BP Australia Pty Limited v Nyran Pty Limited

Federal Court of Australia|1990-08-16|Before: Doussa JJ, Nicholson J

REASONS FOR JUDGMENT 1 On behalf of the applicant leave is sought to serve a notice to produce returnable on a date not later than 15 August 2003. The notice of motion is brought in reliance on O 33 r 12(1) of the Federal Court Rules. Strictly, that does not require leave for the issue of a notice to produce but it is accepted on behalf of the applicant that leave is required in this case because the notice seeks return other than at trial or hearing. In terms of the rule the power of the Court the recipient of the notice must produce any documents or thing in accordance with the notice 'unless the Court otherwise orders'. The bringing of the motion, therefore, requires the Court to form a view on whether the notice of motion is appropriate and should be allowed to issue. 2 Reasons for judgment in the trial of this matter were delivered on 28 May 2003. On 22 August 2003 the Court will convene to hear argument on the form of orders which should be made. At the same time the Court will hear a motion brought on behalf of the respondent for leave to amend its Defence by withdrawing an admission appearing in par 13(a) of that document to the allegations in par 19(c) of the Further Amended Statement of Claim. 3 The notice to produce identifies the documents now sought as being those containing or recording or referring to instructions given to the legal advisors of the respondent/cross-claimant or advice given by its legal advisors in the following four categories: (i) in the period 1 July 1999 to 12 June 2003 in relation to whether BP is entitled to increase the Clean Fuel Quality Premium charged by BP under the Restated Fuel Supply Agreement; (ii) in connection with the making of the admission contained in paragraph 13(a) of Gull's Defence and Cross Claim filed 21 June 2002; (iii) in connection with the making of the admission contained in paragraph 13(a) of Gull's Defence to Further Amended Statement of Claim and Amended Cross Claim filed 9 October 2002; (iv) in connection with the amendment to paragraph 13(a) in Gull's Proposed Amended Defence to Second Further Amended Statement of Claim and Further Amended Cross Claim dated 12 June 2003. 4 It is accepted for the applicant that the documents sought may, once produced, be the subject of a claim for client legal privilege and the applicant will address that if and when it arises. An argument is foreshadowed that any privilege which may be claimed has been waived by the respondent putting in issue its state of mind, the state of mind of its lawyers and the actions taken by its lawyers: BP v Nyran [2002] FCA 1302 and authorities therein cited.

HISTORY OF PLEADINGS 5 The claim on behalf of the applicant against the respondent substantially, if not wholly, concerned the proper interpretation of a first draft of a Deed of Restatement and Variation (described in the Further Amended Statement of Claim as 'the Deed') and the Restated Fuel Supply Agreement (described in the same document as the 'RFSA'). In the Statement of Claim and Amended Statement, par 6 pleaded: '6. On or about 17 November 1999 it was agreed between BP and Gull inter-alia as follows: (a) Gull would take supply of fuel from BP and would not seek supply from an alternative source; (b) the term of the FSA would be extended from 3 years to 7 years; and (c) Gull would pay the CFQP charged by BP upon BP's assurance that such CFQP would not exceed that paid by other customers of BP and, should the CFQP be altered, then the altered amount of the CFQP would be charged to Gull. Particulars The terms were agreed orally at a meeting which took place on 17 November 1999 at the premises of Gull. Present at the meeting were Brian Mumme on behalf of BP and Ian Green and Neil Rae of Gull.' 6 In par 19 of the Statement of Claim it was pleaded: '19 Upon the proper construction of the Deed and the RFSA: (a) if new prices are not agreed during a price negotiation period then (except in the case of a failure to agree a new CFQP) Gull may, within 7 days of the date on which the next twelve months' commenced give 90 days' notice in writing of termination of the RFSA; (b) if new prices are not agreed during a price negotiation period then the prices specified by BP during the price negotiation period will apply to the fuel to be supplied pursuant to the RFSA for the next twelve months; (c) if a new CFQP payable as part of the prices of fuel is not agreed during a price negotiation period the CFQP specified by BP during the price negotiation period will apply to the fuel to be supplied pursuant to the RFSA for the next twelve months, provided that the CFQP charged to Gull at any time does not exceed the CFQP charged to Gull at any time does not exceed the CFQP charged to any of BP's other customers in Western Australia.' 7 In par 4 of the Defence it was pleaded in response: '4 As to paragraph 6 of the statement of claim: (a) Gull admits that there were meetings on or about 16 and 17 November 1999 at which: (i) it was agreed that the term of the FSA would be extended from 3 to 7 years; and (ii) there was agreement to the effect pleaded in paragraph 6(c) of the statement of claim, save that it was also agreed that the altered amount of the CFQP that could be charged to Gull would not exceed that paid by other customers of BP; (b) the allegations therein are otherwise denied.' 8 On 3 October 2002, Further Amended Statement of Claim was filed. Paragraph 19 remained in the same form as previously. 9 The responsive paragraph in the Defence was as follows: '13 As to paragraph 19: (a) Gull admits sub-paras (a) and (c), and denies sub-paragraph (b); (b) upon a proper construction of the FSA and the Deed of Reinstatement and Variation and the Restated Fuel Supply Agreement (collectively "RFSA"); (i) price negotiations are to take place in the month of March of each and every year during the term of the agreement; (ii) if in any year new prices cannot be agreed in price negotiations, then the prices prevailing under the RFSA at the time of the negotiations will continue to apply for another year, unless Gull chooses to terminate the agreement within 7 days of 2 April of such year by giving 90 days notice in writing of the termination of the RFSA.' 10 In the respondent's Amended Cross Claim it was pleaded: '29 Further, there were terms of the RFSA, on its proper construction, to the effect that with effect from 2 April 1998: (a) BP would supply certain specified quantities of fuel to Gull at specified prices which included a premium in relation to clean fuel; (b) BP guaranteed to Gull that clean fuels quality premia charged to Gull would not exceed that imposed, by any means by BP, on any other customer of BP in Western Australia, including BP Marketing, and on the basis that BP imposed on its other customers in Western Australia such a premium, Gull agreed to pay a premium equal to the lesser of $0.0085 per litre, or the lowest amount per litre, of premium imposed by BP on any other customer of BP in Western Australia; (c) if BP did not impose on any of its other customers in Western Australia a premium in relation to clean fuel it would not charge such a premium to Gull; (d) in the event that, during the term of the RFSA, BP agreed a reduction of the said premium with any other customer of BP in Western Australia, BP would as soon as possible charge the same reduced premium to Gull effective immediately from the date that the reduction applied to such other customer; (e) BP would advise Gull as soon as practicable of any changes to the premium that it imposed on other in Western Australia in relation to clean fuel.'` 11 In the reply to the Amended Cross Claim, it was pleaded for the applicant: '11. As to paragraph 29 of the Amended Cross-Claim, BP denies the construction of clause 81 of the RFSA set out therein and says that upon the proper construction of the Deed and the RFSA, if a new CFQP payable as part of the prices of fuel is not agreed during a price negotiation period the CFQP specified by BP during the price negotiation period will apply to the fuel to be supplied pursuant to the RFSA for the next twelve months, provided that the CFQP charged to Gull at any time does not exceed the CFQP charged to any of BP's other customers in Western Australia.' 12 In its submissions in support of its motion for leave to amend its defence the respondent has submitted that the admission was made in error occasioned by its lawyers. No evidence has been filed in support of that contention. The issue is not one which must be decided on this occasion.

APPLICANT'S CONTENTIONS 13 For the applicants it is contended that when the motion on behalf of the respondent is brought on for hearing on 22 August 2003 two issues of fact will require resolution. The first is, what instructions and information were provided to the respondent's solicitors and counsel in relation to the matters admitted. The second, it is said, is whether there was an error in a relevant sense or was there a conscious forensic decision made to make the admissions and not to put in issue the claims for construction and rectification in relation to increasing the CFQP ('the Clean Fuel Quality Premium'). It is submitted that the respondent's state of mind has been put in issue in asserting that par 13(a) of the Defence was an error. The applicant contends that it wishes to issue the notice to produce to test the factual issues and the state of mind of the respondent, its officers and its lawyers. 14 Essentially, the applicant wishes to contest the correctness of the respondent's assertion that the admission in par 13(a) so far as it applied to par 13(c) was made in error. 15 On behalf of the applicant it is said there is a matter of elementary justice. The applicant should be entitled to challenge the facts asserted and to seek production of the documents relevant to the facts in issue. 16 The applicant says that the specific issues which will arise in this context are: (a) what instructions Gull gave to its lawyers about the subject matter of the admission; (b) what consideration the lawyers gave in light of those instructions: How did the alleged error arise?; what is the subject matter?; which lawyer made the alleged error?; (c) was a draft of the Defence given to Gull's officers for approval before the document was filed? If so, how did the alleged error escape their attention? (d) when was the alleged error first detected? What passed between Gull and its lawyers about the alleged error? (e) was it an error by the respondent's solicitors or counsel or both?; If an error by counsel, how was the error not detected and corrected by the solicitors for the respondent?

RESPONDENT'S CONTENTIONS 17 On behalf of the respondent it is submitted that a notice to produce has in substance the same effect as a subpoena and may be refused or set aside where the interests of justice in the particular circumstances of the case so require or upon any of the grounds applicable to subpoenas: CCOM Pty Ltd v Jiejing Pty Ltd (1992) 37 FCR 1 at 5; Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 at 133; Australia and New Zealand Banking Group Ltd v Deputy Commissioner Taxation [2001] FCA 314 at pars 20 and 21. So it is said that a notice to produce may be refused or set aside where it seeks to obtain irrelevant evidence or documents, where it is for an impermissible purpose such as 'fishing', where it is oppressive or is an abuse of process: Botany Bay Instrumentation and Control Pty Ltd v Stewart [1984] 3 NSWLR 98 at 100 - 101. 18 It is said that the respondent's application to amend par 13(a) of its Defence is made in the context of the applicant's application for a declaration in terms of par 1(d) of the applicant's minute of proposed orders. Those orders relate to the alleged proper construction of cl 81 of the RFSA. The applicant seeks to rely upon par 13(a) of the respondent's defence to support the proposed declaration. 19 For the respondent it is said that the plea in par 13(a) is one relating to a matter of law, namely, the proper construction of an aspect of the RFSA: Bowes v Chaleyer (1923) 32 CLR 159 at 172. It is said that it should be inferred that the plea is manifestly erroneous. This is because cl 81 of the RFSA is incapable of bearing the construction alleged in the admitted paragraph. Further, cll 20 - 24 of the RFSA do not refer to the CFQP and the Court has upheld the respondent's contention that the prices specified by the applicant during price negotiation could prevail in the absence of agreement. Additionally, it is said that pars 29 and 31 of the Amended Defence and Cross Claim clearly pleaded that, on the proper construction of the RFSA, the respondent agreed to pay a CFQP of the lesser of $0.0085 per litre or the lowest amount imposed on other WA customers; a plea which is inconsistent with the construction the subject of the erroneous admission. The respondent takes this submission further by asserting that the erroneous admission in par 13(a) of the Defence is no longer an operative admission having regard to the specific pleas in pars 29 and 31 which were introduced by amendment resulting from consent in October 2002. Furthermore, it is said that if the alleged admission continued to be operative after October 2002 it does not support the applicant's proposed declaration 1(d). 20 In the circumstances where the pleading error is one relating to a matter of law, it is said for the respondent, affidavit evidence is not required to demonstrate the pleading error. Rather, the pleading error is revealed by considering the pleading as a whole and the instrument to which it relates. The respondent denied that any question of fact to which the document sought could be relevant arises because the relevant questions are all questions of law. This is to be contrasted with the error at issue in Celestino v Celestino (unreported, Spender, Miles and von Doussa JJ, 16 August 1990), it was submitted. 21 It is the case that the plea in reply in answer to par 29 is in substance the plea which started in par 19(c) and was admitted in the respondent's par 13(a). This approach was repeated in relation to par 30 of the Further Amended Statement of Claim in par 12.1 of the Reply. The respondent will rely upon these circumstances in saying that the Court ought to infer error. 22 For the present, the respondent urges the Court to order that the notice to produce should not issue because the material sought is irrelevant and it would be an abuse of process to require privileged material to be produced in such circumstances.

APPLICABLE LAW 23 The applicant will be required to satisfy the Court that an error or mistake is made out; that a sensible explanation for the making of the admission had been provided based on evidence of a solid and substantial character; and that no injustice would be occasioned to the other party by the withdrawal of the admission, other than hardship, delay or costs which can be met by appropriate costs order. This statement of criteria relies in particular on Celestino. There it was accepted by the Court that when the proposed change to a pleading involves the withdrawal of admission the Court is entitled to assume that counsel who made the admission in the course of the conduct of the trial was satisfied that the admission was, on his or her client's version of the facts, a proper admission to make. Consequently, in such circumstances a court will require an explanation for the making of the admission. Their Honours there said that 'the explanation must be a sensible one based on evidence of a solid and substantial character': Langdale v Danby [1982] 1 WLR 1123 at 1134; Hollis v Burton [1892] 2 Ch 226; and Cumper v Pothecary [1941] 2 KB 58 at 70. 24 The reasoning in Celestino was considered by Mansfield J in Murran Investments Pty Ltd v Aromatic Beauty Products Pty Ltd (2000) 191 ALR 579 at 589. His Honour said that the reasoning of the Full Court in Celestino was founded on the principles stated by Bowen LJ in Cropper v Smith (1884) 26 Ch D 700 at 710 - 711 to the effect that there is no kind of error or mistake which, if not fraudulent or intended to overreach, a court ought not to correct provided there is no injustice to the other party. He said that statement of a principle was approved by the High Court in Clough & Rogers v Frog (1974) 4 ALR 615 and in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 at 154. 25 These authorities were considered by Kenny J in Matland Holdings Pty Ltd v NTZ Pty Ltd [2002] FCA 1590. Her Honour referred to observations of Gillard J in McKenzie v The Commonwealth [2001] VSC 361 at [44] - [45] disagreeing with the Full Court in Celestino, if it was seeking to lay down a principle that is necessary to show there has been an error or mistake and that there should be a reasonable explanation of making an admission before a party is entitled to withdrawal the admission in a pleading. Gillard J accepted that a court would expect some explanation of the change but the absence of an explanation which was adequate or reasonable would not be determinant of the application because the primary consideration was doing justice between the parties.

REASONING 26 Although it may be the case that argument for the respondent will be content to focus on the drawing of inferences from the documents before the Court, that is not the way in which the case for the applicant wishes to proceed. For example, it wishes to have the Court consider whether the admission when first made was not an error in the context of a case which then included a claim for rectification. The applicant is entitled to bring and have access to evidence to enable it to argue any relevant contention, subject of course to the determination of any exclusionary claim. It cannot be left to the proposed case for the respondent to determine the scope of relevance. On the face of things, the evidence proposed to be brought for the applicant may arguably be relevant to the issue of the existence or non-existence of error. 27 While it may be the case that the principles developed in the case law pertain to admissions of facts, I do not consider that the view that admission arguably relates to a matter of law should lead to application of different principles. The reason is that what the court will be called upon to decide is whether the admission, of which withdrawal is sought, was made in error. That is an issue of fact. It may be reached by the court relying upon evidence of circumstances or it could equally be reached by the court drawing inferences from the pleadings or from a mixture of both. 28 It is not for the court to constrain the evidentiary foundation which the parties seek to bring to the court for argument on the issue. The applicant says it may be that by making the admission in par 13(a) Messrs Rae and Green took out of play the issue of whether they had reached agreement with the applicant in relation to the CFQP and took out of play the rectification claim and the issue of misleading and deceptive conduct, thus removing the possibility that their credit would be adversely affected by them attempting to advance an untenable factual proposition that they had not reached such an agreement. This, it is submitted, would be a very sound reason why the admission would have been made and maintained. In those circumstances the fact that the respondent may seek to reach its goal in reliance only upon the pleadings cannot govern the determination of the present issue. 29 However, in respect of the breadth of the notice to produce, I agree with the respondent that the purpose of the notice would be met by confining the notice to pars (ii) and (iii) referred to in the motion. 30 Production is, of course, subject to any claim of privilege so that no issue of abuse of process arises. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.

Counsel for the Applicant: Mr RM Smith SC with Mr S Goodman

Counsel for the Respondent: Mr CL Zelestis QC with Mr GH Murphy

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Parties

Cases Cited (10)

Cited By (4)