WTE Co-generation v RCR (No 2)
[2016] VSC 443
•5 AUGUST 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST
S CI 2013 01707
| WTE CO-GENERATION PTY LTD (ACN 142 284 820) | First Plaintiff |
| VISY ENERGY PTY LTD (ACN 115 133 321) | Second Plaintiff |
| v | |
| RCR ENERGY PTY LTD (ACN 080 753 680) | First Defendant |
| RCR TOMLINSON PTY LTD (ACN 008 898 486) | Second Defendant |
| AND BETWEEN | |
| RCR ENERGY PTY LTD (ACN 080 753 680) | Plaintiff by Counterclaim |
| v | |
| WTE CO-GENERATION PTY LTD (ACN 142 284 820) | First Defendant by Counterclaim |
| VISY PAPER PTY LTD (ACN 005 803 234) | Second Defendant by Counterclaim |
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JUDGE: | VICKERY J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 25 MAY 2016 |
DATE OF JUDGMENT: | 5 AUGUST 2016 |
CASE MAY BE CITED AS: | WTE CO-GENERATION v RCR (No 2) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 443 |
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PRACTICE AND PROCEDURE — Discovery and inspection — Discovery of documents under rr 29.08 and 29.09 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the ‘Rules’) — Discovery of documents under s 55(1) of the Civil Procedure Act 2010 (Vic) — Whether or not all relevant documents discovered progressively subject to a valid claim for privilege — Management order made for a consolidated affidavit of documents to include the contentious documents be filed and served — Potential for appointment of Special Referee pursuant to O 50 of the Rules — Referee may determine and report on whether or not Plaintiffs have a valid claim for privilege of large number of documents.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Whitten SC | Arnold Bloch Leibler |
| For the Defendant | Ms K L Stynes | Corrs Chambers Westgarth |
HIS HONOUR:
By their Summons dated 19 May 2016 (the ‘Summons’), RCR Energy Pty Ltd (‘RCRE’) and RCR Tomlinson Ltd (‘RCRT’), being the First and Second Defendants respectively (together called the ‘Defendants’), seek orders as to discovery against WTE Co-Generation Pty Ltd (‘WTE’) and Visy Energy Pty Ltd (‘Visy Energy’), who are the First and Second Plaintiffs (together, the ‘Plaintiffs’) and Visy Paper Pty Ltd (‘Visy Paper’), which is the Second Defendant by Counterclaim. The principal orders sought against the Plaintiffs include orders that they make discovery and provide inspection of certain documents referred to in the Summons (called the ‘Schedule A Documents’).
More particularly, the Defendants seek, inter alia:
(a)an order pursuant to rr 29.08 and 29.09 of the Supreme Court (General Civil Procedure Rules) 2015 (Vic) that the Plaintiffs and Second Defendant by Counterclaim (together called the ‘Plaintiffs’) make discovery and provide inspection of the Schedule A Documents; or
(b)alternatively, an order pursuant to s 55(1) of the Civil Procedure Act 2010 (Vic) that the Plaintiffs make discovery and provide inspection of the Schedule A Documents.
The Schedule A Documents comprise categories of discovery sought by the Defendants identified as:
Communications between WTE Co-Generation Pty Ltd (WTE), Visy Energy Pty Ltd (Visy Energy) and Visy Paper Pty Ltd (Visy Paper) and communications between any of them and their legal representatives or advisors concerning:
1the representations alleged in paragraphs 10 and 10A of the draft further amended statement of claim (‘FASOC’);
2the terms and effect of the Coolaroo Cogeneration Plant Boiler Contract dated 15 October 2008 (‘Contract’), particularly:
(a)SC21, "Limit of Liability", in the Special Conditions of Contract (Annexure Part F to the Contract);
(b) the Technical Schedule (Annexure Part H to the Contract);
(c) the Proposal (Annexure Part I to the Contract); and
(d)the Performance Guarantees (Annexure Part K to the Contract); and
3the rights of Visy Paper, WTE and/or Visy Energy in the event that the Plant (the subject of the Contract) did not have the performance characteristics described in paragraph 10 of the FASOC,
in the period between 24 January 2006 and 15 October 2008.
The Plaintiffs oppose the orders sought by the Defendants.
The Application was heard on 25 May 2016.
The Defendants do not challenge the position that any advice provided to the Plaintiffs and Second Defendant by Counterclaim before the relevant contract was executed (the ‘pre-Contract Advice’) is likely to be privileged. They do contend, however, that any privilege in such advice has been waived by the pleadings of the plaintiff parties.
In particular, the Defendants contend that, in this case, any privilege subsisting in the pre-Contract Advice has been waived by the conduct of the Plaintiffs and Second Defendant by Counterclaim by their pleading of paragraphs 10, 10A and 20 of the Further Amended Statement of Claim (‘FASOC’).
Factual background
The proceeding arises from a dispute that arose in relation to the construction of the Coolaroo Cogeneration Plant (the ‘Plant’).
By agreement entitled ‘Coolaroo Cogeneration Plant Boiler Contract’ (the ‘Contract’) dated 15 October 2008, Visy Paper as the Principal and RCRE as Contractor entered into a contract pursuant to which RCRE agreed to design and construct the Plant for the contract sum of $19,913,481 subject to adjustment. The date for practical completion was extended to 15 June 2011.
The Contract was comprised in an amended version of the General Conditions AS4902-2000 form.
On or about 15 October 2008, Visy Paper and RCRT entered into an agreement pursuant to which RCRT agreed to guarantee to the Principal the due and punctual performance of the obligations of RCRE under the Contract.
On or about 6 September 2010, Visy Paper, WTE and RCRE entered into a novation agreement, pursuant to which:
(a)WTE agreed to assume all rights, obligations and duties of Visy Paper and to perform the rights and obligations of the Principal under the Contract in place of Visy Paper;
(b)RCRE consented to and accepted the assumption by WTE of all of the obligations, duties and liabilities of Visy Paper under the Contract and WTE’s agreement to perform all of the obligations of Visy Paper under the Contract;
(c)RCRE acknowledged that its obligations, duties and liabilities under the Contract were owed to and were to be performed for the benefit of WTE as Principal under the Contract and agreed to perform the obligations, duties and liabilities of the Contractor under the Contract;
(d)The novation and release did not prejudice any accrued rights, obligations, claims or liabilities arising under the Contract in connection with the performance of the Contract before the novation which Visy Paper and RCRE may have against each other.
On or about 5 April 2013, WTE issued to RCRE a termination notice, stating that:
(a)RCR had failed to show reasonable cause why WTE should not terminate the Contract; and
(b) WTE was terminating the Contract.
By Originating Process dated 15 April 2013, the Plaintiffs commenced this proceeding.
The essence of the Plaintiffs’ allegations is that:
(a) RCR breached the Warranties terms of the Contract;
(b) RCR breached the Operational Performance terms of the Contract; and
(c)The Plant is not capable of achieving the desired performance criteria in respect of fuel flows and compositions, and is unable to operate reliably, with uniform fuel supply, or with consistent fuel emissions.
The Plaintiffs claim:
(a)Damages, including damages under s 82 of the Trade Practices Act 1974 (Cth) (‘TPA’) and/or s 236 of the Australian Consumer Law (‘ACL’);[1]
(b) A declaration that the Contract was validly terminated on 5 April 2015;
(c) Interest and costs.
[1]Competition and Consumer Act 2010 (Cth) sch 2.
On or about 20 June 2014, the Defendants filed a Defence and Counterclaim, amended on or about 12 June 2015.
The Defendants principally claim against WTE:
(a) The amount of $2,242,000 in respect of milestone payments;
(b)A declaration that the date for practical completion was extended to 3 June 2013;
(c)A declaration that practical completion would have been achieved on 21 August 2011 (three calendar weeks after 31 July 2011);
(d) The amount of $3,977,738 in respect of delay costs;
(e) The amount of $1,137,529 in respect of disruption costs;
(f) The amount of $1,335,423 in respect of variations;
(g)Alternatively, damages assessed on a quantum meruit basis in the amount of $13,914,539; and
(h) Interest and costs.
The Defendants claim against Visy Paper:
(a) Damages (in the alternative) under s 82 of the TPA and/or s 236 of the ACL.
(b) Interest and costs.
The representations
In their FASOC dated 20 May 2016, the Plaintiffs allege that a number of representations were made by the Defendants in the course of the negotiations towards the Contract, and that these were made in the text of the Contract itself prior to it coming into operation upon its execution.
By paragraph [10] of the FASOC dated 20 May 2016, the Plaintiffs allege that, in the Contract, RCRE and Tomlinson represented to Visy Paper and Visy Energy that the Plant would have certain performance characteristics, namely that it would:
(a)Have 100% MCR or, and be capable of producing, 39,600 kg of steam per hour;
(b)Be capable of achieving its 100% MCR (that is, of producing 39,600kg of steam per hour) using fuel comprising 0,350kg/hr of PMR and material recovery facility residue (Operating Condition 1);
(c)Be capable of achieving its 100% MCR (that is, of producing 39,600 kg of steam per hour) using fuel comprising 9,350 kg/hr of PMR and demolition wood residue (Operating Condition 2);
(d)Be capable of achieving its 100% MCR (that is, of producing 39,600 kg of steam per hour) using fuel comprising 14,303kg/hr of PMR (Operating Condition 3);
(e) Be complete and capable of:
(i) achieving 100% MCR (that is, of producing up to 39,600 kg of steam per hour); and
(ii) satisfying Operating Conditions 1, 2 and 3.
By paragraph [10A] of the FASOC dated 20 May 2016, the Plaintiffs allege that, in the Contract, RCRE and RCRT represented to Visy Paper and Visy Energy that RCRE:
(a)Was suitably qualified and experienced, and would exercise due skill, care and diligence in the carrying out and completion of the works;
(b)Had prepared the Proposal (as defined) so that the works under the Contract, performed in accordance with the Proposal, would enable the works to meet and continue to meet the Performance Guarantees on and from achievement of practical completion.
By paragraph [20] of the FASOC dated 20 May 2016, the Plaintiffs allege that, in reliance upon the representations of paragraph [10] and the further representations of paragraph [10A]:
(a) Visy Paper entered into the Contract;
(b)WTE Entered into the Deed of Novation and an agreement in writing with Visy Energy styled ‘Deed of Sub-sublease and Chattel Lease’ dated 30 June 2010 (the ‘Chattel Lease’);
(c)Visy Energy entered into the Chattel Lease and into an agreement in writing with Visy Industries Australia Pty Ltd (ACN 004 337 615) and Westpac Banking Corporation, styled ‘Take and Pay Agreement’ dated 30 June 2010.
Order as to discovery under the Rules
The first issue arising under the Defendants’ application is: should an order be made, under r 29.08 of the Supreme Court (General Civil Procedure) Rules2015 (the ‘Rules’), that the Plaintiffs and Second Defendant by Counterclaim make and serve an affidavit stating whether they are in possession of documents sought by the Defendants as described in the Schedule A Documents.
Rule 29.08 provides for orders for particular discovery in the following terms:
(1) This Rule applies to any proceeding in the Court.
(2)Where, at any stage of a proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any question in the proceeding may be or may have been in the possession of a party, the Court may order that party to make and serve on any other party an affidavit stating—
(a)whether that document or any, and if so what, document or documents of that class is or has been in that party's possession; and
(b)if it has been but is no longer in that party's possession, when the party parted with it and that party's belief as to what has become of it.
(3)An order may be made against a party under paragraph (2) notwithstanding that the party has already made or been required to make an affidavit of documents.
A companion to r 29.08 is r 29.09 which provides for inspection of documents referred to in an affidavit of documents in the following terms:
(1)A party upon whom an affidavit of documents is served in accordance with Rule 29.03 or in accordance with an order made under Rule 29.07 or 29.08 and a party to whom an affidavit of documents is supplied in accordance with Rule 29.06 may, by notice to produce served on the party making the affidavit, require that the party produce the documents in that party's possession referred to in the affidavit (other than any which that party objects to produce) for inspection.
(2)A party upon whom a notice to produce is served in accordance with paragraph (1) shall, within seven days after that service, serve on the party requiring production a notice appointing a time within seven days after service of the notice under this paragraph when, and a place where, the documents may be inspected.
(3) A notice to produce under paragraph (1) shall be in Form 29C.
(4)A party to whom documents are produced for inspection under this Rule may take copies of the documents.
(5)For the purpose of paragraph (4), taking a copy of a document includes photocopying the document, and if the party to whom a document is produced states that the party wishes to have it photocopied, the party producing the document shall at that party's option either—
(a)allow the other party to photocopy the document at such place as the parties agree; or
(b) supply the other party with a photocopy of the document.
(6)Unless the Court otherwise orders, the cost of a photocopy of a document supplied to a party in accordance with paragraph (5) shall—
(a)be borne by that party in the first instance and be ultimately a cost in the proceeding; and
(b) be in the amount allowed in Appendix A for copy documents.
Determination of this, therefore, issue requires the Court in this case to consider whether:
(a) the Schedule A Documents relate to a question in the proceeding; and
(b)it appears to the Court from evidence or the nature or circumstances of the case, or from any document filed in the proceeding, that there are grounds for a belief that such documents or documents within that class may be or may have been in the possession of the Plaintiffs and Second Defendant by Counterclaim.
Given that application of the Rule is a matter for the discretion of the Court, a central issue to be considered in the exercise of the discretion is whether the party said to be in the possession of documents relating to any question in the proceeding (or to have been in such possession) has already made discovery of those documents by the provision of an affidavit of documents or otherwise.
Order under the CPA
In the alternative, the Defendants seek an order pursuant to s 55(1) of the Civil Procedure Act 2010 (Vic) (the ‘CPA’) that the Plaintiffs make discovery and provide inspection of the documents identified in Schedule A to the Summons.
Subsection 55(1) of the CPA provides in terms which are very broad:
(1)A court may make any order or give any directions in relation to discovery that it considers necessary or appropriate.
Examples of orders which may be made under s 55(1) are provided in a non-exclusive list in s 55(2) of the CPA.
Subsection 55(1) may include an order or direction for the production of an affidavit relating to a class of documents and inspection of those documents.
In this case, the approach to the exercise of the discretion conferred by s 55(1) will be similar to the exercise of the discretion under the Rules.
The submissions of the Defendants under r 29.08
The Defendants submitted as follows in their application made under r 29.08.
The Plaintiffs’ claim against the Defendants can be separated into two parts:
(a)WTE’s claim for rectifications costs (of $16,124,463) and liquidated damages (of $995,674). WTE’s claim is made pursuant to terms of the Contract, to which RCR a party; and
(b)Visy Energy’s claim for loss of income of $24,704,000. Visy Energy is not a party to the Contract. Its claim is based on warranties in the Contract which are said to constitute actionable misrepresentations under the TPA/ACL.
The present application relates to Visy Energy’s claim against the Defendants. That claim has been augmented by the Plaintiffs’ FASOC dated 20 May 2016.
Visy Energy’s claim in the FASOC dated 20 May 2016 is pleaded as follows:
(a)At paragraphs 10 and 10A, the Plaintiffs allege that the Defendants made representations regarding:
(i) the plant’s future performance characteristics;
(ii) its qualifications and experience; and
(iii)the suitability of its Proposal for the works (to ensure the works would achieve the performance guarantees),
where the source of the representations is said to be the Contract.
(b)At paragraph 12, the plaintiffs allege that Visy Paper ‘was acting for and on behalf of Visy Energy in relation to the conduct of Visy Paper that is alleged’.
(c)At paragraph 20, the Plaintiffs allege that in reliance on the alleged representations:
(i) Visy Paper entered into the Contract dated 15 October 2008;
(ii)WTE entered into the Deed of Novation dated 6 September 2010 (Deed of Novation) and Deed of Sub-sublease and Chattel Lease dated 30 June 2010 (Chattel Lease); and
(iii)Visy Energy entered into the Chattel Lease and the Take and Pay Agreement dated 30 June 2010 (‘Take and Pay Agreement’) – an agreement between Visy Energy, Visy Industries Australia and Westpac. RCR is not a party to the Take and Pay Agreement.
(d) At paragraph 36, the alleged representations are said to be misleading or deceptive in breach of s 52 of the TPA (and/or s 18 of the ACL). The Plaintiffs contend that the representations were representations as to future matters and rely (solely) on the deeming provision in s 51A of the TPA (and/or s 4 of the ACL).
(e)At paragraph 38, Visy Energy alleges that it has suffered loss and damage by entry into the Take and Pay Agreement.
In summary, Visy Energy says that in reliance on contractual warranties given by RCR to Visy Paper (in the Contract between RCR and Visy Paper dated 15 October 2008):
(a)it entered into the Take and Pay Agreement with Visy Industries Australia and Westpac (on 30 June 2010); and
(b)it has suffered loss of income of $24,704,000 pursuant to the Take and Pay Agreement.
The Defendants claim that it is significant to this application that the alleged source of the representations is the text of the Contract itself.
In this context, the Defendants submit that the Schedule A Documents are relevant to:
the communication of the alleged representations to the plaintiffs and second defendant by counterclaim; and
their understanding of the terms of the Contract – being the source and context for those representations.
The Schedule A Documents are therefore contended to be relevant to the Plaintiffs’ claimed reliance on the alleged representations.
It is next said by the Defendants that there are grounds for a belief that the Schedule A Documents are in possession of the Plaintiffs and Second Defendant by Counterclaim. They rely on various references in the correspondence between the parties which are said to reveal that documents, including legal advices, meeting the description of the Schedule A Documents are in the possession of the Plaintiffs. This evidence is contained in the affidavit of Mr Jeykishan Nandacumaran dated 19 May 2016 filed on behalf of the Defendants. The principal correspondence of relevance is:
A letter from the solicitors of the Plaintiffs, Arnold Bloch Leibler (‘ABL’), dated 19 October 2015, which states:
“[w]e are instructed that our clients’ preliminary searches have identified some additional documents which our clients propose to discover …”;
A letter from ABL dated 2 November 2015, which encloses documents meeting the description of the Schedule A Documents;
A letter from the solicitors of the Defendants, Corrs Chambers Westgarth (‘Corrs’), dated 16 November 2015, describing the results of Mr Nandacumaran’s review of the recently provided documents, which reveal correspondence directing questions to Visy Paper’s in-house counsel but fail to disclose any response;
A letter form ABL dated 20 November 2015 stating:
“As you know, any advice provided to our clients by legal representatives or advisers concerning the terms of the Contract or the representations contained in the Contract are privileged.
Our clients have discovered relevant documents going to reliance. The facts and circumstances surrounding our clients' reliance on the representations were explained in our letter dated 19 October 2015 and are borne out in the documents discovered. These matters will also be addressed in our clients' lay evidence in due course.
That our clients have in their possession few documents falling within paragraph 1 and 2 of the Reliance Categories should not come as a surprise. Our clients did not expect that the representations made by your clients in the Contract and prior to entry into the Contract would be false.”; and
A letter from ABL dated 19 January 2016. In this response to a request by Corrs for confirmation that the Plaintiffs did not obtain any advice of the kind described in Schedule A to the summons, ABL stated on behalf of their clients, the Plaintiffs:
“As would be expected of a contract of this nature, our clients obtained advice in relation to the Contract during its negotiation with your clients. The advice is privileged.
Our clients have discovered relevant documents in their possession going to the issue of reliance. If any additional documents are located, our clients will discover them under their ongoing discovery obligations.
As previously explained, our clients had no expectation that the representations made by your clients were not reasonably made. Our clients had no cause to obtain advice in relation to the consequences of the plant not meeting the performance capabilities represented by your clients. As revealed by the documents already discovered by our clients, our clients relied on the representations made by your clients as to the performance of the plant.”
The Defendants say further that a claim of privilege does not prevent an order being made under r 29.08 or compliance with it. Privilege may be relied on to resist a notice to produce under r 29.09. If privilege is claimed over documents required to be discovered, the ground on which privilege is claimed must be stated in the affidavit in accordance with usual practice.
The submissions of the Plaintiffs under r 29.08
By way of summary, the Plaintiffs’ position is as follows.
The Plaintiffs have already discovered relevant documents in response to the categories of documents sought in the Summons, with appropriate redactions to remove privileged content.
The Plaintiffs contend that they have progressively discovered documents in response to the categories sought by the Defendants without any admission or concession that the documents sought were discoverable or relevant in the proceeding. The Plaintiffs’ third list of discoverable documents identified 15 documents over which the Plaintiffs claimed privilege. The documents over which privilege is claimed were redacted in part to remove privileged content.
The Plaintiffs say that the complaint of the Defendants, as far as the Plaintiffs can discern, is that the Plaintiffs’ discovery to date is inadequate.
Whether any and, if so, what order should be made in the circumstances?
I am satisfied on the material before the Court that the Plaintiffs have already discovered at least some of the Schedule A Documents and claimed privilege in respect of some parts of those documents. However, I am unable on the material before me to ascertain whether or not the Plaintiffs have already made discovery of all of the Schedule A Documents.
The Plaintiffs have provided discovery to this point in a progressive fashion. Given the present controversy between the parties, it is desirable that a consolidated affidavit of documents be prepared in relation to the Schedule A Documents.
In the circumstances I should make the following order under r 29.08 and s 55(1) of the CPA:
The Plaintiffs make, file and serve on the Defendants a further affidavit (the ‘Consolidated Schedule A Affidavit of Documents’) stating—
(a) whether any, and if so what, document or documents of the documents identified in Schedule A to the Defendants’ Summons dated 19 May 2016 is or has been in that party's possession; and
(b) if any such document has been but is no longer in that party's possession, when the party parted with it and that party's belief as to what has become of it.
Further, given the significant disagreement between the parties as to whether any and which of the documents are the subject of a legitimate claim for privilege, I will make a further order that:
(a)if any such document, or part of such document, is the subject of a claim for privilege by the Plaintiffs, the affidavit must identify each document and part of each document for which privilege is claimed.
At this point I will not make any order as to inspection of the documents identified in the Consolidated Schedule A Affidavit of Documents. This will have to await a further determination as to whether any and which parts of any documents over which privilege is claimed ought to be inspected or whether a claim for privilege can be sustained in the face of the claim by the Defendants that any such privilege has been waived by the Plaintiffs through their pleading of the representations in the FASOC dated 20 May 2016.
A central question for the remaining determination will be whether there is any inconsistency between the allegation of reliance contained in paragraph 20 of the FASOC dated 20 May 2016 and the maintenance of the confidentiality of communications between the Plaintiffs and their legal representatives which the doctrine of privilege is intended to protect.
This can only be properly determined, not in the abstract, but by specific reference to each document for which privilege has been claimed.
Given the volume of documents potentially in issue, I may well be persuaded to refer the question to a Special Referee to be appointed under O 50 of the Rules, and await the report of the Special Referee (the ‘Privilege Reference’).
If this course is followed, the Special Referee will be commissioned to prepare a report for the Court on the question by applying the principles as to the claim for privilege and waiver of that privilege which have arisen and been argued in this case. Having already heard the parties on the issue, I will take their submissions into account in giving directions to the Special Referee as to the conduct of any Privilege Reference and the principles to be applied.
Orders
I will make the following orders on the Summons at this stage:
1.By [a date to be fixed] the Plaintiffs make, file and serve on the Defendants a consolidated Schedule A affidavit of documents stating—
(a) whether any, and if so what, document or documents of the documents identified in Schedule A to the Defendants’ Summons dated 19 May 2016 is or has been in that party's possession; and
(b) if any such document has been but is no longer in that party's possession, when the party parted with it and that party's belief as to what has become of it; and
(c) if any such document, or part of such document, is the subject of a claim for privilege by the Plaintiffs, the affidavit must identify each document and part of each document for which privilege is claimed.
2. The costs of the Summons to date will be reserved.
I will hear the parties as to the date by which the Plaintiffs should file and serve on the Defendants the Consolidated Schedule A Affidavit of Documents.
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