Transfield Philippines Inc v Pacific Hydro Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

BUILDING CASES LIST

No. 4978 of 2002

Transfield Philippines Inc & Others	Plaintiffs
v
Pacific Hydro Limited (ACN 057 279 508) & Others	Defendants

No 7501 of 2004

Transfield Philippines Inc & Another	Plaintiffs
v
Pacific Hydro Limited (ACN 057 279 508) & Another	Defendants

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JUDGE:	Hollingworth J
WHERE HELD:	Melbourne
DATE OF HEARING:	8, 11 April 2005, 22 June 2006
DATE OF RULING:	4 December 2006
CASE MAY BE CITED AS:	Transfield v Pacific Hydro
MEDIUM NEUTRAL CITATION:	[2006] VSC 175

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Practice and procedure – service of originating process – whether basis for service out of Australia under r.7.01(1)(l) – whether writ properly indorsed under r.7.02

Practice and procedure – pleadings – adequacy of general indorsement – whether properly indorsed under r.5.04(2)(b) – new claims made in statement of claim which were outside the scope of the writ – no leave obtained under r.14.03(2)

Practice and procedure – stay of proceedings – application for stay under s.7 of the International Arbitration Act 1974 (Cth) – whether plaintiffs’ claims capable of settlement by arbitration under contractual arbitration agreements

Practice and procedure – application for substituted service

Documents produced in arbitration by way of discovery or subpoena – whether subject to implied undertaking limiting use outside arbitration – whether this court has power to release a party from such an implied undertaking

Preliminary discovery – application under r.32.05 – whether reasonable grounds for believing applicant may have right to obtain relief from this court

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr R. C. Macaw QC Mr J. A. H. Foxcroft S.C.	Mallesons Stephen Jaques
For the Defendants	Mr D. F. R. Beach S.C. Mr T. McEvoy	Freehills

HER HONOUR:

A. Background

The current proceedings

During the late 1990s, the Bakun AC Hydro Electricity Power Station was constructed on the Bakun River in the Philippines. Numerous legal disputes have arisen out of the power station project, three of which are currently before this court.

Luzon Hydro Corporation (“Luzon”) is a company incorporated in the Philippines for the purpose of the construction and operation of the power station. Pacific Hydro Limited (“Pacific”), a company incorporated in Victoria, owns one half of the shares in Luzon; the other half is owned by Philippine entities connected with the Aboitiz family.

Transfield Philippines Inc (“TPI”) undertook the design and construction for Luzon, under a contract dated 26 March 1997 and executed in the Philippines (“the turnkey contract”). TPI is a wholly-owned Philippine subsidiary of Transfield Holdings Pty Ltd (“Holdings”), a company incorporated in NSW and the holding company for the Transfield group of companies. Where appropriate, TPI and Holdings are collectively referred to as Transfield. Holdings guaranteed TPI’s performance of the turnkey contract by a guarantee and indemnity dated 14 April 1997, which was executed by Holdings in Sydney and Luzon in the Philippines (“the guarantee”).

In proceeding No 4978 of 2002 (“the project proceeding”), Transfield seeks damages for misleading and deceptive conduct, breaches of the turnkey contract and guarantee, procurement of those breaches and unconscionable conduct.

In the first application before me in the project proceeding, brought by summons dated 29 July 2004, Luzon seeks orders:

(a) Setting aside the proceeding;

(b) Alternatively, setting aside service of the writ on Luzon;

(c) Further, or alternatively, permanently staying the proceeding;

(d) Setting aside the conditional appearance of Luzon filed 15 July 2004.

In proceeding No 7501 of 2004 (“the preliminary discovery proceeding”) Transfield seeks preliminary discovery under r.32.05 of the Supreme Court (General Civil Procedure) Rules 1996 from Pacific and Luzon. In addition, Luzon challenges service of the proceeding against it. There is also a dispute about Transfield’s entitlement to rely, for the purposes of the preliminary discovery application, upon certain documents which were obtained by it in one of the arbitrations which have taken place between the parties. Those applications are all presently before me.

In proceeding No 8182 of 2004 (“the settlement proceeding”), Transfield seeks from Luzon, Pacific and other defendants damages suffered as a result of the alleged breach of a deed of settlement of certain project disputes. It also seeks damages for misrepresentations allegedly made in connection with that settlement, in breach of s.52 of the Trade Practices Act 1974 (Cth) (“TPA”) and s.9 of the Fair Trading Act 1999 (Vic) (“FTA”). On 11 April 2005, I made orders by consent that the settlement proceeding be adjourned pending the determination of the applications then before the court in the project and preliminary discovery proceedings.

The substantive applications were heard by me in April 2005. In late May 2006, my associate circulated to the parties the reasons for decision which I proposed to formally publish on 31 May 2006 (“the proposed reasons”). I adopted that course due to the complexity of the proposed reasons and the need for the parties to consider them before addressing me in relation to the form of orders. On 26 May 2006, Transfield contacted the court and indicated that it wished to seek leave to lead further evidence in relation to factual matters which had changed since the April 2005 hearing, which it believed would alter the proposed reasons. Transfield also wished to make further applications in the project and settlement proceedings. Accordingly, I did not formally publish the proposed reasons. Instead, a timetable was set for the filing of any evidence and further submissions relating to these additional matters.

On 22 June 2006, I heard Transfield’s application for leave to adduce further evidence in the form of an affidavit of Elizabeth Cubitt sworn 5 June 2006. The most important part of that affidavit related to the status of two arbitrations between the parties, which are discussed below. I have decided that it is appropriate to receive that fresh evidence, so that my decision proceeds on a correct factual basis. I then heard argument as to the possible impact of that fresh evidence on the proposed reasons, as well as further argument in the preliminary discovery proceeding in relation to the use of documents obtained in one of those arbitrations. During the hearing on 22 June 2006, I also heard an application by Transfield for substituted service of the writ and second statement of claim in the project proceeding; that application is dealt with in these reasons. By consent, I further adjourned the application for directions in the settlement proceeding.

At the completion of the hearing on 22 June, I reserved my decision. I also set a timetable for the provision of further written submissions, as both sides wished to consider the issues further. Substantial written submissions and further folders of authorities were filed by both sides during July.

Other disputes

In order to understand the present applications, it is necessary to understand something of the numerous other disputes between the parties which have arisen out of the project.

During the late 1990s, several project disputes were referred to a Construction Industry Arbitration Commission, a form of compulsory arbitration for the construction industry in the Philippines.

In June 1999, Luzon commenced a proceeding in the Regional Trial Court in La Union, the Philippines, seeking to prevent TPI from relying on a force majeure clause in the turnkey contract (“the La Union proceeding”). On 25 June 1999, Luzon obtained a preliminary injunction to that effect. On 22 July 1999, TPI applied to dismiss the injunction. The court deliberated on TPI’s application until 2 September 1999, when Luzon conceded that TPI could exercise its contractual rights under the turnkey contract.

Both the turnkey contract and the guarantee contain clauses which provide:

(a) That the applicable law is that of the Philippines (“the choice of law clause”); and

(b) That all disputes arising out of or in connection with the agreement are to be submitted for arbitration in Singapore, in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (“the ICC rules”), by a tribunal of three arbitrators appointed in accordance with the ICC rules (“the arbitration agreement”).

In late 2000, further disputes arose between Luzon and TPI in relation to the turnkey contract. TPI initiated an arbitration and Luzon raised a counterclaim (“the first arbitration”). At the time of the initial hearing before me in April 2005, the arbitral tribunal in the first arbitration[1] had completed a number of hearings and made five partial awards and an addendum to the third partial award. On 7 June 2005, TPI and Luzon executed terms (“the June 2005 settlement”) which, amongst other things, settled the claims in the first arbitration described by the parties as the second quantum matters. After conducting further hearings, on 21 June 2005 the tribunal declared the arbitration proceeding closed. In early August 2005, the arbitral tribunal issued its final award.
[1]Comprised of Dr Michael Pryles, Dr Clyde Croft S.C. and Mr Neil Kaplan QC.

In November 2000, TPI applied to the Regional Trial Court in Makati, the Philippines, seeking to restrain Luzon from drawing on letters of credit that Holdings had provided to Luzon pursuant to the guarantee (“the Makati proceeding”). On 9 November 2000, Judge Oscar Pimental granted a temporary restraining order. On 24 November 2000, TPI’s application for further injunctive relief was dismissed. Luzon subsequently drew down on the letters of credit between November 2000 and April 2001.

In early April 2001, Luzon issued a 14 day termination notice under the turnkey contract. Before the notice expired, Luzon obtained a 72 hour temporary restraining order, preventing TPI from interfering with Luzon’s possession of the site. The temporary order was issued by the Regional Trial Court in Tagudin, the Philippines (“the Tagudin proceeding”).

Further disputes arose in relation to the guarantee. As a result of those disputes, Luzon initiated a second arbitration in April 2003 against Holdings (“the second arbitration”). As at April 2005, an arbitral tribunal for the second arbitration[2] had been appointed and draft terms of reference circulated to the parties. The terms of reference were never finalised. As part of the June 2005 settlement, the parties released each other from the claims made in the second arbitration.
[2]Comprised of The Honourable Allan McDonald QC, Mr Graham Easton and Mr Chelva Rajah S.C.

B. Service issues in the project proceeding

The writ in the project proceeding was filed on 28 March 2002. The time for service has subsequently been extended on several occasions by orders of this court.

The writ contained a simple indorsement of claim (“the general indorsement”), which alleged that Pacific and Luzon had engaged in misleading or deceptive conduct, contrary to s.52 of the TPA and equivalent provisions in the FTA and its NSW equivalent, in connection with the entry into, execution and carrying out of the turnkey contract and the guarantee. The only material facts pleaded were the dates of the two contracts and a brief description of their respective nature. No details of the alleged conduct were pleaded. The relief sought was compensation and an order that the guarantee was void ab initio.

The writ also contained an indorsement (“the service indorsement”) in the following terms:

“AND TAKE NOTICE that [Pacific] is a corporation duly incorporated pursuant to the laws of State of Victoria and duly served within Victoria. … [Luzon] is a necessary and proper party to the proceeding and has committed misleading and deceptive conduct as set out in the [general indorsement], the contract/guarantee referred to in the [general indorsement] was made by or through an agent carrying on business or residing within Victoria on behalf of the principal residing out of Victoria.
In support of service of the writ on [Luzon] out of Australia [Transfield relies] upon Rule 7.01(1)(c), (f)(ii), (i), (j) and (l) of [the rules].”

The first statement of claim was dated 23 July 2004. It pleaded only one misrepresentation, allegedly made by Mr Jeffrey Harding, the managing director of Pacific, on several occasions in February 1997, to the effect that Dr Philip van der Riet would have no significant long term involvement in the project (“the February 1997 representation”). It also pleaded a number of causes of action against Luzon and Pacific which clearly fell outside the scope of the general indorsement, including breaches of the turnkey contract and guarantee, and unconscionable conduct at common law and under s.51AA of the TPA.

An amended statement of claim was filed on 17 March 2005. The only substantive change was to allege that the February 1997 representation had been made on behalf of Luzon and Pacific and that it had been made by telephone calls within Australia.

No further representations have been pleaded or alleged in any of the affidavits before me.

Transfield argued in its written submissions that service of the writ on Luzon was validly effected in Victoria pursuant to r.6.04(a), by service in Melbourne on Robert Grant, President of Luzon, on 5 July 2004. However, at the hearing of this application, Transfield did not press this argument; instead, it relied only on service on the company secretary of Luzon in the Philippines on 6 July 2004.

Luzon filed and served a notice of conditional appearance on 15 July 2004. Luzon argues that the overseas service of the writ was invalid and should be set aside because:

(a) Service outside the jurisdiction was not authorised under r.7.01, because there was no proper basis for service on it outside the jurisdiction;

(b) The writ was not indorsed with a statement of the facts relied upon to support service outside the jurisdiction as required by r.7.02;

(c) The general indorsement did not contain a statement sufficient to give, with reasonable particularity, notice of the nature of the claim, the cause thereof and the relief or remedy sought in the proceeding; and/or

(d) The only claims made in the first statement of claim against Luzon were new claims which were not raised in the general indorsement.

Was the general indorsement adequate?

Luzon says that the general indorsement does not comply with r.5.04(2)(b), in that it does not contain a statement sufficient to give notice, with reasonable particularity, of the nature of the claim, the causes of action relied upon, and the relief or remedy sought in the proceeding.

The general indorsement adequately identifies the causes of action relied upon and the remedy or relief sought. However, as far as the nature of the claim is concerned, the general indorsement is less satisfactory. It says no more than that the defendants have engaged in misleading or deceptive conduct between late 1994 and 1997 in relation to or in connection with the entry into, execution of and carrying out of the turnkey contract and the guarantee. But a general indorsement is not in the nature of a pleading and should not be construed as such; it is only a notice of the nature of the claim, the cause of action and the relief sought. Whilst the amount of detail provided of the nature of the claim is relatively brief in this case, in my opinion the general indorsement is sufficient for the purposes of r.5.04(2)(b).

Even if, contrary to the above, the general indorsement did not comply with r.5.04(2)(b), it would only be an irregularity, not a nullity. The options open in the case of an irregular indorsement include setting aside the writ or its service, or setting aside the indorsement. Ordinarily, the court will preserve the proceeding and allow the plaintiff to correct the defect, if that can readily be done. One way to overcome the irregularity is by serving a statement of claim[3]. Here, the service of the first statement of claim would have sufficed to cure any non-compliance with r.5.04(2)(b) in relation to the claim for misleading and deceptive conduct.
[3]Hill v Luton Corp [1951] 2 KB 387 at 391; Elsum v Jameson [1974] VR 529 at 533, 543.

The raising of new claims

As mentioned earlier, the first statement of claim pleaded a number of causes of action against Luzon and Pacific, which clearly fell outside the scope of the general indorsement, including unconscionable conduct and breaches of the turnkey contract and the guarantee.

These new claims were not part of “the claim as endorsed on the writ”, within the meaning of r.14.03(1). Accordingly, Transfield could not simply serve a statement of claim which included them, without obtaining leave under r.14.03(2)[4]. No such leave was sought or given. In order to obtain such leave, Transfield would need to satisfy the requirement of r.7.01 in respect of each new cause of action, otherwise abandon those that did not satisfy r.7.01 or risk having the entire action stayed[5].
[4]The case is distinguishable from the facts in Gutnick v Dow Jones [2001] VSC 305, upon which both sides sought to rely. In that case, Hedigan J held that the relevant cause of action pleaded in the amended statement of claim did fall within the scope of the indorsement on the writ.
[5]Williams v The Society of Lloyds & Ors [1994] 1 VR 274 at 291-2.

However, in so far as the first statement of claim pleaded the February 1997 representation, that was a claim which was raised in the general indorsement. The fact that Transfield has subsequently purported to raise new causes of action, which were not part of the claim as endorsed on the writ, is not a basis for setting aside what was valid service of the writ in respect of the TPA and FTA claims.

Was service authorised under r.7.01(1)?

In the service indorsement, Transfield sought to justify service out without leave in reliance on rr.7.01(1)(c)[6], (f)(ii)[7], (i)[8], (j)[9] and (l). However, the only ground pursued before me was r.7.01(1)(l), which permits service out without leave where the proceeding is properly brought against a person duly served within or out of Victoria and another person out of Australia is a necessary or proper party to the proceeding. The test for whether the foreign defendant is a necessary or proper party is whether the defendants are properly joined in accordance with r.9.02.
[6]Where relief is sought against a person domiciled or ordinarily resident within Victoria.
[7]Where the proceeding is one brought to enforce, rescind, dissolve, rectify, annul or otherwise affect a contract, or to recover damages or other relief in respect of the breach of a contract, and the contract was made by or through an agent carrying on business or residing within Victoria on behalf of a principal carrying on business or residing outside Victoria.
[8]Where the proceeding is founded on a tort committed within Victoria.
[9]Where the proceeding is brought in respect of damage suffered wholly or partly in Victoria and caused by a tortious act or omission wherever occurring.

Rule 9.02(a) permits two or more persons to be joined as defendants in one proceeding where, if separate proceedings were brought, a common question of law or fact would arise in all the proceedings, and all rights or relief claimed are in respect of or arise out of the same transaction or series of transactions. Rule 9.02(b) allows for joinder of parties, either before or after the joinder, by leave of the court.

It is for Transfield to establish, in respect of each cause of action on which it relies, that there is “a strong arguable case” that service out of the jurisdiction of that claim is justifiable under one or other of the sub-sections of r.7.01[10].
[10]See: Williams v The Society of Lloyds & Ors [1994] 1 VR 274 at 291 per McDonald J, and the cases cited therein, including Siskina (Owners of cargo laden on board) v Distos Compania Naviera SA [1979] AC 210.

Transfield says that:

(a) The proceeding was properly brought against Pacific and Dr van der Riet, a former director of Pacific, the other defendants named in the writ;

(b) The proceeding was validly served on Pacific on 28 June 2004, prior to service on Luzon on 6 July 2004[11]; and

(c) Luzon is a necessary and proper party to the proceeding, within the meaning of r.9.02, because the alleged representations were made by Jeffrey Harding, a director of both Pacific and Luzon, on their behalves, and further, Luzon is a party to both the turnkey contract and the guarantee in relation to which the misleading representations are alleged to have been made.

[11]The proceeding against Dr van der Riet was discontinued prior to service of the writ on him.

Neither paragraph (a) nor (b) above is disputed. However, Luzon puts forward several arguments as to why it is not a necessary or proper party in terms of paragraph (c).

First, Luzon says that any common question which may have existed in the general indorsement was abandoned by the filing of the first statement of claim and cannot be resuscitated, as it would now be statute-barred. I do not agree that there has been any such abandonment, for the following reasons.

The general indorsement clearly alleged misleading and deceptive conduct by both Pacific and Luzon. Paragraph 20 of the first statement of claim alleged that the February 1997 representation was made by Harding, the managing director of Pacific; however, it did not say on whose behalf he made it. Paragraph 24 went on to allege that, by making the February 1997 representation, Pacific engaged in misleading or deceptive conduct; there was no equivalent allegation in respect of Luzon. However, paragraph 35 alleged that Transfield had suffered loss and damage by reason of the conduct of Pacific and Luzon in contravention of s.52 of the TPA and equivalent FTA provisions. It was not said to what specific conduct of Luzon paragraph 35 related. Although ambiguous and unsatisfactory from a pleading point of view, the wording of paragraph 35 is inconsistent with an intention to abandon altogether the TPA and FTA claims against Luzon[12].
[12]Therefore the case does not fall within the principles enunciated by the Full Court in Renowden v McMullin [1969] VR 744 at 751, upon which Luzon placed great weight.

The amended statement of claim has remedied this ambiguity in the following way. Paragraph 20 now pleads that the February 1997 representation was made for and on behalf of Pacific and Luzon. Paragraph 24 now refers to Luzon as well as Pacific. No change was required to paragraph 35.

In the circumstances, I am not satisfied that Transfield intended to, or has in fact, ever abandoned its claim against Luzon for misleading and deceptive conduct. Accordingly, Luzon’s argument that any common question was abandoned and cannot be resuscitated must fail.

Secondly, Luzon argues that there is insufficient detail to allow one to consider whether there truly is a common question which would justify joinder. There might be some force in that submission if one only looked at the general indorsement. However, if one also looks at the statements of claim – as Luzon says the court is entitled to do – it is clear that sufficient detail has been provided to allow one to find that there are a number of common questions in relation to the February 1997 representation and that all rights or relief claimed are in respect of or arise out of the same transaction or series of transactions.

Finally, Luzon says that it is not a necessary or proper party because, if separate proceedings were commenced against it, they could not be sustained having regard to the existence of the first and second arbitrations. In part C of these reasons, I explain in some detail why TPI’s claims against Luzon ought to be stayed under s.7 of the International Arbitration Act 1974 (Cth). However, I have concluded that Holdings’ claims against Luzon ought not be stayed. Given those findings, and the nature of the claims raised in the project proceeding, it cannot be said that Luzon is a not a necessary or proper party to the proceeding. Accordingly, I would not set aside service on this ground.

Was the service indorsement adequate?

The final service question is this: does the service indorsement comply with the requirement in r.7.02(1) that originating process served on any defendant out of Australia shall contain an indorsement “stating the facts and the particular paragraph of r.7.01 relied upon in support of such service”?

The purpose of a r.7.02 indorsement is to give the other party sufficient notice of the grounds on which the party claims to be entitled to serve the originating process out of the jurisdiction. The indorsement must identify not only the paragraph or paragraphs of r.7.01 upon which the plaintiff relies, but must also state the facts which bring the case within that rule.

“In this way a defendant is given an appropriate opportunity to determine whether to object that the court ought not to hear and determine the proceeding on the ground that the proceeding is not within r.7.01(1) before filing an appearance or conditional appearance in the proceeding.”[13]

[13]Whinnen v Cussons (International) Ltd (Unreported SC (Vic) 5904/97 per Beach J, 24 February 1998) at 3-4.

I agree with Luzon that the service indorsement does not comply with r.7.02 because, although it identifies the paragraphs of r.7.01 upon which Transfield relies, it does not contain any statement of the supporting facts.

The assertion in the service indorsement that Luzon “is a necessary and proper party to the proceeding and has committed misleading and deceptive conduct as set out in the [general indorsement]”, is a bald conclusion rather than a factual summary. The general indorsement does not contain an adequate factual summary either. The general indorsement does not identify, even in the most general terms, the alleged conduct; nor does it state how or by whom it was allegedly engaged. Most critically for jurisdictional purposes, there is no allegation as to where any offending conduct is alleged to have occurred. There is simply nothing enabling Luzon to determine whether or not to object to this court exercising jurisdiction in respect of the misleading and deceptive conduct claim.

There is a difference of opinion amongst judges of this court sitting at first instance as to whether regard may be had to a combination of a r.7.02 indorsement and an accompanying pleading to fill any gaps in the indorsement[14]. Whatever the answer to that question may be, it is clear that a defect in the indorsement cannot be cured by an amendment after the writ has been served[15]. Similarly, such a defect cannot be cured by the provision of a pleading after the writ had been served. Accordingly, the defects in the service indorsement could not be cured by the service of the first statement of claim on Luzon on 23 July 2004, because the writ had already been served by then.
[14]In Pivot v Hoechst [2000] VSC 262 at [13] per Hedigan J and VWA v Orientstar [2003] VSC 311 at [16] per Balmford J, the court said it was permissible to have regard to the pleadings which accompanied the originating process; compare Fujitsu Australia Limited v Dewar Electronics Pty Ltd & Anor [2001] VSC 222 at [29] per Gillard J.
[15]Whinnen v Cussons (International) Ltd (Unreported SC (Vic) 5904/97 per Beach J, 24 February 1998) at 3-4; Schweitzer v Kronen Verwaltungs & Anor [1998] VSC 190 per McDonald J; Pivot v Hoechst [2000] VSC 262 at [12].

However, that is not the end of the matter. The failure to comply with r.7.02 is an irregularity and does not render the writ a nullity[16]. The court may, as a matter of discretion, dispense with the requirements of r.7.02 if it is in the interests of justice to do so[17]. Rule 7.02 must be read subject to the general power of the court under r.2.04 to dispense with any of the requirements of the rules[18].
[16]Rule 2.01(1).
[17]Fujitsu at [32]-[35], followed in Schib Packaging S.r.l v Emrich Industries Pty Ltd [2005] VSCA 236 at [22] – [24] per Charles JA.
[18]Schib Packaging S.r.l v Emrich Industries Pty Ltd [2005] VSCA 236 at [24] per Charles JA.

Transfield says that I should dispense with the requirement of r.7.02, because Luzon had adequate notice of the claims the subject of the writ by the time it was served on 6 July 2004. Transfield says that Luzon and its solicitors, Freehills, were well aware of the claims, by reason of the fact that the claims were the same as those raised in the first and second arbitrations.

It is true that Transfield raised several claims of misleading and deceptive conduct under the TPA and FTA in both arbitrations. Furthermore, Luzon was aware almost one year before the writ was served on it that the project proceeding had been issued and its solicitors had seen a copy of the writ some months before service occurred.

The precise contents of the FTA and TPA claims made in the arbitrations are discussed in greater detail in part C of these reasons; suffice to say that those claims were only put in the most general terms. The documents filed in the arbitrations did not disclose precisely what representations are alleged to have been made, or when, where or by whom they were made. That is to say, they did not provide sufficient information to enable Luzon to determine whether this court might have jurisdiction to determine those claims.

Nor has that problem been fixed by any affidavit filed by Transfield in opposition to Luzon’s application. Luzon is still left guessing as to what matters are alleged to give this court jurisdiction to determine the claims. In the circumstances, in the exercise of my discretion, I would not be minded to dispense with the requirements of r.7.02(1). Accordingly, service on Luzon should be set aside on this ground.

C. Application to stay the project proceeding under the International Arbitration Act

In the event that service of the writ is not set aside, Luzon seeks an order staying the project proceeding against it, either pursuant to statute or on the basis that the proceeding is an abuse of process. As I have ruled that service should be set aside, it is not strictly necessary for me to rule as to whether there should be a stay. However, it is conceded that the likelihood that there would be a stay is a matter which may be relevant to my consideration of Transfield’s alternative application for substituted service of the writ.

Luzon seeks an order that the project proceeding be stayed under s.7 of the International Arbitration Act 1974 (Cth) (“IAA”), on the basis that the proceeding involves the determination of a matter or matters capable of settlement by arbitration under the arbitration agreements. If the s.7 criteria are made out, a party is entitled to have an arbitration agreement given effect to by the court, unless the arbitration agreement is null and void, inoperative or incapable of being performed[19].
[19]IAA s7(5); Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) & Anor (1998) 90 FCR 1 at 13-14 per Beaumont, Branson and Emmett JJ.

Section 7 of the IAA relevantly provides as follows:

“(1) Where:
(a)the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a Convention country;
…

this section applies to the agreement.

(2) Subject to this Part, where:
(a)proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and
(b)the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration;

on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter.”

Section 7(1)(a) is concerned with the procedural law of the arbitration, not the substantive law (which is the law of the Philippines). The arbitration agreements require arbitrations to be conducted in Singapore. The parties have agreed that the law governing the arbitral procedure is that of Singapore. Singapore is a Contracting State to the United Nations Convention on the Recognition and Enforcement of Arbitral Awards, and therefore a Convention country as defined in the IAA. Transfield did not dispute that the requirements of s.7(1)(a) are therefore met.

The requirements of s.7(2)(a) are also met. The project proceeding has been instituted by Transfield against Luzon, all of whom are parties to the arbitration agreements.

The primary dispute at the initial hearing was as to whether the requirement of s.7(2)(b) was met, namely, whether the project proceeding involves the determination of a matter that is “capable of settlement by arbitration” pursuant to the arbitration agreements. At the time of the initial hearing, both arbitrations were still on foot. Since then, the final ruling has been given in the first arbitration and the second arbitration has been abandoned. Accordingly, Transfield now argues that s.7(2) cannot be satisfied, because this court can no longer refer “the parties to arbitration in respect of that matter”.

I will commence by considering whether the project proceeding involves a matter which is “capable of settlement by arbitration”, pursuant to the arbitration agreements. In this regard, the arbitration agreements require “all disputes arising out of or in connection with” the relevant contract to be submitted for arbitration.

As has been recently observed, “the clear tide of judicial opinion as to arbitration clauses, where the fair reading of them is not confined, is to give width, flexibility and amplitude to them.”[20] As a matter of general principle, it is the duty of the court to give effect to the purpose which lies behind an arbitration agreement and to respect the intention of the parties as expressed here in the turnkey contract and the guarantee. As far as reasonably possible, the arbitration agreements should be given a construction which avoids the inconvenience of a divided dispute and multiplicity of proceedings[21].
[20]Incitec Ltd v Alkimos Shipping Corporation and Anor (2004) 206 ALR 558 at [36] per Allsop J. See also IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466.
[21]IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 at 472–473.

I agree with Luzon that the words “in connection with”, which are used in the arbitration agreements, are words of the widest import and should not, in the absence of compelling reason to the contrary, be read down[22]. I turn to consider the pleaded claims in the light of those general principles.
[22]Incitec Ltd v Alkimos Shipping Corporation and Anor (2004) 206 ALR 558 at [32]-[35].

The misrepresentation claim by TPI

The general indorsement alleged that Luzon and Pacific had engaged in misleading or deceptive conduct “in relation to or in connection with the entry into, execution of, and carrying out of” the turnkey contract and guarantee. Notwithstanding the breadth of the general indorsement, the only misleading or deceptive conduct pleaded by Transfield relates to the February 1997 representation, which is said to have induced TPI and Holdings to have entered into the turnkey contract and guarantee, respectively.

A claim for misleading and deceptive conduct or misrepresentation is not a claim “arising from” a contract[23]. However, the arbitration agreements also apply to disputes arising “in connection with” the relevant contract. The words “in connection with” are sufficiently wide to encompass claims made on the basis of misrepresentation in pre-contractual negotiations, including claims under the TPA and FTA[24]. Indeed, TPI expressly conceded as much in the first arbitration.
[23]Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) (1998) 90 FCR 1 at 6, 23.
[24]IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466 at 480; Advanced Switching Services Pty Ltd v State Bank of NSW (2001) ATPR 41-848 at [12]-[17] per Hely J.

However, TPI argues that the claim against Luzon under the TPA and FTA is not “capable of settlement by arbitration”, because the arbitral tribunal in the first arbitration “declined to deal with” it, and therefore it should be allowed to proceed in this court. Luzon says that is an incorrect characterisation of what the first arbitral tribunal in fact did.

On 10 May 2001, TPI and Luzon executed terms of reference for the first arbitration (“the first reference”). TPI’s claims included the following:

“Misleading and deceptive conduct

(a) [TPI] is entitled to damages for breaches of the [TPA] and/or [FTA] where applicable and for negligent misrepresentation and for equivalent breaches of Philippine law, where applicable, as a result of [Luzon], by itself or by its sponsors and its or their directors, officers and employees, misleading and deceiving both [TPI] and its directors, servants, agents or sponsors about what it might expect in relation to the project, their role in it and the manner in which the project would proceed.

(b) In particular, but without limiting the generality of the above, Dr Philip van der Riet, a director of [Luzon], in Australia and by means of electronic telecommunications with Australia, misled and deceived [TPI] as to the nature of the project, and in particular the tunnel, which [Luzon] required.”

The first reference does not specify precisely what representations are alleged to have been made, when or by whom. Nevertheless, it appears to be broad enough to encapsulate most, if not all, of the claims made by TPI against Luzon in the general indorsement. It is certainly broad enough to include the February 1997 representation, relating as that does to the role of Dr van der Riet (a director, servant or agent of Luzon) in the project.

The first partial award, dated 18 February 2002, dealt with preliminary issues including the proper law of the arbitration. After noting the substantial connecting features with the Philippines[25] and the lack of connecting features with Australia, the arbitral tribunal concluded at page 24 that:
[25]Both parties are incorporated in the Philippines; the subject matter of the contract and of the commercial relationship between them is there; the contract between the parties is expressly governed by the law of the Philippines.

“… the claims for misleading and deceptive conduct are governed by the law of the Philippines under either of two alternative approaches. The first is to apply the law of the Philippines directly without recourse to choice of law rules (‘voie directe’). Alternatively if the governing law is to be selected indirectly through the application of a choice of law rule, the arbitral tribunal determines that the appropriate choice of law rule (application of the law most closely connected with the claim) also leads to the selection of the law of the Philippines.

[TPI] has indicated that it will institute court proceedings in Australia if this arbitral tribunal does not determine claims under the [TPA] and/or the [FTA]. [TPI] has submitted that resort to two tribunals is undesirable. The arbitral tribunal agrees. However, this consideration is not of itself sufficient to warrant the application of a law which the tribunal considers in all the circumstances, not to be appropriate to the dispute between the parties. Further, this tribunal notes that [TPI] has also sought damages for misrepresentation under the law of the Philippines. The claim for misrepresentation will still proceed in this arbitration but will be determined in accordance with the law of the Philippines.

5. Order

… the claims made by [TPI] in this arbitration concerning misleading and deceptive conduct and negligent misrepresentations, as well as the claims for breach of contract, are to be determined in accordance with the internal laws of the Philippines. The arbitral tribunal further declares that the [TPA] and the [FTA] in force in Australia are not applicable in this arbitration.”

TPI did not appeal or otherwise seek to set aside the first partial award. Subsequently, TPI abandoned its claim in the first arbitration that it was induced to enter into the turnkey contract by misleading and deceptive conduct. The project proceeding was then instituted on 28 March 2002.

TPI submits that because of the first arbitral award, the condition in s.7(2)(b) of the IAA is not or cannot be met. I disagree, for the following reasons.

The first arbitral tribunal held that TPI’s claims for misleading and deceptive conduct and misrepresentation were governed by the law of the Philippines and the TPA and FTA were not applicable to the arbitral proceeding. The arbitral tribunal gave thorough consideration to the approach it should adopt to the selection of the applicable law, and found that “the preponderance of claims put forward are clearly rooted in a contract governed by the law of the Philippines.”

The first tribunal having found that the misrepresentation and misleading and deceptive conduct claims were clearly covered by the arbitration agreement, a court should ordinarily respect the parties’ agreed choice of dispute resolution procedure. I am not sitting on an appeal against the first arbitral award, nor is it otherwise my role to review the correctness of the arbitral tribunal’s decision. As Gleeson CJ observed in Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd:

“It will be for the arbitrator to decide, applying relevant principles of conflict of laws, what part the allegation of a contravention of s.52 of the [TPA] … will play in the arbitration. It is not for this court to pre-empt that decision.”[26]

[26](1996) 39 NSWLR 160 at 167 per Gleeson CJ, with whom Meagher and Sheller JJA agreed.

I expressed the view in my proposed reasons that it would not be appropriate for an Australian court to adjudicate claims for misrepresentation under Australian statutes dealing with misleading and deceptive conduct, once the arbitral tribunal had determined, applying appropriate choice of law rules, that such claims are governed by the law of the Philippines. To do so would lead to a multiplicity of proceedings, usurp the jurisdiction of the tribunal and deny the intention of the parties as expressed by them in the arbitration agreement[27]. Furthermore, s.7 is expressed in mandatory, not discretionary terms, once the relevant matters are established.
[27]It is true that there could be a multiplicity of proceedings if Pacific is sued in this court, and Luzon is sued in an arbitration. But that is a consequence of the arbitration agreements entered into by Luzon, but not Pacific.

TPI argues that, because of the June 2005 settlement, there is now no matter capable of settlement by arbitration and no extant arbitration to which the court can refer the parties. I make several observations in relation to that. First, s.7(2) does not expressly or implicitly require that there be an extant arbitration, before a stay can be ordered. The concluding words of the section merely require an ability on the part of the court to “refer the parties to arbitration”.

Secondly, the June 2005 settlement did not bring the first arbitration to an end, nor did it purport to foreclose the reference of future disputes to an arbitral tribunal. The only releases it contained which relate to the subject matter of the first arbitration were mutual releases in relation to the second quantum matters (which do not include any misrepresentation or misleading and deceptive conduct claim). I agree with Luzon that the June 2005 settlement cannot provide a basis for a conclusion that TPI’s misrepresentation or misleading and deceptive conduct claims cannot be referred to arbitration.

But that is not the end of the matter. On 9 August 2005, the first arbitral tribunal delivered what it described as a final award. TPI argues that the first tribunal is therefore now functus officio; Luzon disputes that assertion. In the course of their supplementary written submissions, both parties addressed me at some length as to what “final award” means under Singaporean law (which both parties accept is the relevant law for determining whether or not the arbitral tribunal can properly be said to be functus officio). Although I was referred to some Singaporean case and statute law, I have not received the assistance of expert evidence, which would be the appropriate way of putting foreign law before this court.

I also agree with Luzon that the very question of whether the first arbitral tribunal would still be able and willing to consider the misrepresentation claims (if TPI sought to reinstate them in that arbitration) is a significant matter which the tribunal, not this court, ought to decide.

But even if the first arbitral tribunal took the view that it was unable or unwilling to consider those matters, that does not necessarily lead to the conclusion that they are not capable of referral to arbitration before another tribunal. Such a conclusion is entirely consistent with the importance of holding parties to their bargain in relation to arbitrations, which is part of the important public policy to which the IAA gives effect.

If it were necessary for me to rule in relation to the matter, I would still come to the conclusion that there should be a stay under s.7 of TPI’s claims against Luzon for misleading and deceptive conduct or misrepresentation prior to the turnkey contract.

The misrepresentation claim by Holdings

In the project proceeding, Holdings alleges that it was induced by the February 1997 representation to enter into the guarantee.

Luzon instituted the second arbitration in April 2003. In its answer and counterclaim dated June 2003, Holdings sought relief in respect of a number of representations[28] said to constitute negligent misrepresentation, and contraventions of s.52 of the TPA and equivalent FTA provisions and the law of the Philippines. Once again, no details were given as to the terms of any alleged representation, or as to when, where or by whom it was made. However, Holdings stated in that document that those matters “are the subject of action No 4978 of 2002 issued out of the Supreme Court of Victoria”, namely, the project proceeding.
[28]Relating to the nature, condition and geological attributes of the land; the adequacy of hydrological materials supplied to Transfield; the contractual consistency of technical requirements; the adequacy of the contract sum; the nature of the relationship and level of co-operation between Luzon and Transfield; and the composition of the ownership of Luzon.

At the time of the initial hearing of this application in April 2005, the second arbitral tribunal had not considered whether the misrepresentation and misleading and deceptive conduct claims were covered by the relevant arbitration agreement. At that hearing, both parties agreed that I should assume that the second arbitral tribunal would in due course decide that the TPA and FTA claims would not be determined in the second arbitration, for the same reasons as given by the tribunal in the first arbitration[29]. Any such assumption has now been overtaken by subsequent events.
[29]Of course, if the second arbitral tribunal decided it would deal with the FTA and TPA claims, then Transfield would have no basis for resisting a stay application on this particular basis.

The June 2005 settlement has several important features here. First, Luzon agreed to abandon the second arbitration, which it subsequently did. In itself, that would not be determinative, because a further arbitration could have been commenced. But Holdings and Luzon also gave each other mutual releases from and in relation to the second arbitration. It seems to be common ground in the parties’ supplementary written submissions that the effect of the releases is to preclude Holdings from commencing a fresh arbitration in relation to any misrepresentation which may have induced it to enter into the guarantee. It follows that this particular dispute is no longer “capable of determination by arbitration”, within the meaning of s.7(2)(b), therefore an application for a stay under that section ought not be granted.

The new claims

Transfield has, without leave, pleaded the following new causes of action which were not included in the general indorsement:

(a) Breaches of the turnkey contract by Luzon;

(b) Breaches of the guarantee by Luzon;

(c) The procurement by Pacific of those breaches of contract by Luzon;

(d) By the conduct which gave rise to the breaches of contract, Luzon and Pacific acted in a manner which was unconscionable at common law and contrary to s.51AA of the TPA.

No application is made to stay the proceeding against Pacific for the alleged procurement of breach of contract or unconscionable conduct.

As far as the new claims against Luzon are concerned, it is difficult to conceive of a claim which more clearly “arises out of” or in connection with a contract than a claim for relief for breach of that contract.

The claim of unconscionable conduct by Luzon relates to the very same conduct which is alleged to have given rise to the breaches of contract. Whether brought under the TPA or at common law, it is a dispute arising “in connection with” the relevant contract.

It follows that, even if they had been validly pleaded and served, the new claims against Luzon would all be matters capable of settlement by arbitration. They have not been the subject of either arbitration or the releases in the June 2005 settlement. By virtue of s.7 of the IAA, there would be no discretion for the court to exercise; the proceeding against Luzon in relation to these claims would also be stayed.

D. Application to stay on the basis of abuse of process

In the alternative, Luzon seeks an order that the entire project proceeding be stayed against it, on the ground that it is an abuse of process to pursue the proceeding against Luzon having regard to the arbitration agreements and proceedings.

Luzon suggests that, although no longer capable of referral to arbitration, TPI’s claims for misleading and deceptive conduct or misrepresentation should nevertheless be stayed in the court’s inherent jurisdiction “pending the award, either by the [first tribunal] or by any newly constituted arbitral tribunal” in relation to the turnkey contract. No reason was put forward in support of that conclusion. It was not suggested, for example, that the result in this court might be dependent on the result in any arbitral tribunal. Given that there are different contracts and different plaintiffs, and that the project proceeding can and will continue against Pacific, I see no reason to stay the claim by Holdings against Luzon in relation to the guarantee, just because I have concluded that there would be a basis for ordering a stay of the claim by TPI against Luzon in relation to the turnkey contract (once service issues have been overcome).

There is otherwise no need for me to consider this alternative basis for applying for a stay, given my earlier findings.

E. Application for substituted service

I have concluded that service of the writ on Luzon ought to be set aside, due to the failure to comply with r.7.02(1). In that event, Transfield seeks an order for substituted service of the current writ on Luzon’s Australian lawyers, Freehills.

Transfield relies upon an affidavit of its solicitor, Peter Megens, sworn on 21 October 2004 in the settlement proceeding. That deposed to problems which Transfield experienced in trying to serve the writ in that proceeding on Luzon’s company secretary in the Philippines or a director here in Australia. In the settlement proceeding, Byrne J ordered (apparently by consent) that substituted service could be effected on Luzon and related entities by service on Freehills. Based on that affidavit, I would be prepared to accept that the requirements of r.6.10 have been satisfied in this proceeding, and that it is impracticable to serve Luzon under the rules.

However, there seems to be little point ordering substituted service of the current writ, which I have found to be deficient. An application by Transfield for leave to amend the writ has been adjourned off by consent for future consideration. Transfield also conceded that there would be no point in ordering substituted service on Luzon if a stay of the proceedings was to be ordered.

I will give the parties an opportunity to consider these reasons for decision and address me further on the question of substituted service.

F. Issues in the preliminary discovery proceeding

Transfield is concerned that there may have been judicial or governmental impropriety involved in the La Union and Makati proceedings, as a result of the conduct of Pacific and Luzon. In general terms, it seeks preliminary discovery of the following documents in relation to those proceedings:

(a) Communications and dealings between Pacific or Luzon and any Philippine judicial, court or government official;

(b) Any rulings, judgments or favours which any such Philippine official was requested by Pacific or Luzon to make;

(c) Any gifts, donations or contributions made or proposed to be made by Pacific or Luzon to any such Philippine official.

Transfield’s originating motion and summons were filed on 10 August 2004. The originating motion contained no service indorsement in accordance with r.7.02.

The originating motion was served on Pacific by delivering it, together with the summons and supporting affidavit, to Freehills, the Melbourne solicitors of Luzon and Pacific, on 10 August 2004. Those documents were purportedly served on Luzon’s office in Makati, the Philippines, on 11 August 2004.

During the course of the hearing before me, and by consent, I gave Transfield leave to file and serve an amended originating motion and to serve it on Freehills by way of substituted service on Luzon. An amended originating motion was duly filed and served before the start of the second day of the hearing. It contained an indorsement to the effect that Transfield relies on r.7.01(1)(l), namely that Luzon is a necessary or proper party to the proceeding against Pacific. Luzon has entered a conditional appearance and seeks to have the proceeding against it set aside or stayed on jurisdictional grounds.

There is also a preliminary question as to whether, in considering the substantive application, I may have regard to the disputed documents which are discussed below.

The disputed documents

During the hearing, I was handed on a confidential basis a small bundle of documents upon which Transfield wishes to rely for the purposes of the substantive application for preliminary discovery. The documents consist of six pages of e-mails passing between various directors or officers or employees of Luzon or Pacific and the Aboitiz family, together with a six-page letter from Mallesons Stephen Jaques to Freehills dated 13 July 2004, which discusses the contents of the e-mails.

The disputed e-mails cover two different date periods, the first being September 1999, and the second being November 2000. The earlier e-mails clearly relate to the La Union proceeding, and the later ones to the drawing of the letters of credit. Some of the e-mails contain information which would clearly assist Transfield in its application for preliminary discovery.

Transfield obtained the e-mails during the course of the first arbitration. The earlier e-mails were obtained by way of subpoena served on Warwick Dart, a former employee of Luzon. The later e-mails were obtained by way of discovery from Luzon in the first arbitration.

Pacific and Luzon argue that the disputed documents are subject to an implied undertaking not to be used other than for the first arbitration, and that Transfield should not be released from that undertaking. Transfield says that no such undertaking arises in respect of documents obtained in an arbitration. Alternatively, Transfield argues that it ought be excused from any such undertaking as may exist.

The general rule is that a party to a legal proceeding who obtains documents in that proceeding gives an implied undertaking not to use those documents for any purpose other than the proceeding itself. The rule applies not only to documents obtained on discovery[30], but also to all documents obtained through other compulsory court processes, such as by way of subpoena or notice to produce[31].
[30]As were the documents in Harman v Secretary of State for the Home Department [1983] 1 AC 280, the House of Lords decision which is generally cited as the original authority for the existence of the implied undertaking.
[31]See British American Tobacco Australia Services Ltd v Cowell [2003] VSCA 43 and the various authorities referred to in the joint judgment of Phillips, Batt and Buchanan JJA at [19].

In order to obtain a release or modification of that undertaking, special circumstances are required and it needs to be demonstrated that the release or modification would not cause injustice to the party who produced the document[32].
[32]Crest Homes Plc v Marks [1987] AC 829, followed in Holpitt Pty Ltd v Varimu Pty Ltd & Others (1991) 29 FCR 576 at 578 per Burchett J; Springfield Nominees Pty Ltd v Bridgelands Securities Ltd (1992) 110 ALR 685 per Wilcox J; Re Addstone Pty Ltd (in liq); ex parte Macks (1998) 30 ACSR 162; British American Tobacco Australia Services Ltd v Cowell [2003] VSCA 43.

There is no doubt that the disputed documents would be covered by such an undertaking if they were obtained in the course of a court proceeding. I need to determine:

(a) Whether such an implied undertaking applies to documents compulsorily obtained in an arbitration; and

(b) If so, whether I can and ought to release Transfield from the implied undertaking.

I note that there is no express confidentiality provision in the arbitration agreements, the first reference or the ICC rules.

In Esso Australia Resources Ltd v Plowman[33], the High Court considered the nature of arbitral proceedings and documents produced during their course. The majority[34] held that absolute confidentiality of documents produced and information disclosed in an arbitration is not a characteristic of arbitrations in Australia. In so deciding, the majority disapproved the contrary approach which had developed in the United Kingdom[35]. However, the court held that documents produced compulsorily, for example, pursuant to a direction by the arbitrator, do attract the same confidentiality or implied undertaking as would apply in court proceedings[36].
[33](1995) 183 CLR 10.
[34]Mason CJ, Brennan, Dawson and McHugh JJ; Toohey J dissenting.
[35]Dolling-Baker v Merrett [1990] 1 WLR 1205; Hassneh Insurance Company of Israel v New [1993] 2 Lloyd’s Rep 243.
[36]Esso per Mason CJ at 32-33, Dawson J at 39, Toohey J at 46, McHugh J at 48. Brennan J dealt with the matter at 36 by holding that there should be implied into the arbitral agreement a confidentiality term, which was subject to certain exceptions.

Applying the principles enunciated in Esso, I hold that the disputed e-mails are the subject of an implied undertaking on the part of Transfield. As such an implied undertaking applies not only to the e-mails themselves, but also to information derived from them[37], the Mallesons letter which refers to the contents of the e-mails is also subject to the implied undertaking.
[37]Crest Homes Plc v Marks [1987] 1 AC 829 at 854.

Luzon and Pacific argue that any application to be excused from such an implied undertaking ought to be made to the arbitral tribunal in the first arbitration and not to this court. Transfield asserts that I have the power to excuse it from the implied undertaking.

I was taken to a few cases in which an application to be released from an implied undertaking was heard and determined in a proceeding other than the one in which the documents were originally produced. In Holpitt v Varimu[38], Burchett J said that such an application ought to be made in the proceeding in which the implied undertaking was given, a principle which was approved by Mandie J in Playcorp Ltd v Tyco Industries Inc[39] and Byrne J in McCabe v British American Tobacco Australia Services Ltd (No 3)[40]. However, as all parties in Holpitt agreed that he should deal with the matter, and as both proceedings were in the Federal Court, Burchett J proceeded to determine the application. Likewise in McCabe, both proceedings had been brought in the Supreme Court of Victoria, and the respondent to the application did not take the point that the application ought properly to have been brought in the earlier proceeding.
[38](1991) 103 ALR 684.
[39][2000] VSC 440 at [14].
[40][2002] VSC 150. Although Byrne J’s decision in this case was overturned on appeal, the Court of Appeal did so on grounds not relevant to this particular point.

I am not aware of any case in which a court has determined an application to release a party from an implied undertaking given to a completely different court, tribunal or arbitrator. Transfield submitted that the decision in Alstom Power Ltd v Eraring Energy[41] “exemplified” the principle that an application for leave to use documents could be made to a completely different court; however, an examination of the case shows that the judge did not make such a finding. Alstom involved an application for preliminary discovery under the Federal Court rule equivalent to r.32.05. In that case, the respondent, whose documents had been obtained in the course of discovery in an arbitration, had expressly agreed that the appellant could use those documents for the purpose of forming a decision whether or not to bring proceedings[42]. Accordingly, Selway J was not required to consider whether the court had power to release the appellant from the implied undertaking, in the absence of such consent.
[41][2004] FCA 706, (2004) ATPR 42-009.
[42]At [11].

The earlier e-mails were obtained by use of a subpoena issued out of this court pursuant to the Commercial Arbitration Act 1984 (“CAA”) and made returnable before the arbitral tribunal. Transfield argued that I therefore had power to release it from the implied undertaking, at least in relation to the subpoenaed documents[43].
[43]Transfield did not expressly suggest that the discovered documents could be released under the CAA, presumably because this court played no role in ordering discovery in the arbitration or resolving any disputes about discovery.

It is necessary to understand a bit more about the circumstances in which the subpoena came to be issued out of this court under the CAA. The arbitration agreements required any arbitration to be conducted in Singapore. There was a period of time during the first arbitration when there were security concerns about conducting arbitration hearings in Singapore. Given that fact, together with the location in Melbourne of two of the arbitrators and the parties’ legal advisers, the parties agreed that some of the hearings would occur in Melbourne. Clause 11.10 of the first reference provided that in respect of any hearings held in Melbourne, the CAA would apply subject to any modifications made by the turnkey contract.

Luzon and Transfield both issued various subpoenas out of this court, pursuant to s.17(1) of the CAA. In May 2002, Byrne J considered applications by Transfield, made pursuant to r.42.07 of the rules, to set aside subpoenas served by Luzon[44]. Unsurprisingly, Byrne J held that the effect of cl.11.10 of the first reference was that local law governed interlocutory hearings held in Melbourne[45].
[44]Transfield Philippines Inc v Luzon Hydro Corporation [2002] VSC 215.
[45]At [9].

The parties subsequently entered into an amending agreement in November 2002, the clear purpose of which was to ensure that, so far as possible, the arbitration would continue to operate under the ICC rules and Singapore procedural law, and the CAA would not generally apply. By clause (a) of the amending agreement, the parties agreed to vary cl.11.10 of the first reference so that the following provisions of the CAA would not apply at all: rights of appeal under s.38(2) and rights to bring an application for determination of a question of law under s.39(1). By clause (b), they agreed and gave undertakings not to make certain applications to this court under the CAA, including an application to set aside award under s.42, an application for the removal of an arbitrator under s.44, and an application for an extension of time under s.48. Section 47 of the CAA provides that this court shall have the same power of making interlocutory orders for the purposes of and in relation to arbitration proceedings as it has for the purposes of and in relation to proceedings in the Court. Most significantly, by clause (ba) of the amending agreement, the parties agreed and undertook not to make any application to this court under s.47.

In so far as Transfield’s application to have the implied undertaking released in respect of the subpoenaed documents is made under s.47 of the CAA, the application is made in breach of clause (ba) of the amending agreement. Although clause (ba) may not have the effect of excluding this court’s jurisdiction to hear the present application, it nevertheless reflects the parties’ clear desire to severely curtail their rights to apply to this court under the CAA, rights which primarily arose because of the fortuitous fact that some hearings were held in Melbourne. The parties’ intentions are a matter which I will discuss further, when I come to consider whether I ought to release Transfield from the implied undertaking.

Further and in the alternative, Transfield argues that this court can, in the exercise of its inherent jurisdiction, release a party from an implied undertaking given to a completely different court, tribunal or arbitrator. Transfield concedes that the argument is a novel one, which has not been the subject of prior consideration.

Transfield referred me to several helpful articles which have analysed the authorities on inherent jurisdiction, including an article by Keith Mason QC as he then was, now President of the NSW Court of Appeal[46]. Mason notes that the concept of inherent jurisdiction “resists analysis in view of judicial claims to exercise the jurisdiction wherever necessary for the administration of justice. Its ubiquitous nature precludes any exhaustive enumeration of the powers which are thus exercised by the courts.” Mason isolated four specific roles served by the inherent jurisdiction:
[46]‘The inherent jurisdiction of the court’ (1983) 57 ALJ 449.

(a) Ensuring convenience and fairness in legal proceedings, in a variety of ways which are not said to be relevant here;

(b) Preventing steps being taken that would render judicial proceedings inefficacious;

(c) Preventing abuse of process, in a variety of ways which are not said to be relevant here;

(d) Acting in aid of superior courts and in aid or control of inferior courts and tribunals, in a variety of ways which are not said to be relevant here[47].

[47]In the case of inferior courts, generally creating or enforcing procedural rights in a situation where the inferior court is powerless to act or where undue expense or delay might be caused if the parties were forced to resort to it.

Transfield concedes that this application does not fall precisely within any of the four suggested categories, but says that category (b) is the closest. I accept that there is no need to fit within an existing category, and that the court’s inherent jurisdiction is not to be fettered by such an approach. Nevertheless, it is helpful to analyse the types of situation covered by category (b), to understand what it is that courts have so far tried to prevent.

Situations which fall within category (b) include the use of the court’s inherent jurisdiction to grant: Mareva injunctions, whose purpose is to prevent abuse and injustice caused by the defendant removing or secreting assets and thereby defeating a judgment of the court; Anton Piller orders, whose purpose is to prevent the removal or destruction of property and documents which might be evidence in the court; stays of execution pending appeal, whose purpose is to preserve the subject matter of the judgment pending a decision on appeal. In each case, the inherent jurisdiction is exercised in order to prevent steps from being taken which could render the court’s own proceedings inefficacious.

Those examples all involve the preservation of something, pending a final court decision, so that the final court decision is not frustrated by the destruction or dissipation of that thing. The current application does not fall within that rationale. Further, none of those examples involve the court interfering with matters which are properly before another judicial or arbitral body.

I am not persuaded that this court has inherent jurisdiction to release Transfield from the implied undertaking given to the first arbitral tribunal.

In so far as I do have the power to release some or all of the disputed documents from the implied undertaking, I would regard it as a power to be exercised sparingly. That is because the very essence of the implied undertaking is that the undertaking is given to that court or tribunal which orders compulsory production of the documents[48]. That body is fully acquainted with the circumstances in which the documents were produced, the use that has or may be made of them, and whether any harm may flow as a result of the use of the documents for other purposes. As a matter of policy, it strikes me as highly undesirable that one court should interfere with an undertaking given to another court or, in this case, tribunal.
[48]Crest Homes Plc v Marks [1987] 1 AC 829.

At the time of the initial hearing of this application in April 2005, the first arbitral tribunal had not completed its task. It was in a far better position than this court to determine the types of matters identified in the previous paragraph and, in particular, to determine the possible risks and benefits which might flow from a release from the undertaking. Whilst I have no doubt that at least some of the disputed documents would assist Transfield in the preliminary discovery application, that reason alone is not sufficient for me to interfere with an undertaking given to the arbitral tribunal.

In my proposed reasons, I noted that Transfield had not put forward any reason why it could not apply to the tribunal to be released from its undertaking. I noted by way of example that its case for interference by this court might be stronger were the arbitral tribunal functus officio. That led to Transfield’s application to seek leave to admit further evidence and make submissions to the effect that the tribunal is now functus officio.

Even if the first arbitral tribunal is now functus officio[49], Transfield consciously chose not to make any application to that tribunal whilst it was still sitting. It adopted that course in the face of warnings by Luzon that any such application should be made to the tribunal.
[49]About which I express no opinion, for the reasons given earlier.

It seems that this particular issue first arose in the following context. Transfield’s lawyers wrote the Mallesons letter of 13 July 2004, which referred to the contents of the disputed e-mails and foreshadowed a preliminary discovery application in this court based on those documents. Luzon’s lawyers, Freehills, responded by a letter dated 28 July 2004, complaining about the use of the disputed documents and asserting that this court would have no jurisdiction to release Transfield from the implied undertaking given in the arbitration. In a letter dated 29 July 2004, Mallesons asserted that it could apply to this court, at least in respect of the subpoenaed documents, and intended to do so. Freehills repeated its position in a letter of 3 August 2004. Transfield then issued the preliminary discovery proceeding on 10 August 2004.

It is apparent from the final award that there was tremendous activity occurring in the first arbitration between August 2004 and early April 2005, including frequent applications and directions hearings[50]. I am not aware of any reason why an application to be released from the implied undertaking could not have been included in the numerous interlocutory steps.
[50]The narrative of the various interlocutory steps which were occurring runs from [18] to [46] of the final award.

In April 2005, Luzon continued to press its argument that this court had no power to release Transfield from the implied undertaking. Transfield continued to argue the contrary position.

By 7 June 2005, the parties had reached agreement in relation to the second quantum matters and requested the arbitral tribunal to incorporate these into the final award. There was then a further directions hearing, before a two day final hearing before the arbitral tribunal sitting in Melbourne on 20 and 21 June 2005. Transfield was represented by the same counsel as appeared before me in April 2005. Both parties then filed post-hearing submissions and other material. Once again, I am not aware of any reason why an application to be released from the implied undertaking could not have been made at this stage.

There is absolutely nothing in Transfield’s material which explains why it did not approach the arbitral tribunal for release from the implied undertaking, when it clearly had plenty of opportunity to do so, and had been warned that that was the only place in which it could make the application. Whether or not Transfield thought that this court also had jurisdiction, there was absolutely no doubt that the arbitral tribunal was the most appropriate place in which to make such an application. Luzon complains, with some justification, that Transfield now seeks to derive some benefit from the inevitable conclusion of the arbitration to improve its position in this court.

The court’s discretion in determining whether there are special circumstances which would justify release from the implied undertaking is a broad one. On the one hand, I have already observed that at least some of the earlier e-mails would assist Transfield in its application for preliminary discovery. On the other hand, I have had particular regard to the following matters in exercising that discretion: large, commercial parties to a contract, governed by foreign law and relating to a foreign construction project, agreed not to make interlocutory applications to this court in relation to the arbitration, and agreed to limit this court’s powers under the CAA; for the reasons expressed earlier, the arbitral tribunal was in the best possible position to determine such an application; although it had plenty of opportunity to do so, Transfield consciously chose not to make any such application to the arbitral tribunal, in the face of strong arguments that that was the appropriate forum. In so far as this court has power to consider Transfield’s application to be released from the implied undertaking[51], I am not satisfied that the interests of justice require that Transfield be so released.
[51]Either pursuant to s.47 of the CAA, or if I am wrong in my conclusion that there is no inherent power.

It follows that the disputed documents do not form part of the evidence before me for the purposes of the substantive preliminary discovery application.

Luzon’s jurisdiction argument

The amended originating motion is indorsed under r.7.01(1)(l) with a claim that Luzon is a necessary or proper party to the proceeding brought against Pacific. There is no dispute that Pacific, a Victorian company, has been validly served with the amended originating motion. Nor is there any argument as to the adequacy of the r.7.01 indorsement in the preliminary discovery proceeding.

The dispute is as to whether Luzon is a necessary or proper party. In that regard, the r.7.01 indorsement asserts that:

(a) Transfield reasonably believes that Pacific and Luzon are parties to the alleged conspiracy;

(b) Luzon is a necessary defendant to the application to release the disputed documents from the implied undertaking, as the documents were produced in the arbitration to which it was a party;

(c) The disputed documents passed between representatives of Luzon and Pacific in Victoria, amongst other places.

(d) The following common questions arise in this proceeding:

(i) The release from the implied undertaking;

(ii) Whether there is reasonable cause to believe that there is a cause of action against Luzon and Pacific for unlawful means conspiracy involving bribery of Philippine officials;

(iii) Whether there is reasonable cause to believe that each of Luzon and Pacific has or had in its power and possession documents which would assist Transfield in making a decision to institute proceedings.

I have already expressed the opinion that this court has no power to hear the application to release the disputed documents from the implied undertaking. In any event, that application only concerns the evidence that will be before the court on the hearing of the application for preliminary discovery. The rules require me to consider whether Luzon is a necessary or proper party to the preliminary discovery proceeding, not whether it has an interest in the disputed documents or might wish to be heard on any application to release them from the implied undertaking. A person may have an interest in documents which are sought to be obtained and used as evidence in proceedings - for example by way of subpoena or non-party discovery - and may wish to be heard in relation to such documents. However, that fact does not make the person a necessary or proper party to the entire proceeding. It follows that Luzon is not a necessary or proper party to the proceeding by reason only of the application to use the disputed documents.

The only other basis on which Luzon is said to be a necessary or proper party is that it is a party to the alleged conspiracy with Pacific, a Victorian company. There is no other factor alleged to connect the possible claim with Victoria. Based on the evidence which is discussed later in my reasons, I have concluded that there is no basis for a reasonable belief that Pacific may have been a party to any unlawful means conspiracy involving bribery of Philippine officials. Absent any possible cause of action against Pacific, the only Victorian party, Luzon is not a necessary or proper party to this proceeding.

Even if it were a necessary or proper party, the application for preliminary discovery against Luzon would fail for the following reasons.

G. The application for preliminary discovery

An applicant for preliminary discovery under r.32.05 must establish:

(a) There is reasonable cause to believe that the applicant has or may have the right to obtain relief in the court from a person whose description it has ascertained;

(b) After making all reasonable enquiries, the applicant has not sufficient information to enable it to decide whether to commence a proceeding in the court to obtain that relief; and

(c) There is a reasonable cause to believe that that person has or is likely to have or has had or is likely to have had in its possession any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist it to make the decision.

Each of those elements must be satisfied for relief to be granted.

What is a “reasonable cause to believe” must be determined objectively[52]. Although the rule should be construed benevolently[53] and must be given the fullest scope its language will reasonably allow[54], a “flimsy foundation” will not be sufficient to constitute reasonable cause[55]. The court should be satisfied there will be a real benefit from making an order, such as the possible avoidance of unnecessary or fruitless litigation. An applicant’s desire to explore “a mere hunch” is insufficient foundation for the relevant belief; however, an applicant does not have to prove that there will be, only that there may be, a real benefit from making the order[56].
[52]Hooper v Kirella Pty Ltd (1999) 96 FCR 1 at 11; Alstom Power Ltd v Eraring Energy (2004) ATPR 42-009.
[53]Schmidt v Won [1998] 3 VR 435 at 445.
[54]Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733.
[55]Scarletti Pty Ltd v Millwood Printing Co Pty Ltd (SC (Vic) App Div No 8500/93, 28 July 1994, unreported BC 9400965).
[56]Scarletti Pty Ltd v Millwood Printing Co Pty Ltd (SC (Vic) App Div No 8500/93, 28 July 1994, unreported BC 9400965) at 11-12.

Transfield says that there is reasonable cause to believe that it has the right to obtain relief in this court from Pacific and Luzon. The proposed cause of action is for damages for an unlawful means conspiracy between Pacific and Luzon involving bribery of Philippine officials. It is said that the conspiracy has substantial connections with Victoria because Pacific is based here, and this court has jurisdictional grounds to grant Transfield relief.

Pacific and Luzon say that Transfield has not shown that:

(a) This court would exercise jurisdiction in respect of such a claim against Pacific or Luzon; or

(b) Pacific is a party against whom Transfield can properly claim a right to relief.

In particular, they say that there is no evidence of Pacific being involved with any of the Philippine proceedings. Because Transfield’s potential cause of action relates only to proceedings in the Philippines, to which Pacific is not a party, there is no basis for a potential cause of action against Pacific. Luzon also says that the evidence before me does not demonstrate an objective basis for any belief as to Transfield’s right to relief against Luzon.

Transfield relies upon the affidavit of Roger James Holmes sworn 10 August 2004. Mr Holmes is a commercial manager employed by Transfield, who is responsible for the group’s Asian operations in the building and civil engineering division. He deposes to the background of the disputes relating to the project and sets out the basis for his suspicions about “extra legal activity” (meaning interference with the judicial process) on the part of Luzon or Pacific in respect of the La Union and Makati proceedings.

Pacific and Luzon rely upon the affidavits of two lawyers[57] employed by Luzon’s Philippine lawyers, the law firm SyCip Salazar Hernandez and Gatmaitan (“SyCip”). They also rely upon an affidavit of their Australian lawyer[58]. In general terms, those deponents deny any wrongdoing on their part or on behalf of their respective firms.
[57]Ben Dominic R Yap sworn 21 September 2004 and Amer Hussein N Mambuay sworn 23 September 2004.
[58]Denis James Davies sworn 21 September 2004.

Evidence in relation to the Makati proceeding

The Makati proceeding involved an application by TPI for an injunction to restrain Luzon from calling on the letters of credit under the guarantee. The proceeding commenced in November 2000. On 9 November 2000, Judge Oscar Pimental granted a temporary restraining order in favour of TPI, which was apparently due to expire on Sunday 26 November 2000. Between 14 and 16 November, Judge Pimental received evidence in relation to a further injunction application by TPI; there is a dispute as to whether that evidence was in support of an application for a preliminary or permanent injunction. On 24 November 2000, the judge dismissed TPI’s application for a further injunction.

Mr Holmes believes that directors of Luzon and Pacific may have engaged in activities intended to influence the decision of Judge Pimental to refuse to grant TPI’s further injunction application, based on the following matters:

(a) During the week commencing 20 November 2000, Mr Holmes was advised by Mr Ogsimer of Romulo, Mabanta, Buenentura, Sayoc and De Los Angeles (“RMBSA”), Transfield’s Philippine lawyers, that Mr Ogsimer understood the judge would hand down his orders on Friday 24 November 2000.

(b) Prior to 23 November 2000, Mr Holmes had been advised by Mr Ogsimer that “he believed that TPI had a very good case at law and therefore he had high expectations of obtaining the injunction applied for.” Mr Holmes later learned that one of the reasons why Mr Ogsimer was so confident of a positive result was that an attorney at RMBSA, who had formerly been a judge on the Makati court, had become aware through a former colleague in the court, that written orders were sitting on Judge Pimental’s desk and TPI’s injunction would be granted.

(c) Judge Pimental was supposed to give classes on the evening of Thursday 23 November 2000, but missed those classes and dined out instead. This caused RMBSA to be concerned that “extra legal activity” may be taking place.

(d) Mr Holmes rang Mr Ogsimer’s mobile phone on the Friday morning, the 24^th, and was told that Mr Ogsimer and Mr Tumangan, another solicitor from RMBSA, were at the Makati court, awaiting the arrival of the judge. Luzon’s lawyers were also waiting outside the court. Mr Ogsimer said that he or Mr Tumangan would wait at the court until the judge arrived to ensure that no “extra legal activity” took place.

(e) When Mr Holmes spoke to Mr Ogsimer later that morning, Mr Ogsimer said he had a growing concern that “something was not quite right”.

(f) Later that afternoon, Mr Ogsimer advised Mr Holmes that TPI had lost the application. They discussed filing an appeal, but could not do so until first thing on Monday morning. They feared that Luzon would immediately draw down on the letters of credit. In fact, Luzon drew on them at various times between November 2000 and April 2001.

Mr Ben Yap, a senior associate with SyCip, and one of the Philippine lawyers principally acting for Luzon in the Makati proceeding, has disputed that any impropriety occurred. He denies that he or any other SyCip lawyer had any advance knowledge of the contents of the judge’s orders of the 24^th. He agrees that some of his junior colleagues had been asked to go down to the Makati courthouse on the 24^th, to see whether or not a ruling had been handed down. When his colleagues later told him that Messrs Ogsimer and Tumangan were also there, he told his colleagues to stay until the ruling was handed down. Mr Yap also denies that he or anyone else at SyCip met or dined with Judge Pimental on the evening of the 23^rd, or that they were aware of the judge’s schedule or activities that evening. He is unaware of any meeting between Judge Pimental and any other representative of Luzon on the evening of the 23^rd.

Mr Yap has also deposed to the following matters, which were not mentioned at all by Mr Holmes:

(a) On 27 November 2000, TPI filed a petition for certiorari with the Court of Appeals, seeking to have Judge Pimental’s order of 24 November 2000 set aside “for having been issued with grave abuse of discretion amounting to lack of or excess of jurisdiction.”

(b) The following day, TPI obtained a temporary restraining order preventing Luzon from further drawing on the letters of credit.

(c) On 31 January 2001, three judges of the Court of Appeals dismissed TPI’s petition for certiorari “for lack of merit”.

(d) TPI sought review of the Court of Appeals decision by the Supreme Court of the Philippines. The Supreme Court rejected TPI’s application on 22 November 2004.

Transfield does not allege any wrongdoing on the part of Luzon or Pacific in relation to the decisions of the Court of Appeals or the Supreme Court. Given that fact, it is not clear what damages might be said to flow from Judge Pimental’s refusal to grant TPI further injunctive relief, if that occurred as the result of extra legal activity.

I am not in a position to resolve any factual disputes between the parties as to how Judge Pimental’s orders of the 24^th came into existence. Even if I accepted Transfield’s evidence at its highest, for the reasons which follow, the evidence is not sufficient to establish that there is reasonable cause to believe that Transfield may have a right to relief against Pacific or Luzon.

In relation to Luzon, the evidence in Mr Holmes’ affidavit is flimsy and relies heavily on speculation. Transfield’s evidence amounts to this. Its Philippine lawyers, RMBSA, received “inside information” from somebody in the Makati court to the effect that Judge Pimental intended to find in Transfield’s favour. Whether such information was received by RMBSA in a solicited or unsolicited manner is not known to me. Such a leak would be regarded as highly improper, had it occurred in an Australian court. Mr Yap has deposed that such conduct would also be regarded as highly inappropriate in the Philippines. Indeed, Mr Holmes’ own file note of 6 December 2000 notes that “because of how RMBSA gained the confidential insight, it is a bit sensitive to the use of this knowledge”; that confirms some degree of sensitivity as to the source of Transfield’s information.

Leaving to one side the propriety of Transfield’s conduct in obtaining it, the evidence is remote hearsay, originating from an unidentified person in the Makati court, who told an unidentified person in RMBSA, who told Mr Ogsimer, who in turn told Mr Holmes. Precisely what, when and how the person in the court learned about Judge Pimental’s intentions is not capable of assessment by me.

Furthermore, a judge may change his or her mind as to the outcome of a proceeding at various stages in the decision making process, for a variety of reasons which have nothing to do with bribery, corruption or any other type of impropriety. Without knowing exactly what it was that the source of the leak saw and when, it is not possible for me to make any finding as to whether Judge Pimental did indeed change his mind and, if so, what caused him to do so.

The matters upon which Transfield relies as showing that something untoward must have caused Judge Pimental to change his mind, assuming he did in fact do so, are the alleged change of the judge’s evening plans on 23 November, together with the alleged reputation of one of Luzon’s shareholders, the Aboitiz group of companies.

Transfield’s evidence in relation to the evening plans comes down to this. Mr Ogsimer told Mr Holmes that Judge Pimental was supposed to give classes that evening, but “missed them” and “dined out” instead. There is no evidence as to the source of Mr Ogsimer’s belief. Even if there were such evidence, there are so many potential explanations for such conduct which are utterly innocent, that it would be pure speculation to assume that the judge went to dinner with somebody acting on behalf of Luzon, and was persuaded or prevailed upon to change his mind.

Similarly, the bald assertion by RMBSA that the Aboitiz group of companies has a “particular reputation” in the area of “extra legal activity”[59] is not evidence of any wrongdoing in this case (or indeed in any other).
[59]Which assertion is disputed by Mr Yap.

In assessing the evidence, I have borne in mind the fact that bribery and corruption are, by their very nature, secretive activities; obtaining evidence of such activities may be difficult for a person in Transfield’s position. Nevertheless, r.32.05 does not permit applications based on unsourced speculation and innuendo. I am not satisfied on the evidence before me that there is reasonable cause to believe that Luzon has engaged in any improper conduct in relation to the Makati proceeding.

Even if, contrary to that finding, the evidence was sufficient to give rise to the possibility of interference by Luzon in the judicial process, there is simply no evidence to suggest that Pacific was in any way involved with the Makati proceeding. It was not a party to the guarantee, the letters of credit or any Philippine court proceeding or arbitration relating thereto. The mere fact that Pacific is a substantial shareholder in Luzon or has some common directors is not sufficient for me to ignore the fact that they are separate legal entities and assume that Pacific must be a party to a conspiracy with Luzon. That is sufficient to dispose of any claim based on a possible conspiracy.

It is therefore not necessary for me to determine Luzon’s further argument that any possible claim by Transfield relating to impropriety in the Makati proceeding could not succeed because it was raised in the first arbitration and could be stayed by virtue of s.7 of the IAA[60].
[60] In its amended statement of case in the first arbitration, dated 7 June 2002, TPI alleged that Luzon had engaged in improper conduct in relation to the Makati proceeding. Specifically, it alleged that Luzon had sought to procure the dismissal of TPI’s application for a permanent injunction on 24 November 2000, “by means of a transaction involving communications between a ‘contact’ of and arranged by [Luzon] with the judge who made that order, from which communications TPI was excluded.” TPI sought exemplary damages pursuant to the Civil Code of the Philippines, on the ground that Luzon’s conduct was “wanton, fraudulent, reckless, oppressive and/or malevolent.”

Evidence in relation to the Tagudin proceeding

Transfield has led evidence of alleged impropriety by Luzon in the Tagudin proceeding. However, Transfield is not seeking preliminary discovery of documents relating to possible impropriety in the Tagudin proceeding; perhaps that is because it was ultimately successful in that proceeding. Rather, it wishes to rely on evidence of what happened in the Tagudin proceeding to support an inference that there may have been impropriety in the La Union proceeding, some 2 years earlier.

The Tagudin proceeding involved an application by Luzon to obtain a temporary restraining order preventing TPI from interfering with Luzon’s possession of the project site. On 19 April 2001, Justice Melanio Rojas granted Luzon such an order for 72 hours. On 20 April 2001, the judge heard argument as to whether the order should be extended and reserved his decision. In an order dated 27 April 2001, but not received by the parties until early May, the judge dismissed Luzon’s application for further injunctive relief.

Mr Holmes has deposed that Mr Neil McDonald of TPI informed him that he attended at court on the 20^th, together with TPI’s lawyers, Mr Ogsimer and Mr Tumangan. After the hearing, Mr McDonald and the two lawyers went back to his offices. When they realised that Luzon’s lawyers were still at the courthouse when they left, it was decided that Mr Tumangan should go back to the court to make sure that Luzon’s lawyers had no further dealings with the judge. Mr Tumangan told Mr McDonald that, when he arrived back at court, he found Luzon’s lawyers and representative talking to the judge. Mr Tumangan joined in the discussion and there were further arguments about the case. RMBSA filed further written arguments on 24 April 2001.

When Mr McDonald went to the court on 7 May 2001 to find out if the judgment had been made, a court clerk directed him to the judge’s chamber. Mr McDonald then had a private conversation with the judge, in which the judge informed him that:

(a) He had made an order, which TPI should have received in the post.

(b) In his order, he had asked Luzon’s lawyers to explain why they should not be held in contempt of court as a result of their conduct, including conduct which the judge described as attempting to push him around.

(c) Luzon’s lawyers had invited the judge to go to Makati or Manila and had said they would send a car to pick him up, and they could accompany him to visit their offices in Makati. The judge had declined to go and said he had his own car.

Mr McDonald said that although the judge did not say so in words, he obviously thought this was the start of an attempt to influence him to find in Luzon’s favour.

In response, Mr Yap has denied that anybody from SyCip offered the judge a lift, invited him to visit their offices or otherwise engaged in any activity designed to influence the judge. He deposed to what he had been told of a private discussion about the Tagudin proceeding, between Mr Lucero of TPI and the judge, said to have taken place in the judge’s chambers after the hearing on the 20^th.

Mr Yap also denied that the judge issued an order requiring SyCip to explain why they should not be held in contempt for “pushing him around.” In fact the order (which was produced to me by Luzon and not Transfield) required SyCip to explain why it should not be held in contempt for a lack of candour about the fact that it commenced the Tagudin proceeding before it was contractually entitled to possession of the project site. It did not mention the judge being pushed around or interfered with in the manner asserted by Transfield. No finding of contempt was in fact made.

It seems from the conduct of both sides, that communication with a judge in the absence of one’s opponent may not be regarded in the same way in the Philippines as in Australia. The private discussion, which Transfield’s lawyers admit they had with the judge in chambers on 7 May, would be regarded as highly inappropriate in Australia. It would be equally inappropriate for Luzon’s lawyers to have spoken privately to the judge (as Transfield asserts), or for a Transfield representative to have spoken privately to the judge (as Luzon asserts), on 20 April.

Once again, the evidence of possible impropriety by Luzon is weak. Furthermore, Transfield’s argument that one can infer from what occurred in the Tagudin proceeding, that unspecified impropriety must have occurred 2 years earlier in the La Union proceeding, is even weaker.

As in the case of the Makati proceeding, there is simply no evidence of any relevant conduct by Pacific, which was not a party to the Tagudin or La Union proceedings.

The lack of any evidence that Pacific was in any way involved with any of the relevant Philippine proceedings is fatal to Transfield’s entire application for preliminary discovery. That is because the only cause of action upon which Transfield seeks to rely is a conspiracy involving two parties, Luzon and Pacific. If there is no basis for believing that Transfield has any potential claim against one of those co-conspirators, a conspiracy claim against the other alleged co-conspirator must fail.

Even if Luzon’s conduct might give rise to a cause of action against it other than conspiracy, there is no reasonable basis for believing that such a claim could be brought in Victoria against Luzon, a Philippine company, in respect of events which occurred in the Philippines.

Put in the terms of r.32.05, there is no reasonable basis for believing that Transfield has or may have the right to obtain relief in this court against Pacific or Luzon. Accordingly, the application for preliminary discovery must fail.

H. Conclusion and orders

In the project proceeding, Luzon is entitled to an order that service of the writ be set aside. The proceeding against Pacific would continue, however, Transfield will need to seek leave to amend the writ if it wishes to raise the new claims not covered by the general indorsement.

In the preliminary discovery proceeding, I would set aside service of the originating motion on Luzon. Transfield’s application for preliminary discovery by either Pacific or Luzon must fail.

I will hear from the parties as to the precise form of orders, including directions as to the future conduct of the project and settlement proceedings, and as to costs.

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[2006] VSC 175

4 December 2006