreements and acts by the Joint Venture and the third parties would have occurred, and that they would have occurred in a particular time frame. And if that is so, then, second, they must, in the particular context of a case which has been managed in that way, be permitted to contend that the way that the various decisions, agreements and acts by the Joint Venture and the third parties would have occurred is because of the plaintiffs’ unpleaded advice case, there being no relevant distinction between the former course and the latter course.[28] They say that the defendants are engaged in hair-splitting.
[28] Transcript day 71, T71-35 line 43 – T71-36 line 15 and T71-72 lines 19 – 30.
I disagree with the second proposition and reject the contention that the defendants are engaged in hair-splitting. I agree with the defendants’ submission that even if the plaintiffs should be permitted at the end of this trial to ask me to infer from the evidence admitted in the trial that the various counterfactual propositions inherent in the plaintiffs’ unpleaded counterfactual case would have occurred at the times necessary for the Stage 2 Feasibility Study to have the content which they allege, there is a substantial difference between permitting them to take that course, and permitting them to run a case to the effect that particular consultants were likely to have been retained and would likely have provided a series of advices about the entry into contracts and the like, which would have been acted upon, with particular consequences.[29] Permitting them to run such a case could not be contemplated unless the plaintiffs had at least set out sufficient specificity of that case so as to give their opponents the chance by their evidence to engage with matters such as: (1) the likelihood of an expert of a particular kind or with particular qualifications being retained, (2) the timing and content of the hypothesised advice, (3) the factual foundation of the advice at the time it would allegedly have been given, and (4) the factual likelihood of that advice being accepted or rejected, which would also have required an examination of the state of the factual information which would have existed at the time the decision would have been made (the state of thermal coal prices being amongst the more important). The defendants rightly complain that the relevant lay witnesses have come and gone in this trial without that happening.
[29] The position is not materially different to my observations concerning why it would have been necessary to plead a breach case if a breach case had been part of the plaintiffs’ unpleaded counterfactual case: see at [54] above.
In fact, the defendants submit – and I agree – that neither the pleadings, nor the course of the lay evidence to date, nor the content of Mr Freeman’s reports relied on in this trial, nor the plaintiffs’ written opening submissions, fairly revealed to the defendants that the plaintiffs were advancing the unpleaded advice case.
As to pleadings:
(a)The way I reach my conclusions above that the plaintiffs’ unpleaded counterfactual case was not but should have been pleaded in the plaintiffs’ statement of claim applies equally to justify the conclusion that the plaintiffs’ unpleaded advice case was not but should have been pleaded in the plaintiffs’ statement of claim.
(b)Moreover, if this sort of case had formed part of the plaintiffs’ case, one would have expected it to be revealed by the form of the traverse of defence [163](e) which appears in reply [163](b). If the plaintiffs’ denial of the defendants’ positive counterfactual case was founded on the proposition that, contrary to the defendants’ assertion, the requisite decisions would have been made because consultants would have been retained and particular professional judgments which they formed would have been communicated and acted upon at particular times during the 3 years prior to the time that the Stage 2 Feasibility Study would have been prepared in May 2005, then that should have been pleaded.
The particular aspects of the objections advanced by the defendants which are informed by this analysis will be identified later in this judgment and in the rulings which I make as expressed in the Schedules to this judgment.
Proof of what a person would have done in hypothetical circumstances
An important but, in one respect, disputed aspect of general principle dealt with in Sanrus No. 5, concerned how evidence might be adduced as to what a person would have done in hypothetical circumstances, should proof of that hypothetical fact be relevant in a proceeding.
In Sanrus No. 5 at [54], I recorded that the plaintiffs did not dispute the following summary of principle set out in the defendants’ submissions:
(a)A witness may give evidence of what he or she would have done in hypothetical circumstances. Such evidence is not opinion evidence, but evidence of fact.[36]
(b)Similarly, a witness with appropriate authority may also give factual evidence of what his or her corporate employer would have done in a hypothetical set of circumstances.[37]
(c)On the other hand, evidence of what another person would have done in hypothetical circumstances, or what a reasonable person would have done in hypothetical circumstances, is opinion evidence.[38] There are generally three circumstances in which such evidence can be given:
(i) A suitably qualified professional expert may give evidence of the content of general practices of professionals in his or her field, or to put it another way, evidence about what professionals generally do in stated circumstances.[39] Outside the field of professional practices, an expert may give similar evidence about the content of industry practices.[40]
(ii) A suitably qualified professional expert may go beyond evidence of the content of general practices, by expressing an opinion about the practice of competent and careful professionals in specified circumstances which are recurring or typical.[41] However, evidence of what an expert would himself or herself do in hypothetical circumstances is inadmissible.[42]
(iii) A suitably qualified professional expert may go beyond evidence of the general practice of competent and careful professionals in stated circumstances, and give evidence of what, in stated circumstances which are out of the ordinary and not amenable to observations about a developed practice, a competent and careful professional would be expected to do.[43] It has been suggested that some additional and special qualification over and above the ordinary training and experience of a professional in the field is required in order to be able to express an opinion of this kind.[44]
[36] See Allstate Life Insurance Co v ANZ Banking Group Ltd (No 5) (1996) 64 FCR 73 at 75‑76; Seltsam Pty Ltd v McNeill [2006] NSWCA 158 at [118] – [123]; La Trobe Capital & Mortgage Corporation Limited v Hay Property Consultants Pty Ltd (2011) 190 FCR 299 at [53] – [55]; Vella v The Queen [2015] NSWCCA 148 at [117] – [119].
[37] See Hughes Aircraft Systems International v Airservices Australia (1997) 80 FCR 276 at 280; La Trobe Capital & Mortgage Corporation Limited v Hay Property Consultants Pty Ltd (2011) 190 FCR 299 at [56] – [58].
[38]Beslic v MLC Ltd (No 2) [2016] NSWSC 746 at [96].
[39] ASIC v Vines (2003) 48 ACSR 291 at [13], [20]; Lucantonio v Kleinert [2009] NSWSC 853 at [8](1); Howe v Fischer [2014] NSWCA 286 at [81].
[40]ASIC v Vines (2003) 48 ACSR 291 at [20].
[41] ASIC v Vines (2003) 48 ACSR 291 at [21]; Lucantonio v Kleinert [2009] NSWSC 853 at [8](3); MB v Protective Commissioner [2000] NSWSC 718 at [2] – [5]; Adler v ASIC (2003) 46 ACSR 504 at [617] – [620], [632].
[42]ASIC v Vines (2003) 48 ACSR 291 at [31].
[43] ASIC v Vines (2003) 48 ACSR 291 at [22] – [26]; MB v Protective Commissioner [2000] NSWSC 718 at [5] – [10]; Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404 at [380]; Weller v Phipps [2010] NSWCA 323 at [76].
[44]MB v Protective Commissioner [2000] NSWSC 718 at [9].
In Sanrus No. 5, the plaintiffs sought to extend the principles identified in the previous paragraph, to justify the conclusion that it was permissible for an expert qualified by having specialised knowledge of the industry in which a particular identified corporate person operated, to express an opinion as to what that corporate person would have done in hypothetical circumstances as proof of that fact.
I rejected the plaintiffs’ argument, in these terms:
[56] […] That subject matter is not a proper matter for expert opinion. The plaintiffs were not able to identify any authority which supported the argument beyond the authorities which permit experts to give evidence of the content of industry practices and of the practices of consumers or industry participants generally. In my view those cases do not permit of such an extension. As Allsop CJ observed in Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2007] 245 ALR 15 at [24] in relation to cases which authorised expert opinion evidence about how customers in the market would react in hypothesised circumstances “… it goes without saying that [the expert] cannot say what any particular individual person would have done on a particular day.”
[57] That is not to say that an expert might not be able to give admissible factual evidence concerning practices or procedures in an industry. But the expert would have to do so in an admissible way. And, as we have seen in the principles stated at [103](c) above, in some circumstances an expert might go on to express opinion based on the expert’s admissible factual evidence. But in so doing, the expert would have to comply with the Makita criteria.
[58] Nor is it to say that factual evidence about a corporate person’s particular past conduct or practices might not be admissible, with a view to providing an evidentiary basis for a submission that the trier of fact should draw a particular inference about that person’s likely conduct in hypothetical circumstances. But the proof of past conduct or practices would have to occur in an admissible way. And whether the trier of fact should draw the inference contended for based on the evidence of past conduct or practices is a matter for the trier of fact. It is not a proper subject for expert opinion evidence. Permitting that to occur would usurp the function of the trier of fact and would permit the party seeking to adduce such evidence to engage in precisely the type of conduct criticised by Gleeson CJ in in HG v The Queen quoted at [97](c) above.
In written submissions which they placed before me for the purpose of my making final rulings in relation to the objections to the reports of Mr Freeman, the plaintiffs advanced what seemed to me to be contradictory positions.
First, they submitted that “where the causation case involves the taking of a step which in fact was not taken, it is orthodox to call expert evidence to opine as to the content of the hypothetical step”[45] and “where the hypothetical step involves a particular third party, case-law indicates that a person with relevant expertise may give evidence as to the prospects of that third party acting in a particular way”.[46] But later in the same submissions they wrote:[47]
The plaintiffs do not contend that what the Joint Venture would have done is properly the subject of expert evidence. The Joint Venture is not a body about which one can have specialised knowledge that would permit such opinion evidence to be given.
[45] Plaintiffs’ submission in response to the objections to Mr Freeman’s reports for hearing on 9 September 2019 [SBM.010.037.0001] at [38].
[46] Plaintiffs’ submission in response to the objections to Mr Freeman’s reports for hearing on 9 September 2019 [SBM.010.037.0001] at [41].
[47] Plaintiffs’ submission in response to the objections to Mr Freeman’s reports for hearing on 9 September 2019 [SBM.010.037.0001] at [93].
I agree with the proposition in the last quote. If the Joint Venture and the third parties like QR, GPC, SunWater and Powerlink are not bodies about which one could have specialised knowledge as would permit expert opinion evidence to be given as to what they would and would not do, then my ruling in Sanrus No. 5 was correct.
Despite this it did seem to me that the plaintiffs sought to challenge the correctness of my ruling in Sanrus No. 5, and invited me to reconsider it. The defendants took the same view of the plaintiffs’ argument, and submitted that I should not reopen a ruling which had already been decided. At first during the course of oral argument, the plaintiffs confirmed that their intention was to persuade me to reconsider my ruling. Later, also during the course of oral argument, they changed that position and indicated that they would accept the ruling for the purposes of my making the final rulings which I had to make, but, as I had invited them to do, would reserve their ability to argue on appeal that the ruling in Sanrus No. 5 was incorrect. Unfortunately, this approach did not inform their written submissions or the schedule by which they advanced, item by item, their suggested rulings in relation to the impugned parts of Mr Freeman’s reports. Some attempt to remedy that flaw was made orally.
In any event, and for completeness, I should indicate that I have considered the written submissions which each side provided to me which addressed the correctness of my rejection of the plaintiffs’ argument in Sanrus No. 5. I agree, for the reasons set out in the defendants’ written submissions, that the plaintiffs did not advance any submissions which cast any doubt on the conclusion which I reached in Sanrus No. 5.
For the purposes of making my final rulings I will proceed on the basis of the correctness of my ruling in Sanrus No. 5.
This has a number of implications.
First, as I explained in Sanrus No. 5, it is not open to Mr Freeman to give expert opinion evidence as to what the Joint Venture would have done in hypothetical circumstances for the purposes of proving that fact.[48] That means that if it is ever relevant to any issue in this proceeding that I make a finding as to whether the Joint Venture would have done that thing in those hypothetical circumstances (or if it is ever relevant to making a finding on the possibilities or probabilities of that happening), Mr Freeman’s opinion that the Joint Venture would have done that thing cannot form part of the body of the evidence to which I could have regard in order to make that finding. Examples of opinion evidence of Mr Freeman covered by this ruling include:
(a)The statement in the last sentence of [389](b) of the Report dated 2 November 2018:[49]
In my opinion it is likely that the Joint Venture would have selected option (ii) given the time constraints were manageable, the capital cost would be amortised over the life of the asset rather than being funded upfront, and in my experience, it was an easier and faster process to acquire an easement when undertaken by a statutory Government Owned Corporation.
(b)The statement at [39] – [40] of the Report dated 22 November 2018:[50]
I consider that the Joint Venture could have negotiated a port agreement in 2003-2004, with the costs of the port services stated in the contract in line with that recorded by GPC for 2003. In my experience these would have escalated at CPI throughout the negotiation period until contract execution.
In my opinion a likely term for a port agreement would be 10 years commencing 1 July 2007 with a renewable option for a further 10 years. In my experience port agreements had options to renew at 5-year or 10-year intervals.
[48] The plaintiffs often sought to avoid this ruling by suggesting that Mr Freeman’s evidence should be construed as intending to refer to a possibility (e.g. “could” rather than “would”, or the existence of an “opportunity”), rather than directly saying what the joint venture or a third party would have done. I was not persuaded. The submission often flew in the face of the language used. And even if the language permitted of it, the language used still had implicit in it a statement about what the joint venture or a third party would have thought or would have been prepared to consider and was still impermissible.
[49] See my ruling in Schedule 1, item 16.
[50] See my ruling in Schedule 1, item 96.
Second, as I explained in Sanrus No. 5, it is not open to Mr Freeman to give expert opinion evidence as to what GPC, or SunWater, or Powerlink would have done in hypothetical circumstances for the purposes of proving that fact.[51] That means that if it is ever relevant to any issue in this proceeding that I make a finding as to whether one of those bodies would have done that thing in those hypothetical circumstances (or if it is ever relevant to making a finding on the possibilities or probabilities of that happening), Mr Freeman’s opinion that the corporation would have done that thing cannot form part of the body of the evidence to which I could have regard in order to make that finding. Examples of opinion evidence of Mr Freeman covered by this ruling include:
(a)The statement at [288] of the Report dated 2 November 2018, in relation to what SunWater would have done “[…] however I consider it unlikely that Sunwater would have objected to HDPE pipe as a suitable product.”[52]
(b)The statement at [38](b) of the Report dated 22 November 2018, in relation to the Joint Venture securing port capacity allocation with GPC:[53]
I disagree with this opinion as capacity was available during the feasibility period and would have been allocated to the Joint Venture upon execution of a port agreement.
[51] See footnote 49.
[52] See my ruling in Schedule 1, item 39.
[53] See my ruling in Schedule 1, item 95.
Third, the question whether Mr Freeman can give admissible factual evidence on what QR would have done in particular hypothetical circumstances, or whether such evidence must be dealt with in the same way as GPC, SunWater and Powerlink remains to be ruled upon. If it transpires that he cannot give such admissible factual evidence on what QR would have done, then his various statements as to what QR would or would not have done, must be dealt with in the same way as similar expressions of opinion in relation to GPC, SunWater and Powerlink. As I explained in Sanrus No. 5 at [61](a):
Mr Freeman’s opinions in relation to QR are in a different category to the other corporations. He was at some relevant times an employee of QR. I do not think it is yet appropriate to express an evaluation as to whether the nature of his role might have been such that he could give admissible factual evidence of what QR would have done in a hypothetical set of circumstances. I would not make findings on that question at this time. If he was not in that position, then the observations I make in relation to GPA, SunWater, or Powerlink would apply. However even if he was, it would be necessary for the expression of his opinions to meet the assumption identification rule and the statement of reasoning rule.
Fourth, what I have said in the previous three paragraphs does not exclude the possibility that Mr Freeman might be able to give admissible factual evidence concerning: (1) practices or procedures in an industry; or (2) particular conduct or practices of one of the corporate persons mentioned. But he would have to do so in an admissible way, and if any of the evidence involved opinion evidence, it would have to comply with the Makita criteria and the principles stated at [103] above. If all those criteria were met, evidence might be capable of being elicited from Mr Freeman which could form part of the relevant body of evidence for the purposes mentioned in the preceding three paragraphs.
The particular aspects of the objections advanced by the defendants which are informed by the foregoing analysis will be identified later in this judgment and in the rulings which I make as expressed in the Schedules to this judgment.
The plaintiffs’ fallback argument
There is another way in which the plaintiffs sought to justify use in this trial of the various impugned statements by Mr Freeman about what the Joint Venture would or could have done, or what third parties would or could have done, or how either would or could have contracted, and that is as part of the fallback argument presented by the plaintiffs to which I have referred at [46] to [48] above. That is a subject to which I will now turn.
The plaintiffs’ fallback argument was that at the least the evidence to which the defendants had objected could be regarded as expressing Mr Freeman’s views as to matters which would have been considered by appropriately qualified and competent experts who were preparing a hypothetical bankable feasibility study for the Monto Coal Stage 2 Project, and as identifying what conclusions those experts, acting with reasonable care and skill, would have reached on those matters.
Based on this proposition, the plaintiffs then contended that evidence of what the professional judgments of relevant experts would have been was then probative in two ways. First, for the purpose of proving what would have been the content of the Stage 2 Feasibility Study referred to in the statement of claim at [23]. As I have explained in my analysis at [23] above, that meant proving what would have been the content of a document prepared in about May 2005. Second, for the purpose of supporting the unpleaded advice case.
Since I have ruled in this judgment that the unpleaded advice case may not be advanced by the plaintiffs, the second possibility need not be considered further.
In the remainder of this judgment and in the Schedules to it, I will refer to the plaintiffs’ fallback argument as the argument that the impugned statements and opinions by Mr Freeman may be admitted to prove Mr Freeman’s views as to matters which would have been considered by appropriately qualified and competent experts who were preparing a hypothetical bankable feasibility study for the Monto Coal Stage 2 Project, and as identifying what conclusions those experts, acting with reasonable care and skill, would have reached on those matters, for the limited purpose of proving what would have been the content of the Stage 2 Feasibility Study prepared in about May 2005.
In Sanrus No. 5, I raised a number of questions for further submission concerning the plaintiffs’ fallback argument. I received extensive argument in writing and orally about those questions. As I understood it, all or almost all of the impugned parts of Mr Freeman’s reports were said to be within the scope of the plaintiffs’ fallback argument.
The course I will take to explain my response is to record and to explain the conclusions I draw in relation to the points of principle underlying the objections by the defendants, and otherwise to deal with the objections in the course of the expression of the rulings which I record in the various Schedules to this judgment.
First, the defendants submitted that, in principle, evidence is not admissible through Mr Freeman, for the purpose of proving decisions, agreements and acts made by the Joint Venture and by various third parties (land-holders, statutory bodies and regulators, corporate infrastructure providers and the like) because none of those counterfactual propositions have been pleaded. As to this:
(a)As I explained at [71] to [75] above, I think there are aspects of the plaintiffs’ unpleaded counterfactual case which it would be unfair to conclude that the plaintiffs may not seek to demonstrate at this trial.
(b)For reasons I have explained –
(i) I have ruled that Mr Freeman could not express an opinion on what the joint venture (or third parties) would have done (as to which see [104] to [116] above); and
(ii) I have ruled that the plaintiffs may not advance the unpleaded advice case and, it would follow, evidence admitted as relevant to the plaintiffs’ fallback argument could not be admitted for the purpose of the unpleaded advice case.
(c)I will continue to apply the rulings referred to in [125](b)(i) and [125](b)(ii). However it should not be inferred that I accept the generality of the defendants’ proposition advanced in the chapeau of the present paragraph.
(d)For the defendants to succeed on this objection, it would be necessary for them to persuade me – as they have successfully done in relation to the plaintiffs’ unpleaded advice case – that the relevant counterfactual proposition to which the impugned evidence was directed was not a counterfactual proposition which had been fairly disclosed and deliberately, or by clear acquiescence, engaged with in the way I have earlier discussed in the first section of this judgment.
Second, the defendants advanced an argument related to the first argument, namely that sometimes the matters to which the impugned evidence was directed were matters which, by the time of preparation of the Stage 2 Feasibility Study as at May 2005, would have been hypothetical anterior facts which either would or would not have happened. Accordingly, evidence directed to them could not be characterised as an input by way of opinion into a Stage 2 Feasibility Study as at May 2005. I agree that if the impugned evidence is not capable of being so regarded, it could not fall within the scope of the plaintiffs’ fallback argument. I agree with the defendants’ submission that hypothetical anterior facts said by an expert to have occurred prior to the preparation of the Stage 2 Feasibility Study as at May 2005, can only be treated as assumptions of underlying facts for otherwise admissible opinion evidence (and not as proof of the truth of the facts asserted). So if Mr Freeman opines that the Joint Venture could or would have obtained a contract with a third party in particular terms in 2003 or 2004, that is not admissible to prove that fact for reasons already stated. But nor could it be an input into the Stage 2 Feasibility Study as at May 2005 because by that time, the contract either would or would not have been obtained and if it had been its terms would have been known.
The evidence which was subject to the foregoing two arguments was that identified in item 1 of the schedule to the defendants’ written submissions in reply and the way in which I have disposed of the objection may be seen in –
(a)Schedule 1 items 5, 7, 9, 10 – 15, 18, 25, 37 – 39, 43, 47, 51, 55, 58, 60, 61, 74, 77, 78, 92, 95, 96, 102 – 108, 113, 115, 122 – 124, 126, 131, 134, 136, 137, 145, 146, 150 – 152, 155 and 156; and
(b)Schedule 2 items 1, 5, 8, 10, 14, and 16 – 18.
Third, the defendants submitted that any of Mr Freeman’s opinions which rely on post-2005 documents could not possibly be seen as informing the content of a Stage 2 Feasibility Study as at May 2005. I agree that if it is apparent that the impugned evidence is founded on information which could not have been available at the relevant time, then it could not fall within the scope of the plaintiffs’ fallback argument. The evidence which was subject to this objection was that identified in item 2 of the schedule to the defendants’ written submissions in reply and the way in which I have disposed of the objection may be seen in -
(a)Schedule 1 items 62, 63, 75, 78 – 80, 82, 94, 117, 118, 139, 148, 152 and 154; and
(b)Schedule 2 items 2 and 7.
Fourth, the defendants submitted that opinions in Mr Freeman’s ‘Actual Costs’ report dated 22 November 2018 [EXP.010.007.0001] could not possibly be read as being an input into a Stage 2 feasibility study because he provided his costs estimate on the basis of what would have in fact occurred. The evidence which was subject to this objection was that identified in item 3 of the schedule to the defendants’ written submissions in reply and the way in which I have disposed of the objection may be seen in –
(a)Schedule 1 items 92 – 98; and
(b)Schedule 2 items 12 and 13.
Fifth, the defendants submitted that Mr Freeman’s opinions on port capacity were objectionable for a variety of reasons:
(a)they could not be relied on for the purpose of supporting the unpleaded advice case;
(b)even if they were so construed, they would be inadmissible because of the assumption identification and statement of reasoning rules;
(c)they could not be regarded as falling within the scope of the plaintiffs’ fallback argument because:
(i) insofar as they rely on confidential, internal GPC documents obtained on subpoena they could not reasonably be read as informing the content of a Stage 2 Feasibility Study as at May 2005; and
(ii) insofar as they are directed to proof of the existence of a hypothetical anterior fact, they are not directed towards an opinion which could be read as informing the content of a Stage 2 Feasibility Study as at May 2005.
The evidence which was subject to these objections was that identified in item 4 of the schedule to the defendants’ written submissions in reply and the way in which I have disposed of the objection may be seen in –
(a)Schedule 1 items 12 – 14, 25, 37 – 39, 61 – 63, 74, 75, 77 – 80, 82 – 83, 94, 96 and 140 – 157; and
(b)Schedule 2 items 2, 6 – 8, and 15 – 18.
As will appear from my rulings in the schedules, even if the impugned statements and opinions of Mr Freeman are otherwise inadmissible to prove the facts which they apparently seek directly to assert, if they are within the scope of the plaintiffs’ fallback argument they may be admitted on the limited basis referred to at [122]. But if such statements and opinions are admitted only for that purpose, they are not admitted on any broader basis. They cannot be relied on in support of the unpleaded advice case, because I have ruled that the plaintiffs cannot be permitted to advance that case. Nor could admission for that limited purpose be a means by which the operation of the principles discussed at [104] to [116] above could be avoided. As I have said, they could not be treated as proof of the truth of the facts which they apparently seek directly to assert.
Some objections will be postponed until my final judgment
In Sanrus No. 5, I explained that I would apply the general rule expressed in Dasreef Pty Ltd v Hawchar to which I have earlier referred, namely that ordinarily a trial judge should not defer ruling on admissibility until judgment.
I also explained that my application of the general rule would be subject to some caveats.
One of those caveats concerned the application of the proof of assumption rule. In Sanrus No. 5, I explained that there was often a difficulty with applying the proof of assumption rule before all the evidence was in and before the trier of fact was in a position to evaluate all the evidence in the trial in context. Whilst I thought it was possible that if the evidence was clearly discrete and encapsulated that I might be persuaded to apply the proof of assumption rule before my final judgment, I had not thought it appropriate to do so in relation to the items which I had examined at that time.
In this regard, although the defendants had advanced multiple objections based on an alleged inability of the plaintiffs to prove the assumptions on which impugned parts of the reports were based, after examining my ruling in Sanrus No. 5, they advised me that they were content for me to postpone ruling on such objections until my final judgment on the merits. The plaintiffs did not demur to this course. Accordingly, that is the course which I will follow. The result is that, the schedules which express my final rulings will not deal with the proof of assumption objection. To the extent that provisional rulings had included statements that I would not rule on such questions, I have removed those statements from the final expression of my rulings because they are now otiose.
Another obvious caveat to my application of the general rule concerns the expression of opinions by Mr Freeman on what QR would have done in particular hypothetical circumstances. For the reasons I have previously explained, I would postpone ruling on the admissibility of those opinions until my final judgment on the merits of this proceeding.
My rulings
As to Schedule 1:
(a)Columns 1 to 4 reproduce the equivalent columns from the schedule which expressed my provisional rulings in Sanrus No. 5.
(b)Column 5 reproduces a submission which the defendants had made as to the suggested ruling but I have added to it a summary of relevant further submissions which the defendants made in written submissions in reply.
(c)Column 6 reproduces a submission which the plaintiffs had made as to the suggested ruling.
(d)Column 7 sets out my final ruling for each item. Because my final ruling had to consider the plaintiffs’ fallback argument which was not dealt with in Sanrus No. 5, that has led to the need to make some alterations to the form of the provisional rulings which were expressed in the schedule to that judgment. I have not tracked the changes I have made and have simply expressed the final ruling I would make in respect of those items in which I had only expressed a provisional ruling.
As to Schedule 2:
(a)This Schedule identifies additional objections advanced by the defendants as referred to at [5] above.
(b)It largely reproduces a schedule prepared by the parties, but I have added to it a summary of relevant further submissions which the defendants made in written submissions in reply.
(c)Column 7 sets out my final ruling for each item.
Schedule 3 largely reproduces the schedule by which the defendants advanced objections to the admissibility of the further supplementary report of Mr Freeman, supplemented with a final column setting out my ruling.
The rulings expressed in the final column of each of the Schedules are to be read with the matters discussed in the body of these reasons.
Conclusion
For the reasons set out above and in the Schedules to these reasons, I make the following orders:
1. The plaintiffs are granted leave to rely on the further supplementary report of Mr Freeman dated 8 September 2019 [EXP.010.111.0001]
2. In relation to the defendants’ objections to –
(a)Expert Report of Mr Freeman dated 2 November 2018 [EXP.010.005.0001];
(b)Expert Report of Mr Freeman dated 22 November 2018 [EXP.010.007.0001];
(c)Joint Expert Report on Offsite Water Supply of Mr Freeman and Mr Harradine (D), with contributions from Mr Smith (D), Mr Cavanagh (D), Mr Simpson (P) and Ms Power (D), dated 15 July 2019 [EXP.500.004.0001_2];
(d)Joint Expert Report on Offsite Power Supply of Mr Freeman and Mr Harradine, with contributions from Mr Smith (D), Mr Cavanagh (D) and Mr Simpson (P), dated 15 July 2019 [EXP.500.011.0001_2]; and
(e)Joint Expert Report on Port of Jamie Freeman and Euan Morton (D) [EXP.500.026.0001_2]; and
(f) Further Supplementary Report of Mr Freeman dated 8 September 2019 [EXP.010.111.0001],
I make the rulings set out in Schedules 1, 2 and 3 to these reasons.
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