FEDERAL COURT OF AUSTRALIA

United Salvage Pty Ltd v Louis Dreyfus Armateurs SNC [2006] FCA 116

DIRECTIONS - discovery

Federal Court Rules O 15 r 8

International Convention on Salvage (1989)

Australian Broadcasting Commission v Parish (1981) 41 FLR 292 cited

Index Group of Companies Pty Ltd v Nolan [2002] FCA 608 cited

UNITED SALVAGE PTY LTD, GLADSTONE TUG SERVICES PTY LTD AND QUEENSLAND TUG AND SALVAGE CO PTY LIMITED v LOUIS DREYFUS ARMATEURS SNC, LOUIS DREYFUS ARMATEURS SAS, SOCIETE ANONYME LOUIS DREYFUS et COMPAGNIE AND OLTRAMARE SHIPPING CO SA

N246 of 2002

TAMBERLIN J

SYDNEY 

17 FEBRUARY 2006

THE COURT ORDERS THAT:

1.         The plaintiff to discover the documents as indicated in these reasons incorporating the modifications referred to. 

2.         Costs reserved. 

3.         The defendant to submit Short Minutes of appropriate orders to give effect to these reasons within seven days.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT - DISCOVERY

1                     This claim relates to salvage reward.  The defendants seek further discovery under 0 15 r 8 of the Federal Court Rules.  This rule empowers the Court to require particular discovery of documents where it appears that some documents relating to the matters in question are in the possession of a party.  The requests in this case relate to the criteria for fixing the award set out in Article 13 of the International Convention On Salvage (1989).  This Article requires the fixing of the reward with a view to encouraging salvage operations, after taking into account ten specified matters.  The documents sought by the defendants are identified in the Schedule marked “A” attached to the Motion.

2                     After some discussion on the hearing, the documents referred to in clauses 6, 7 and 8 are no longer in contention. 

3                     On a discovery application, the Court has a broad discretion and will balance the costs, time and possible oppression to the producing party against the importance and likely benefits which arise to the requesting party from production of the documents: Australian Broadcasting Commission v Parish (1981) 41 FLR 292 at 295.  The Court will ensure that in all the circumstances, the litigation is conducted fairly in the interests of both parties, and care must be taken to make sure that there is no excessive or unnecessary discovery: see Index Group of Companies Pty Ltd v Nolan [2002] FCA 608.  This Court has made it clear in Practice Note 14 that it will take a restrictive approach to discovery to ensure that excessive and wasteful discovery does not occur.

4                     With these principles in mind, I turn to the specific classes of documents sought to be discovered as set out in the Schedule to the Motion in respect of which there remains a live dispute.

5                     The first five classes of documents in dispute are under the broad heading of “Financial Documents.”  The main subject matter of these clauses concerns expenditure and the value and operation of tugs, and the costs of such tugs, including harbour tugs and salvage capable tugs, which need to be available to carry on the salvage business of the plaintiffs.

6                     The remaining classes of documents relate to payments and also the terms in respect of services provided to distressed vehicles where there is no written salvage contract as to agency.

7                     The first group of documents in Clause (1) of the Schedule concern audited financial reports and other internal records of the Adsteam Marine Group, which are referred to in the affidavit of Mr Grbin of 31 January 2004 in so far as these reports and records are created after 1 July 2000.  The second group in Clauses (2) to (5) refers to the cost of constructing tugs, the value of the plaintiff’s tugs, the annual salvage reward received by a member of the Adsteam Marine Group, and expenditure as a result of the “La Pampa” incident.

8                     In relation to the documents concerning the costs of constructing a salvage or other tug, the plaintiffs raise a number of objections, including the following.  The first is that the reference to “other internal records” is ambiguous and will cause undue expense and inconvenience in identifying the documents sought.  Secondly, it is said the claim is oppressive because it covers the records of seventy subsidiaries and approximately one hundred and fifty vessels.  Thirdly, the time span after 1 July 2000 is too long.  Finally, there is an objection to the expression “referred to” which is said to be excessively broad in that it seeks all construction records.

9                     The problem which the defendants say they face is that evidence has been filed by the Chief Financial Officer of Adsteam, Mr. Grbin, in support of the plaintiff’s claim, alleging that certain estimated figures, which are to be taken into account in respect of additional capital costs of salvage-capable tugs, are figures expressed to have been calculated on the basis of information extracted from the audited financial reports and internal records of the group and provided for the purpose of the claim.  The plaintiffs have discovered the extracted information but the objection is to producing all the audited financial reports and internal records which underpin the extracts.

10                  The monetary amounts to which this evidence refers are not insignificant, and there are several references in the affidavit of Mr. Grbin which make it clear that the extracts are derived from the financial records and other records of each relevant subsidiary, including invoices and other records or expenses concerning the costs of construction and maintenance of salvage-capable and back-up tugs.  In view of the fact that these source records are relied on to formulate the claim, in my opinion it would be unfair to the defendants and unreasonable not to require discovery of the documents to which Mr. Grbin has referred, to ensure that his extraction and statements can be properly tested.  If only the extracts are produced, it is not practicable to challenge the contents of those extracts to see whether in fact the financial reports and records to which he has adverted support his statements.

11                  In my view, these records are discoverable.  Balancing the evidence as to claimed oppression against the legitimate interests of the defendants in challenging the evidence, I consider it is reasonable that they should be discovered as they have been relied on in evidence.

12                  In relation to Clause 1(b) of the Schedule, which concerns the value of the plaintiff’s salvage-capable tugs, this is clearly a relevant consideration under Article 3(j).  Mr. Grbin, in Paragraph [9] of his affidavit, asserts that based on financial reports and records of Adsteam Marine Group, the total figure for the estimated total additional capital cost of constructing a salvage-capable tug is $4.2 million dollars.  It is therefore appropriate for the plaintiff to have access to the financial reports and records so specified and relied on by Mr. Grbin in relation to the additional cost, for the purpose of properly testing the claim which has had regard to Article 13(j).  Mr. Grbin has not limited his assertion to a particular salvage-capable tug, but has stated a figure in general.  He has not limited the reference to the tugs which are the subject of this proceeding.  These documents should be produced.

13                  Clause 1(c) calls for all documents referred to by Mr. Grbin which make reference to the annual salvage award received by a member of the Adsteam Marine Group.  In my view, this is too wide and should be rejected.  The use of the expression “in relation to any member” requires this conclusion.

14                  Clause 2 refers to quotations for the construction of a tug received by any of the plaintiffs, Adsteam Marine Ltd or any of its subsidiaries between 30 June 2000 to 2005.  I do not allow this request because it is too wide.  Quotations, generally speaking, are not evidence of value or of actual construction costs.  Actual costs of construction may be some indication which could point to value but there may be numerous variations.  If value means market value, there is not necessarily any useful connection between construction costs and value. I therefore reject this clause.

15                  Clause 3 seeks all documents that refer to the hours or times or periods during which tugs operated by Adsteam spent in 30 June 2000 to 2005.  In my view, this is too broad and I reject the request.  The reference too “all documents” is too wide.  On its face, it is unduly onerous. It contains the words “referred to” which again is too wide in this context.  It also refers to “salvage-related services”, which is too wide.  This request is rejected.

16                  Clause 4 calls for any documents evidencing costs or expenditure incurred by or on behalf of any one or more of the plaintiffs as a result of the incident involving the vessel “La Pampa” on 27 March 2002.  This bears directly on the question of the expenses and losses suffered by the salvers.  The objection is taken to the production of documents relating to “routine” costs and expenditures.  In my view this is a proper request and is not too wide.  There is no sound basis for cutting it down to cover only “extraordinary costs”, as selected by the plaintiffs.

17                  The final clause under “Financial Documents” is Clause 5, which concerns all documents created from 30 June 2000 to date which refer to the market value of tugs owned or operated by one of the plaintiffs and related companies.  Again, I do not think this is of sufficient benefit or relevance in ascertaining the value of the tugs to outweigh the hardship to the plaintiffs.  The market place value of tugs can be proven by sales, not by documents referring to market value in the abstract.  If there is a market, then this information should be obtained on a more specific basis from an examination of concluded sales.

18                  The next two Clauses in dispute, 9 and 10, refer to documents referred to in an affidavit of Mr. Hoskison of 30 November 2005.

19                  In that affidavit, Mr. Hoskison mentions tug hire rates as referred to in a fax of 4 August 1995, and says that these rates have been applied to all salvage operations in which he has been involved since that date.  The defendants in Clause 9 seek all documents created in the period 1 July 1995 to 27 March 2002 which evidence the invoicing or payment to United Salvage of those tug hire rates.  This request is too broad and in my view oppressive having regard to the volume and work involved in locating these documents.  This category could be properly limited by reference to records of payment of the tug hire rates referred to in the period expressed and it then would not be too wide.  However, in its present form, I believe the request should be rejected.  Likewise, Clause 10 is too broad, and I reject it for the same reasons.  Again, the actual cheques or payment instruments or records could be requested, but in its present excessively broad form, I reject this clause.

20                  In relation to Clause 11, Counsel for the plaintiffs informed me on hearing that documents in respect of three significant common law salvages will be produced.  These are said to be the only recent common law salvages of significance that have taken place.  At this point, I propose to postpone this request until the defendants have had an opportunity to consider the documents produced and to determine whether further material is necessary to their case.  I appreciate that the defendants may take the view that the documents produced have been selected on an indeterminate basis and that they should have an opportunity to consider all the documents to see whether the documents produced are typical or properly representative.

21                  The documents are required to test Mr Hoskison’s evidence that a practice has developed within the Australian and South Pacific salvage industry that where tugs are not available, salvage operations are undertaken by the salvor by subcontracting harbour tugs or salvage-capable harbour tugs owned by local operating authorities, which can be deployed on short notice and on terms well known and routinely agreed upon in the industry to provide salvage service.  His evidence was that from its formation in 1998, United Salvage has never owned any tugs, and all salvage operations performed by it as principal since 1998 have used tugs which had been subcontracted from local port companies.

22                  I direct the plaintiff to discover the documents as indicated in these reasons with the modifications I have referred to.  I reserve the question of costs.  I direct the defendant to submit Short Minutes of appropriate orders to give effect to these reasons.

Associate:

Dated:              17 February 2006