FEDERAL COURT OF AUSTRALIA
Coogee Chemicals Pty Ltd v BHP Billiton Petroleum (Bass Strait) Pty Ltd [2006] FCA 1820
Trade Practices Act 1974 (Cth), s 52
Federal Court Rules Order 15 rule 2(3)
Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 2) [2006] FCA 1001
COOGEE CHEMICALS PTY LTD (ACN 008 747 500) AND MOGAL MARINE PTY LTD (ACN 088 125 571) AND COOGEE ENERGY PTY LTD v BHP BILLITON PETROLEUM (BASS STRAIT) PTY LTD (ACN 004 228 004) AND BHP BILLITON PETROLEUM PTY LTD (ACN 006 918 832)
WAD 81 OF 2003
GILMOUR J
22 DECEMBER 2006
PERTH
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD81 OF 2003 |
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BETWEEN: |
COOGEE CHEMICALS PTY LTD (ACN 008 747 500) AND MOGAL MARINE PTY LTD (ACN 088 125 571) First Applicant
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COOGEE ENERGY PTY LTD (ACN 092 473 795) Second Applicant
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AND: |
BHP BILLITON PETROLEUM (BASS STRAIT) PTY LTD (ACN 004 228 004) First Respondent
BHP BILLITON PETROLEUM PTY LTD (ACN 006 918 832) Second Respondent
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BHP BILLITON PETROLEUM (BASS STRAIT) PTY LTD (ACN 004 228 004) AND BHP BILLITON PETROLEUM PTY LTD (ACN 006 918 832) Cross Claimants
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COOGEE CHEMICALS PTY LTD (ACN 008 747 500) AND MOGAL MARINE PTY LTD (ACN 088 125 571) Cross Respondents
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GILMOUR J |
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DATE OF ORDER: |
22 DECEMBER 2006 |
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WHERE MADE: |
PERTH |
THE COURT ORDERS THAT:
1. Paragraphs 1 and 2 of the motion filed on 4 December 2006 be dismissed.
2. The time set by order 1 of the orders of District Registrar Jan made on 8 September 2006 for the First and Second Respondents to file and serve any further written reports of experts on which they intend to rely be extended to 19 February 2007.
3. The proceeding be adjourned for further directions at 9.30 am on 13 March 2007.
4. The Respondents pay the Applicants’ costs of the motion.
5. Parties have liberty to apply.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD81 OF 2003 |
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BETWEEN: |
COOGEE CHEMICALS PTY LTD (ACN 008 747 500) AND MOGAL MARINE PTY LTD (ACN 088 125 571) First Applicant
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COOGEE ENERGY PTY LTD (aCn 092 473 795) Second Applicant
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AND: |
BHP BILLITON PETROLEUM (BASS STRAIT) PTY LTD (ACN 004 228 004) First Respondent
BHP BILLITON PETROLEUM PTY LTD (ACN 006 918 832) Second Respondent
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BHP BILLITON PETROLEUM (BASS STRAIT) PTY LTD (ACN 004 228 004) and BHP BILLITON PETROLEUM PTY LTD (ACN 006 918 832) Cross Claimants
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COOGEE CHEMICALS PTY LTD (acn 008 747 500) and MOGAL MARINE PTY LTD (acn 088 125 571) Cross Respondents
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JUDGE: |
GILMOUR J |
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DATE: |
22 DECEMBER 2006 |
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PLACE: |
PERTH |
REASONS FOR JUDGMENT
1 By a motion dated 4 December 2006 the respondents seek orders that the applicants file and serve a supplementary list of documents not already discovered. There has been no order for general discovery and it was accepted by counsel for the respondents that the criteria set out in the Federal Court Rules Order 15 Rule 2(3) confine the extent of discovery in this matter.
2 Federal Court Rules Order 15 r 2(3) provides generically for those documents required to be disclosed as being:
(a) documents on which the party relies; and
(b) documents that adversely affect the party’s own case; and
(c) documents that adversely affect another party’s case; and
(d) documents that support another party’s case.
3 These criteria under r 2(3) supersede the “train of inquiry” test as the usual requirements for discovery: Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 2) [2006] FCA 1001 at [145].
4 The respondents also seek ancillary orders including that the time for filing and serving further written reports of experts and which are the subject of orders by District Registrar Jan dated 8 September 2006 be extended for compliance to 2 March 2007.
5 The action in respect of which the applicants seek various relief against the respondents for alleged contraventions of s 52 of the Trade Practices Act 1974 (Cth) concerns the acquisition by the applicants from the respondents of certain property and interests including a Methanol Plant in Laverton, Victoria. The key component of the Plant which is central to the action is the Advance Gas Heated Reformer (“the AGHR”), and its predecessor component, the Gas Heated Reformer (“the GHR”). It was common ground at the hearing before me that the GHR technology included reactor tubes which had been coated with aluminide whereas the reactor tubes installed in the AGHR were not coated with aluminide. A fundamental complaint of the applicants turns on alleged representations concerning the risk of corrosion to the reactor tubes which formed part of the AGHR. This corrosion is described as ‘metal dusting’. It is to protect against metal dusting that aluminide coating is applied to reactor tubes.
the relevant pleadings
6 By paragraph 5 the Further Re-amended Statement of Claim alleges relevantly that by an Information Memorandum the respondents represented to the applicants that:
5.5 The AGHR was installed to replace a gas heater reformer (GHR). Both the GHR and AGHR had specially selected alloys to prevent the occurrence of metal dusting (corrosion) on the reactor tubes;
5.6 The AGHR was based on successful and proven attributes (or technical qualities) of the GHR. Certain design limitations had been overcome.
5.9 The AGHR had operated successfully for over 12 months.
5.10 No significant problems with the Plant, including the AGHR, had occurred in the period from 1 July 1999 until January 2000.
5.11 After five years of operation no signs of metal dusting had been observed in either the GHR or the AGHR.
5.14 The operation of the AGHR had proven to be successful. The objectives of having a reactor which was easy to maintain with the capacity to be scaled up to large single stream plant had been met.
7 By paragraph 6 of the Further Re-amended Statement of Claim the applicants allege by implication the following further representations relevantly:
6.1 The AGHR was a proven item of industrial plant or equipment.
6.2 Save as expressly referred to in the Information Memorandum, the AGHR was of the same design and construction of the GHR.
6.3 There was no change in the metallurgy or metals used between the GHR and the AGHR.
6.4 The GHR and the AGHR had operated successfully for an aggregate period of in excess of five years.
6.5 Metal dusting had not occurred on the AGHR reactor tubes.
6.7 The only area of significant technical risk with the AGHR was the catalyst tube seals and there were no other significant technical risks inherent in the design or operation of the AGHR.
6.8 There was no, or no significant, risk that the AGHR would require extensive repair or maintenance in the near future as a consequence of metal dusting of the AGHR reactor tubes.
8 Paragraph 20 sets out those allegations which in effect falsify the representations said to emerge from the Information Memorandum including that:
20.1 (b) BHP’s research and development program in relation to the Plant had not been successfully completed because:
(i) …
(ii) there was a significant technical risk associated with the operation of the AGHR that is the formation of metal dusting on the reactor tubes, because the reactor tubes were not coated as the GHR reactor tubes had been.
(d) The AGHR was not based on all the successful and proven attributes (or technical qualities) of the GHR because, unlike the GHR, the reactor tubes in the AGHR were not coated. As a consequence there was an increased risk of metal dusting.
(g) There was a significant risk that the AGHR would require extensive repair or maintenance in the near future as a consequence of metal dusting with reactor tubes.
9 Further particulars of paragraph 20.1(d) were provided concerning the allegation that as a consequence of the reactor tubes in the AGHR not being coated with aluminide there was an increased risk of metal dusting as follows:
A12
(a) Aluminide is an inert metal and is not prone to metal dusting.
(a) Aluminide provided a coating which prevented the alloy of the GHR reactor tubes coming into contact with syngas; syngas is highly corrosive and most likely to cause metal dusting.
(b) Because the AGHR reactor tubes were not aluminide coated there was an increased risk of metal dusting of the reactive metal of the reactor tubes as a consequence of contact with syngas.
10 The central allegations then are firstly that it was represented that the Plant had operated for a period of five years successfully; that all of the proven attributes of the GHR had been included in the AGHR which was thereby a successful and proven technology, and secondly that there was no significant risk of metal dusting utilising that technology.
11 Damages are sought on the basis that the Methanol Plant and associated Intellectual Property were worth less on the date of purchase than the price paid.
12 In their Defence the respondents amongst other things:
(a) deny the representations were made as alleged;
(b) deny the falsity of the representations, and in the alternative say that there were reasonable grounds for making the representations;
(c) allege that metal dusting arose from the manner in which the applicants ran the plant; and
(d) deny any loss was suffered.
the respondents’ submissions
13 The categories of further documents discovery of which was sought are set out in Schedule A attached to the written Outline of Submissions filed by the respondents, and as amended by counsel for the respondents at the hearing of the motion.
14 The categories as amended are as follows:
Category 1
15 All documents not yet discovered relating to the research, development and testing of the LCM technology employed in the AGHR which related to metal dusting or to measures to address metal dusting.
Category 2
16 All documents not yet discovered relating to metal dusting with the aluminide-coated reactor tubes installed in the AGHR.
Category 3
17 All communications not yet discovered which refer or relate to the state of the LCM technology employed in the GHR and the AGHR, and whether and on what basis it is proven, between any of the following (including documents which are held or communicated any information on behalf of the applicants):
(a) either of the applicants;
(b) Coogee Resources Ltd;
(c) Kellog, Brown and Root; and
(d) Johnson Matthey.
Category 4
18 All documents not yet discovered evidencing, recording or relating to the value of the joint venture, the Intellectual Property and the Plant (within the meaning of those terms as defined in the further re-amended statement of claim), including documents in connection with the possible transfer or sharing of the Intellectual Property with Coogee Resources Ltd.
19 The applicants by their written outline of submissions at par [5] do not oppose discovery of the category of documents as set out under Category 4. Accordingly these reasons concern only Categories 1-3.
20 The respondents submit that the issues of representations, falsity, reasonable grounds and loss revolve closely around the state of the technology and its operation, both before and after the time of sale. The state of technology and its implications it is said will be the focus for the opinion of the respondents’ technical expert, as it was for the applicants’ experts.
21 They submit that by their written outline of submissions as follows:
Category 1
Documents relating to research, testing and development of the LCM technology by the applicants relate to the alleged deficiencies in the technology and that the applicants have developed and tested the LCM technology in consultation with ICI/Johnson Matthey “in an endeavour to improve the technology, and specifically to overcome the flaws in the technology which existed as at the date of acquisition.” [10]
This is an excerpt from a letter from the applicants’ solicitors to the respondents’ solicitors dated 14 November 2006 and to which I will refer later (annexure “SLF-12” to the affidavit of Sergio Lopes Freire sworn 4 December 2006).
Category 2
The documents relating to metal dusting of coated reactor tubes are relevant because it is alleged that uncoated tubes created the risk of metal dusting [par 20.1(b) of the Further Re-amended Statement of Claim]. [11](Emphasis added).
22 This concern is said to emerge from the content of a letter dated 23 November 2005 from the applicants’ solicitors to the respondents’ solicitors [annexure “SLF-6” to the affidavit of Mr Freire sworn 4 December 2006). I refer to this below. The respondents have had that information for more than one year.
Category 3
The communications by or on behalf of (the applicants) to the effect that the LCM technology is proven are relevant because it is alleged that “the AGHR was not based on all the successful and proven attributes (or technical qualities) of the GHR”: [20.1(d) of the Further Re-amended Statement of Claim]. The prospectus of Coogee Resources Limited said that the technology was “proven” (SLF-11, p 19). [12] (Emphasis added).
the applicants’ submissions
23 The applicants submit that they have already given discovery of all information now sought by the respondents for the period to mid-June 2003 which is effectively three years from the date of purchase of the Plant and that the further discovery sought is not relevant to any of the issues in the action.
Category 1
24 The applicants contend that all of the relevant documents relating to their investigations, conferrals and analysis including information relating to the operation of the Plant have been discovered for the period from 2000 up until in or about June 2003. However they submit that they are under no obligation to discover its analysis of the performance of the Plant and mechanisms to improve the technology or the various changes which have been made or proposed with a view to increasing the performance of the AGHR and or to improve its reliability since June of 2003. They say this is because that process has not been directed to ascertaining whether the problems experienced by the Plant in 1999/2000 were caused by metal dusting which the AGHR was subject to, or, to determining the cause of the metal dusting in the reactor tubes at that time. This work was carried out in co-operation with Johnson Matthey and resulted in a variety of changes to the AGHR either to increase its performance or to improve its reliability.
Category 2
25 The applicants submit that the fact that reactor tubes inserted by them into the AGHR which were coated with aluminide, as had those initially installed in the GHR, bears no relevance to the question whether there was a misrepresentation that the Plant utilising the AGHR technology (where the reactor tubes were not coated with aluminide) carried with it no significant risk of metal dusting to the reactor tubes. See letter applicants’ solicitors to respondents’ solicitors dated 23 November 2005 (“SLF-6” to the affidavit of Mr Freire sworn 4 December 2006).
Category 3
26 The applicants submit that the statement in the prospectus of Coogee Resources Limited (“SLF-11” to the affidavit of Mr Freire sworn 4 December 2006) that the compact methanol technology utilised at the Coogee Chemicals Methanoyl Plant at Laverton in Victoria was “proven technology” is irrelevant in that it is evident from the affidavit of Mr David John Dunne sworn on 18 December 2006 and to which I refer below that the current technology is in material respects different technology from that which has been utilised in the Plant acquired by the applicants from the respondents in 2000.
the history of discovery by the applicants
27 The applicants’ discovery and supplementary discovery was provided during 2004. It is apparent from that discovery that information relating to the operation of the Plant and the technical aspects of the case have only been provided up until about mid 2003. No discovery regarding the on-going development of the technology in the AGHR or the Plant’s operational performance has been given or until recently sought in respect of any period after mid-2003.
28 The first request made by the respondents for further discovery relating to the technology and AGHR was in correspondence from the respondents’ solicitors Messrs Blake Dawson Waldron dated 31 October 2006 (annexure “SLF-10” to the affidavit of Mr Freire). It is apparent from the terms of that letter that the request emanated from the consideration of an article contained in the 20 October 2006 edition of the “Australian Financial Review” concerning the proposed float of a company called Coogee Resources (Pty Ltd) and a further letter from their solicitors dated 21 November 2006 (annexure “SLF-13” to the affidavit of Mr Freire, Vol 2) raises for the first time a more detailed request for discovery relating to the current state of the technology and its development and testing, as well as to the inability allegedly on the part of the respondents to properly brief their experts.
the respondents’ expert reports
29 The respondents have already filed an expert report on the matter of quantum of damages. This was served on 7 September 2006. However it has yet to file and serve its expert report in relation to the technical issues. The respondents assert that their expert requires at least four weeks and more safely six weeks in order to complete his technical expert evidence even if further discovery is not ordered but that such additional time ought run from the date when further discovery as sought is produced for inspection in the event that further discovery is ordered. The applicants do not oppose such an extension of time for compliance in either event. The question is whether further discovery ought be ordered.
30 The respondents submit and it is common ground that the issues in the proceedings are complex. They complain that the applicants’ expert reports were delivered 12 months after the original date fixed by order of the Court and 14 months after the orders were made with four extending orders during that period.
31 On the other hand it is the case that the respondents consented to orders dated 5 July 2006 for their experts’ reports to be provided by 25 August 2006. The respondents then consented to an order made on 8 September 2006 for the provision by them of their experts’ reports (including a report on technical issues) by 30 November 2006. It is also to be remembered that the respondents, by consent order of Lee J dated 4 November 2005 were first ordered to file and serve their expert reports on or before 31 March 2006. The applicants served their technical expert reports on the respondents on 5 August 2005, more than 16 months ago.
the affidavit OF SERGIO LOPES FREIRE
32 The motion is supported by an affidavit of Mr Sergio Lopes Freire sworn on 4 December 2006. Mr Freire is a solicitor in the employ of the respondents’ solicitors. He deposes to the fact that on 31 October 2006 he arranged for a letter to be sent by facsimile transmission to Williams & Hughes the applicants’ solicitors in which was enclosed a copy of a newspaper article referring to the upcoming public float of Coogee Resources Limited on the Australian Stock Exchange (annexure “SLF-10” to the affidavit of Mr Freire).
33 In that letter the respondents’ solicitors referring to the newspaper article concerning the float said the following:
The article refers to the proposed float of Coogee Resources, which appears to be an entity related to the two applicant companies. We infer from the reference to the Laverton Methanol Plant in the fifth paragraph of the article that the Plant formed part of the assets the subject of the proposed float.
We expect that, in anticipation of the float, documents relevant to issues in dispute in this proceeding will have been brought into existence, including documents which ascribe a value to the Plant of which evidence, record or relate to the historical and forecast financial and technical performance of the Plant. We expect that such documents will be in the possession, custody or power of your clients and/or the officers, employees and/or agents. [Emphasis added).
There then followed in that letter a request for discovery of further documents essentially in the categories now sought in the motion.
34 The newspaper article referred to entitled “Coogee Float is Off and Running” contained the following sentence:
The Chief Executive and Chief Financial Officer of Coogee will be present and there will be a tour to the Laverton methanol plant.
35 It seems that it is this reference which excited the interest and the request of the respondents and their solicitors that further discovery be provided.
36 The applicants responded by letter from their solicitors dated 14 November 2006 (“SLF-11”) in which they said the following:
The inference in your letter is that the Laverton Methanol Plant (“the Plant”) or an interest in it is going to be included as part of the assets of Coogee Resources for the purpose of the forthcoming float. This assumption is incorrect.
The tour of the Plant referred to in the article was simply as a matter of commercial interest and to allow people to get a visual indication of the nature of the Plant. No interest in the Plant nor any interest in the business conducted by the applicants at the Laverton site has been valued or will be included in the float. …
Later in the letter the following was set out:
You also request all documents relating to the state of the technology employed in the AGHR and GHR. Our client has for the past six years, been undertaking significant research development and testing in consultation with ICI/Johnson Matthey in an endeavour to improve the technology, and specifically to overcome the flaws in the technology which existed as at the date of acquisition. The further development of the technology is not a matter which is relevant to the current litigation. … We have not previously given discovery of the documentation relating to the research and development governing the technology other than those documents which evidence the inquiries made to identify the problem which is existed as at the date of acquisition. There is nothing in the intended float of Coogee Resources which would alter the relevance of that information.
For the above reasons we do not consider that out clients have in their possession, custody or power any other documents which are relevant to the issues in sanction. (Emphasis added).
37 In their reply dated 21 November 2006 (annexure “SLF-13” to the affidavit of Mr Freire) the respondents’ solicitors said the following:
Further, documents which relate to the current state of the technology employed in the GHR and AGHR, including metal dusting problems with the aluminide-coated reactor tubes installed in the AGHR, are highly relevant to the issues in dispute in this proceeding.
In the first place, to the extent that the flaws sought to be overcome by the “significant research development and testing” undertaken by your clients are flaws of which complaint is made against our clients, documents relating to that research development and testing are discoverable. They are clearly relevant material for the consideration of an expert witness.
Secondly, in your letter to us dated 23 November 2005 you stated that the tubes inserted into the AGHR by your clients which were coated in the same manner as the tubes initially installed in the GHR have suffered damage. You say that this called into question not only the technology that was implemented into the AGHR but also the technology in the GHR.
All documents relating to your client’s experience with metal dusting problems with the aluminide-coated reactor tubes installed in the AGHR bear upon the falsity of representations alleged to have been made by your clients.
Finally, we note that the prospectus for the float of Coogee Resources issued earlier this month contains a number of references to the technology employed in the GHR and AGHR, including the following statement:
“Compact methanol technology is already in operation at Coogee Chemicals’ Methanol Plant at Laverton, Victoria. The Company is in discussions with Kellog, Brown and Root and Johnson Matthey to undertake a FEED study in 2007 and 2008 to evaluate the viability of applying this proven technology in an offshore environment” (p 19) (our emphasis).”
38 There then followed a further request for discovery of documents relating to the state of the technology and whether and on what basis it was said to be “proven”. The respondents’ solicitors then asserted that their clients’ ability to properly brief their expert who retained by them in the matter had been prejudiced by the applicants’ failure to discover such documents and called on them to remedy those deficiencies by providing a supplementary list on or before 30 November 2006. This is the date by which the respondents had agreed to provide their own expert report relating to the technical issues.
conclusions
39 I am not satisfied that discovery of documents under Categories 1-3 should be ordered and I generally accept the submissions of counsel for the applicants in respect to Categories 1-3 the substance of which I have set out above.
Categories 1 and 2
40 Categories 1 and 2 can conveniently be dealt with here together concerning as each does the question of metal dusting.
41 I have earlier referred to correspondence from the respondents’ solicitors to the applicants’ solicitors belatedly seeking further discovery (“SLF-10” and “SLF-12” to the affidavit of Mr Freire).
42 There is no statement in this or any other correspondence from the respondents’ solicitors or in any submission made by their counsel at the hearing that such documents had been specifically requested by the respondents’ technical expert. Indeed the respondents have known since November 2005 that the aluminide coated tubes inserted by the applicants after the Plant’s acquisition had on removal disclosed evidence of metal dusting: see letter from applicants’ solicitors to respondents’ solicitors dated 23 November 2005 (“SLF-6” to the affidavit of Mr Freire). Despite this the orders for provision of expert reports were made by consent in late November 2005 and most recently in September this year.
43 It can be seen then that the concern of the respondents and their request for further discovery communicated by their solicitors arose as a matter of inference. The inferences drawn by them were refuted by the correspondence from the applicants’ solicitors dated 14 November 2006 and to which I have referred. It was not contended by counsel for the respondents at the hearing, nor was their evidence to the effect that what was stated in that letter was incorrect. I accordingly have proceeded for present purposes on the basis that it is correct. It is mere assertion by the respondents as to there being relevant further documents discoverable and said to be necessary for the proper and full instructing by them of their expert in relation to the technical issues. Beyond mere assertion however the respondents provided no other bases to support their request for those additional documents.
44 Their request appears to proceed upon a misapprehension as to the nature of the research and development work carried out by the respondents in consultation with ICI/Johnson Matthey as being relevant to the flaws in relation to the technology acquired.
45 It seems to me that the way in which that additional research and development was described by the applicants’ solicitors in its letter dated 14 November 2006 on the second page and to which I have referred was somewhat ambiguous in its reference to the nature of the research and development as being “specifically to overcome the flaws in the technology which existed as at the date of acquisition.”
46 The ambiguities such as they were, in my view, were put to rest in the affidavit of Mr David John Dunne sworn 18 December 2006 which is relied upon by the applicants in opposition to the orders sought. Mr Dunne is the General Manager of the Laverton Methanol Plant in question. He is the person who was primarily responsible on the part of the applicants for identifying the documents for discovery in this action.
47 He deposed relevantly as follows:
6. When the Plant was acquired by Coogee in or about May 2000, there was a significant problem with its operation, it was ascertained in or about early 2001 that the AGHR had suffered from metal dusting. During the period from then to in or about early to mid 2003, investigation and conferral with Johnson Matthey, the technology providers, was conducted to endeavour to ascertain the cause of the metal dusting and further the metal dusting issues had caused the performance problems the Plant had been experiencing prior to and as at the date of the sale to Coogee.
7. All of the documentation in Coogee’s possession, custody or power relating to these investigations, conferrals and analysis including all information relating to the operation of the Plant has been discovered. Discovery was provided of all of these documents up to and until in or about June 2003.
48 Mr Dunne then deposed to further research and development conducted in relation to the performance of the Plant and in particular the technology. He deposed as follows:
8. Coogee has continued to operate the Plant since that date and in co-operation with Johnson Matthey has been analysing the performance of the Plant and looking at making improvements to the technology. A variety of changes have been made or proposed with a view to increasing the performance of the AGHR and/or to improve its reliability. This process has not been directed to ascertaining whether the problems experienced by the Plant in 1999/2000 were caused by metal dusting which the AGHR was subject to, or, to determining the cause of the metal dusting in the reaction at that time. These efforts have been directed to developing and improving the technology to the point that now the design of the AGHR is proposed to be changed significantly to a Baffled Gas Heated Reformer or BGHR.
49 Mr Dunne further said that the applicants introduced further developments to the AGHR technology including the insertion of differently designed internals in order to try and resolve the metal dusting issue. Those internals did not have a finned design as previous designs had had and both the catalyst tubes and the sheath tube were a different size changing the velocity of the gas passing through reformer. [9] He further said that those tubes suffered from a design fault which required their removal at which time it was noticed that the tubes had been subject to localised metal dusting.
50 The applicants’ case in relation to the risk of metal dusting concerns metal dusting occurring where the reactor tubes were not coated with aluminide. It is no part of the applicants’ case that metal dusting occurred or there was a risk of it occurring when the reactor tubes were coated with aluminide. In other words their case concerns the substitution of uncoated for coated reactor tubes when the AGHR technology was introduced and the failure on the part of the applicants to disclose this substitution and its effect on risks of metal dusting occurring.
51 The fact that metal dusting occurred subsequently in coated reactor tubes of a different design is relevant to a proposition that there was a risk of metal dusting occurring in relation to that technology employing coated reactor tubes. That is not however relevant, in my view, to the applicants’ case as I have explained.
52 The localised metal dusting on reactor tubes of a different design discovered in 2004 cannot impact upon the central allegations in the case namely whether it was represented that the Plant had operated for a period of five years successfully; that all of the proven attributes of the GHR had been included in the AGHR which was thereby a successful and proven technology, and that there was no significant risk of metal dusting utilising that technology. Neither is it relevant to issues of reliance, causation or damages.
53 As the respondents in paragraph 9 of their outline of submissions contend, and I accept, the asserted connection of the subsequent metal dusting which occurred in or about 2004 and which is referred to in paragraph 11 of the respondents’ outline of submissions is not relevant to any issue in the case. Indeed in a letter from the applicants’ solicitors to the respondents’ solicitors dated 20 December 2005 (annexure “SLF-8” to the affidavit of Mr Freire sworn 4 December 2006) it was made clear (at p 3 of that letter, paragraph 4) that no amendment had been made in relation to that subsequent metal dusting, that it did not form part of the applicants’ case and that the respondents ought to prepare their case on the basis of the pleadings as they currently stood. This clear statement was made in response to the respondents’ concern contained in a letter from its solicitors to the applicants’ solicitors dated 19 December 2005 (annexure “SLF-6” to the affidavit of Mr Freire sworn 4 December 2006) that any claim based on that subsequent metal dusting would “represent a fundamental shift” in the applicants’ case and would require an amendment to the applicants’ pleading.
54 Again as the applicants point out in their outline of submissions [19] the respondents have not provided any detailed explanation as to why they consider that further discovery is critical to the provision of their expert reports. This is despite a written request from the applicants’ solicitors by letter dated 29 November 2006 (“SLF-16” to the affidavit of Mr Freire (Vol 2)).
55 In a further letter from the applicants’ solicitors the following day, 30 November 2006, it was reiterated that despite having the applicants’ technical expert reports since August 2005 it was only on 21 November 2006 that the respondents suggested through their solicitors that the applicants had failed in their obligation to provide discovery in relation to the current status of the technology or on-going research and development processes. That it was said was notwithstanding that on 23 November 2005 the applicants’ solicitors advised the respondents’ solicitors of further metal dusting issues which were being incurred by the applicants at the Plant.
56 The letter then put forcibly that if the respondents’ experts had required updated information in relation to the technology, it is inconceivable that they would not have requested access to such information for more than 12 months after they were instructed. In my view there is much to be said for that proposition. In any event there has been no reply from the respondents’ solicitors to either of those quite reasonable requests in the context of complex litigation and where further discovery were it to have been ordered would have been very extensive (see par 14 affidavit of Mr Dunne sworn 18 December 2006) and with the significant extra costs being incurred.
57 Accordingly I am not satisfied that the documents in Categories 1 and 2 satisfy any of the criteria under the Federal Court Rules Order 15 r 2(3).
Category 3
58 These documents are said to be relevant to the issue whether in 2000 when the Plant was acquired the AGHR technology was “proven”. That is a question of fact which will essentially turn on expert opinion evidence. The technology has undergone significant changes since 2000.
59 As Mr Dunne stated in his affidavit further development had been undertaken with the alternative design to overcome design flaws but it was ultimately superseded by a new baffled design, that is to say technology employing a baffled gas heat reformer which although based on the same principal technology of the original GHR and AGHR utilised a quite different mechanical design. [10] and [12]. He then said that tubes installed in 2001 had been reinstalled and were still in operation and that those tubes had been able to be maintained in operation by the use of TMP (Trimethyl Phosphate) and TEP (Triethyl Phosphate) dosing. This process according to Mr Dunn, was identified in 2002 and discovery of TMP and TEP as a dosing material to restrict metal dusting was the subject of discovery of documents up to and including June 2003. He added, in effect, that it was only the use of TMP and TEP which had enabled the AGHR technology to be used on a sustainable basis. [10]-[11]
60 Even assuming for present purposes, that the information contained in the 2006 Coogee Resources Prospectus at p 19 (annexure “SLF-11” to the affidavit of Mr Freire) where the opinion is expressed that the Methanol Plant was “proven technology” emanated from the applicants this is not determinative of relevance.
61 Plainly very significant changes were made to the technology between 2000 and 2006 and that statement in the Prospectus is not, in my opinion, a sufficient evidentiary foundation to sustain the motion, in that respect, for further discovery. It requires in any event to be considered in the light of Mr Dunne’s unchallenged evidence as to the significant changes to the technology during the relevant period.
62 Beyond submissions made from the bar table there was no evidence before me whether of an expert nature or otherwise as to the reason why it is contended that the current state of the technology some six years after the acquisition of the Plant by the applicants from the respondents is relevant to any of the matters pleaded concerning the position which was obtained in 2000 or is otherwise relevant or necessary for the preparation of the expert technical report by the respondents’ expert.
63 I decline therefore to order further discovery under this category.
64 It follows that the motion under paragraphs 1 and 2 ought be dismissed. I will hear the parties in relation to the ancillary orders sought.
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I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour . |
Associate:
Dated: 22 December 2006
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Counsel for the Applicants: |
Mr D Kilpatrick |
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Solicitors for the Applicants: |
Williams & Hughes |
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Counsel for the Respondents: |
Mr C Archibald |
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Solicitors for the Respondents: |
Blake Dawson Waldron |
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Date of Hearing: |
21 December 2006 |
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Date of Judgment: |
22 December 2006 |
