//
[2017] WASC 19
General information, not legal advice.
Supreme Court of WA
2017-01-31
Original judgment source is linked above.
1 This is the plaintiff's application for pre‑action discovery (the Application). At the hearing of the Application, counsel for the plaintiff referred to the plaintiff as BTAC. For ease, I will do the same.
2 BTAC seeks access to documents to ascertain whether or not it has enforceable legal rights against some or all of the defendants arising out of the removal of material from a mining lease held by the first defendant (Onslow Salt).
3 Onslow Salt asserts that the material was removed as part of flood mitigation work, that it did not receive payment for the material and that there is no basis to order the disclosure of documents verifying those assertions.
4 BTAC seeks the documents verifying those assertions, and related documentation to enable it to make an informed decision as to whether or not the material was removed for commercial purposes, being purposes outside those authorised by the mining lease, and in breach of rights conferred in BTAC by a Development Deed between Onslow Salt and BTAC, and by the right to negotiate procedures specified in the Native Title Act 1993 (Cth).
5 BTAC seeks documentation from the second and third defendants (Bechtel and Thiess respectively), to ascertain their knowledge, involvement and participation in the removal of the material, and any infringement by those defendants of BTAC's rights.
6 In making the Application, the most significant hurdle faced by BTAC has been to satisfy the jurisdictional question - that it 'may have a cause of action against' each of Onslow Salt, Bechtel and Thiess.
7 In all of the circumstances and for the reasons explained below, I have concluded that the court should exercise its discretion to require Onslow Salt to provide pre‑action discovery. The Application is refused to the extent orders are sought against Bechtel and Thiess respectively.
8 The circumstances in which the Application was made is conveniently set out in BTAC's submissions dated 6 September 2016, from which a large part of the following overview is drawn.
9 BTAC is a registered native title body corporate which holds native title rights on behalf of the Thalanyji people, over a determination area in and around the town of Onslow.
10 Onslow Salt is the operator of a solar salt field located within the determination area. Onslow Salt operates the salt field under a state agreement,[1] and mining lease 273SA granted on 16 April 1996 (M273SA).
11 On 1 March 1996, prior to the grant of M273SA, BTAC and Onslow Salt entered into a Development Deed, by which BTAC (among other things) consented to the grant of M273SA.[2]
12 In January 2012, Onslow Salt sought ministerial approval to modify its existing operations for the purpose of 'flood mitigation', by removing a maximum of 10 million cubic metres (Mm3) of material from areas of natural elevation, commencing in Q1 of 2012 and continuing for approximately four years and nine months.[3]
13 By January 2012, Chevron Australia Pty Ltd (Chevron) had commenced construction of its Wheatstone LNG Project (the Wheatstone project). The Wheatstone project was situated immediately adjacent to M273SA. In order to progress its works, Chevron estimated that it required 8.5Mm3 of fill material for the foundations of the LNG Plant.
14 Onslow Salt contracted Chevron to undertake the work involved in removing material from M273SA. In turn, Chevron subcontracted that and other work associated with the construction of the LNG Plant to Bechtel. In turn, Bechtel contracted the removal of the material, and the preparation of the foundations of the LNG Plant, to Thiess.
15 Onslow Salt's Annual Report for the period ended 31 March 2012 contains the following statement:
[I]ncluded in the comprehensive income is an amount of $49,359,630 recognised in the account with respect to the Land Agreement entered with a third party.
16 By a letter of demand dated 20 April 2015, the previous solicitors for BTAC wrote to Onslow Salt asserting, among other things, BTAC's belief that Onslow Salt had entered into a 'land agreement' with Chevron for which Onslow Salt was paid for material removed by Chevron and in respect of which BTAC did not receive any royalties. BTAC stated that whilst ostensibly the removal of sand and gravel from M273SA was for the stated purpose of flood mitigation, it believed that the sand and gravel was also used for the construction of Chevron's works outside the area of M273SA.[4]
17 Onslow Salt responded to BTAC by a letter dated 29 April 2015 as follows:
18 Further correspondence passed between the parties and Onslow Salt ultimately refused to provide BTAC with a copy of the documents substantiating its denials on the ground that BTAC does 'not require any further information to make a decision as to whether to enforce its (alleged) rights'.[5]
19 BTAC does not have a copy of the 'land agreement' and does not know the identity of the third party to which it refers. It is the belief of Mr Matthew Slack, the Chief Executive Officer of BTAC, that the land to which the 'land agreement' relates may be a reference to M273SA, because, as far as he is aware, Onslow Salt did not own other land in Western Australia in 2011.[6]
20 The Application was made under O 26A r 4 of the Rules of the Supreme Court 1971(WA). That rule provides:
(1) This rule applies if a person who may have a cause of action against a person whose description has been ascertained (the potential party) wants -
(a) to commence proceedings against the potential party; or
(b) to take proceedings against the potential party in the course of an action to which the person is a party,
but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings.
(2) If there are reasonable grounds for believing that the potential party had, has, or is likely to have had or to have, possession of documents that may assist in making the decision, the person may apply for an order under this rule.
(3) The application shall be supported by an affidavit and a copy of both shall be served on the potential party.
(4) On the application the Court may order the potential party to give discovery of all documents that are or have been in the potential party's possession and that may assist the applicant in making the decision.
21 Order 26A r 4(1) identifies, as a condition for the application of the rule, a requirement that the applicant 'may have a cause of action against' the respondent. This may be referred to as the jurisdictional question, which must be answered affirmatively before the court's discretion to order pre‑action discovery under the rule is enlivened.[7]
22 In Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd, Mitchell J summarised the position as follows:[8]
So an applicant under O 26A r 4 must demonstrate more than mere assertion, conjecture or suspicion, but does not have to positively establish the existence of a cause of action. What the applicant must produce is evidence showing that he, she or it may have a cause of action.
The phrase 'cause of action', as it appears in r 4, should be understood in its ordinary sense of the facts or combination of facts which gives the right to sue. An applicant under r 4 does not need to prove those facts, but there must be evidence indicating (beyond mere assertion, conjecture or suspicion) that all facts necessary to give rise to a right to curial relief may be able to be established. (footnotes omitted)
Apprehended cause of action BTAC's position in relation to Onslow Salt
23 BTAC asserts that the reason for the removal of the material; whether or not Onslow Salt received any payment for the removal; and the arrangements between Onslow Salt and any third party for the removal, are all central questions to its decision whether or not to commence proceedings against some or all of the defendants.
24 BTAC says that, by way of illustration, cl 10(9) of the Onslow Solar Salt Agreement Act 1992 (WA) provides as follows:
The company [Onslow Salt] in accordance with approved proposals may for the construction of works (and maintenance thereof) for the purpose of this Agreement and without payment of royalty, obtains stone sand clay and gravel from the mining leases.
25 BTAC says that if it is the case that it can establish that the material was removed other than for those purposes, Onslow Salt would likely be in breach of its obligations under the State Agreement, exposing Onslow Salt to the attendant consequences of those breaches.
26 BTAC says that those circumstances are directly relevant to its rights. In this regard, BTAC says that the Development Deed was entered into in the context of the right to negotiate procedures in pt 2, div 3, sub‑div P of the Native Title Act. The Development Deed only provides for compensation to BTAC in relation to the 'Salt Project', a project which did not contemplate the taking of the removed materials for other commercial purposes.
27 BTAC further says that because the right to negotiate procedures were not engaged in relation to the removal of the material, that removal is an invalid 'future act', which directly affects BTAC's Native Title rights. A breach of those rights in terms of lost royalties or other benefits which may have become payable to BTAC had their rights not been infringed are likely to be substantial, particularly having regard to the volume of material removed.
28 In relation to Bechtel and Thiess, BTAC's position is as follows:
The basis for ordering discovery against Bechtel and Thiess
Onslow Salt denies that the Land Agreement was with Chevron. Because Chevron contracted Bechtel to construct the LNG Plant, and because Bechtel sub‑contracted the removal works to Thiess, despite Onslow Salt's denial, it remains reasonable for the plaintiff to suspect that either of those parties may have been the 'third party', counterparty, to the Land Agreement. Rhetorically, on what other basis, absent agreement with Onslow Salt, did Bechtel or Thiess enter the mining lease to remove the material?
The plaintiff's rights against Bechtel and Thiess, or either of them, will depend upon a close analysis of their degree of knowledge involvement and participation in the putative unauthorised removal of the material. An analysis of any contract, arrangement or understanding between those entities and Onslow Salt is central to the ability of the plaintiff to make an informed decision as to its rights against those entities.
29 In correspondence which preceded the making of the Application, the solicitors explained the possible causes of action against Bechtel to include the following:
30 The submissions made by the defendants in opposition to the Application were largely consistent.
31 It was asserted that BTAC had failed to establish by evidence (beyond mere assertion, conjecture or suspicion) that all facts necessary to give rise to curial relief may be able to be established.
32 It was not disputed that BTAC need not positively establish the existence of a cause of action.
(a) the suggestion that Onslow Salt is in breach of the State Agreement is baseless as the proposal which contemplated the removal of the material was in fact approved by the relevant Minister;
(b) the suggestion that Onslow Salt is in breach of the Development Deed is also baseless as by the Development Deed, BTAC consented to the removal of material in order to improve the flood protection of the salt project; and
(c) BTAC has already made a decision to commence proceedings, which is reflected in the communications issued by BTAC's former solicitors in 2015.
34 If BTAC was to succeed in a claim against Onslow Salt, much would turn on evidence as to purpose (that is, why was the material removed), and the proper construction of the State Agreement. I am satisfied that there is a sufficient evidentiary basis for finding that Onslow Salt may have breached the State Agreement (by having removed material from M273SA for purposes unrelated to the Salt Project).
35 However, such a breach would not of itself give rise to a cause of action by BTAC against Onslow Salt.
(a) consented to the grant of M273SA;[9]
(b) agreed to the suspension of the operation and enjoyment of Native Title over the Project Area for the duration of the Salt Project;[10]
(c) acknowledged that its agreement to the grant of Mining Leases and the Related Interests[11] includes its consent to the doing of all acts in relation to those Mining Leases and Related Interests including:
(i) construction of roads, dykes, channels and other infrastructure;[12] and
(ii) any and all other acts authorised by the Mining Leases and Related Interests for the Salt Project.[13]
37 If BTAC was to succeed in a claim against Onslow Salt, again, much would turn on a factual finding as to the purpose served by the removal of the material and the proper construction of the Development Deed (in particular, whether the removal of material was permitted regardless of purpose).
38 I am satisfied that there is a sufficient evidentiary basis for finding that Onslow Salt may have engaged in an act not consented to by BTAC under the Development Deed (if Onslow Salt did in fact remove material from M273SA for purposes unrelated to the Salt Project).
39 As explained above, BTAC further says that because the right to negotiate procedures were not engaged in relation to the removal of the material, that removal is an invalid 'future act', which directly affects BTAC's Native Title rights. A breach of those rights in terms of lost royalties or other benefits which may have become payable to BTAC had their rights not been infringed are likely to be substantial, particularly having regard to the volume of material removed.
40 BTAC does not attempt to reconcile this assertion with cl 2.5 of the Development Deed, being BTAC's agreement to the suspension of the operation and enjoyment of Native Title over the Project Area for the duration of the Salt Project. Indeed, the determination of the Application was made all the more difficult by BTAC not having identified the relevant passages of the State Agreement, the Development Deed and the Native Title Act on which it bases its apprehended cause of action.
41 However, for the purpose of enlivening the discretion, it is sufficient for the court to be satisfied that BTAC may have suffered some non‑negligible loss or damage by an act that was not consented to by BTAC under the terms of the Development Deed.[14] On the evidence before the court, including the receipt of $49,359,630 by Onslow Salt, I find that BTAC may have suffered some loss or damage.
42 I stress that the above view does not mean that BTAC has demonstrated the present existence of a cause of action - but it need not do so in order to enliven the court's jurisdiction.[15]
43 Onslow Salt also asserts that BTAC has already made a decision to commence proceedings, which decision is evidenced by the communications issued by its former solicitors in 2015, which communications were framed in the form of demand.
44 On the evidence before the court, I am satisfied that BTAC wants to commence proceedings against Onslow Salt; has made reasonable enquiries for the purpose of obtaining sufficient information to enable BTAC to make a decision as to whether to commence the proceedings; and after making those reasonable enquiries, BTAC has not been able to obtain sufficient information to enable the decision to be made.
45 In coming to this conclusion, I have had regard to the communications which followed BTAC's initial correspondence, including what appear to be carefully worded responses issued to BTAC on behalf of Onslow Salt.
46 On the evidence before the court, I am not satisfied that all facts necessary to give rise to curial relief against Bechtel and/or Thiess may be able to be established.
47 I have given careful consideration to the submissions made on behalf of BTAC, and to the correspondence issued on behalf of BTAC to Bechtel and Thiess before the Application was filed. BTAC has not adduced evidence indicating beyond mere assertion, conjecture, suspicion or speculation that all facts necessary to give rise to curial relief may be able to be established as against Bechtel and/or Thiess.
48 As stated by Mitchell J in Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd,[16] it is established that the discretion to order pre-action discovery will not be exercised in favour of the party seeking discovery as a matter of course. A court considering the exercise of the discretion will commonly consider whether or not the order is reasonably necessary to achieve the proper administration of justice. In Central Exchange Ltd v Anaconda Nickel Ltd,[17] the court identified the following non‑exhaustive factors as relevant to the exercise of its discretion:
49 To that list of relevant factors, Mitchell J added the extent to which the cost and effort involved in undertaking discovery and inspection is proportionate to the likely value of the claim if successful.[18]
50 While I am satisfied that BTAC may have a cause of action against Onslow Salt, at this stage the likelihood that a cause of action will ultimately be found to exist is not at all high. Even with the assistance of pre-action discovery, at any substantive hearing, there is likely to be a significant factual contest, and debate as to complex questions of construction and relief available.
51 As explained above, for the purpose of enlivening the discretion, it is sufficient for the court to be satisfied that BTAC may have suffered some non-negligible loss or damage by an act that was not consented to by BTAC under the terms of the Development Deed. However, at this stage, the value of the claim is not clear.
52 These factors weigh heavily against the exercise of discretion to grant the Application.
53 Despite this, in all of the circumstances, I am satisfied that an order for pre-action discovery is reasonably necessary to achieve the proper administration of justice.
54 The following factors particularly support that conclusion.
55 First, on the evidence, there is no other adequate means available to BTAC to obtain the information it seeks.
56 Secondly, the possible significance of the information contained within those documents (particularly the Land Agreement), to the decision by BTAC as to whether or not to commence the contemplated proceedings. BTAC requires the documents to decide whether to commence proceedings, and without access to the documents, is denied a foundation which is required to plead any case it may have against Onslow Salt.
57 Thirdly, while the documents sought may contain confidential and commercially sensitive information, the confidentiality of that information is not an overriding consideration and the concerns of the defendants might be addressed by adoption of a suitable regime.[19]
58 Fourthly, BTAC has sought an order that it pay the reasonable costs of the defendants in complying with any pre-action discovery orders made, and there is no suggestion that it cannot pay such an order.
59 Fifthly, there is no evidence of bad faith on the part of BTAC.
60 Finally, I note that it is difficult to consider proportionality in the circumstances of this case. However, taking into account all of the circumstances I am satisfied that the cost and effect involved in undertaking discovery is proportionate to the significance of the claim and its potential value, if successful.
61 BTAC's concerns were first raised with Onslow Salt by BTAC's original solicitors in 2015. Some time prior to May 2016, BTAC changed its solicitors. BTAC's new solicitors (Bennett + Co) again agitate BTAC's concerns in May 2016, by a letter addressed to Onslow Salt.[20] In that communication, Bennett + Co invite Onslow Salt to identify solicitors who act for it and asked that Onslow Salt request its solicitors to confer with Bennett + Co directly.[21]
62 By a letter dated 30 May 2016, Gilbert + Tobin responded in the following terms.[22]
We act for Onslow Salt Pty Ltd, and have been provided with a copy of your letter to our client dated 23 May 2016.
You have referred in your letter to the letter of 20 April 2015 from your client's former solicitors to my client. As you will be aware that letter asserts unambiguously that our client has breached the Onslow Salt Agreement and the Development Deed (as defined). That is, your client states that it has a cause of action.
It follows that your client does not require any further information to make a decision as to whether to enforce its (alleged) rights, and so is not entitled to bring an application for pre-action discovery.
We presume that no conferral will therefore be necessary in relation to your client's proposed, though misconceived, application.
63 Further correspondence passes between Bennett + Co and Gilbert + Tobin.[23] Again, the letter from Gilbert + Tobin concludes with the statement 'We presume that no conferral will therefore be necessary in relation to your client's proposed (but misconceived) application'.
65 The Application was filed on 6 September 2016 without a memorandum of conferral. A memorandum of conferral was filed on 22 September 2016 which concerned conferral as to the proper programming of the Application.
66 Onslow Salt complains that there was not adequate conferral prior to the making of the Application. Onslow Salt's complaint arises from the failure by Bennett + Co to meet with its solicitors in person to discuss the Application, and the failure by BTAC to file a memorandum of conferral with the Application.
67 As is made clear in Consolidated Practice Direction 4.3.2, O 59 r 9 of the Rules of the Supreme Court requires that parties confer in the sense of there being an exchange of views for the purpose of trying to resolve the matters in issue. Conferral is required no matter how unlikely it is that the parties will reach agreement or even narrow the issues between them and practitioners with authority to resolve the dispute must confer either face‑to‑face or by telephone. While an exchange of correspondence will often be part of the conferral process it will only be where face‑to‑face or telephone contact is not feasible that reliance simply upon written communication can be justified.
68 In this case, there was an exchange of correspondence only. No substantive conferral took place either face‑to‑face or by telephone. For there to have been adequate conferral, a meeting or a telephone call to discuss the substantive issues was required after the exchange of correspondence.
69 There was inadequate conferral and no memorandum was filed with the Application, as required by O 59 r 9(1). However, taking into account all of the circumstances, I find that the Application does not fail by reason of the failure to meet in person, or by the failure to file the memorandum of conferral with the Application. The defendants were not taken by surprise by the Application and there had been significant conferral in writing. Having regard to the issues raised by the defendants in opposing the Application, it was unlikely that a face‑to‑face meeting or conferral by telephone would have resulted in a substantive narrowing of the issues as between the parties or any resolution so as to avoid the matter proceeding to a hearing of the Application.
70 For the above reasons, I make the following orders:
(a) documents created or dated between the period January 2010 and October 2012 which evidence or refer to any contract, arrangement or understanding between the first defendant (Onslow Salt), on the one hand, and any, or all of, the second defendant (Bechtel), the third defendant (Thiess), and Chevron Australia Ltd (Chevron), on the other, for the removal of material (Fill Material) from Onslow Salt's Mining Lease 273SA. (In this order, a reference to Onslaw Salt, Bechtel, Thiess or Chevron includes a reference to any related body corporate of those entities as that term is defined in the Corporations Act 2001 (Cth));
>
> (b) documents which refer to or record any payment or other consideration paid, given or made to Onslow Salt for:
(i) entering into any contract, arrangement or understanding for the removal or use of the Fill Material;
(c) the Land Agreement referred to in the Onslow Salt Financial Report (Form 338H) for the year ended 31 March 2012, dated 23 July 2012;
(d) documents which evidence the engagement of URS Australia Pty Ltd (URS) as referred to at page 6, point 2.2 of the document entitled 'Onslow Solar Salt Agreement 1992 Additional Proposal - Flood Mitigation Works';
(e) reports issued by URS in response to that engagement.
71 The parties should be heard in relation to the costs of the Application.
[1] Onslow Solar Salt Agreement Act 1992 (WA), an Act to ratify an agreement between the State of Western Australia and Onslow Salt to establish and operate a solar salt field at Onslow and for incidental and other purposes.
[2] A copy of the Development Deed is annexed to the affidavit of Matthew Slack sworn 6 September 2016, 'MS‑1'; a copy of the Development Deed together with Plans and Schedules to that deed is annexed to the affidavit of Timothy Paul O'Leary affirmed on 1 November 2016, 'TPO‑2'.
[3] Affidavit of Matthew Slack sworn 6 September 2016, 'MS‑4' ('Onslow Salt Agreement Act 1992 additional proposal - Flood Mitigation Works').
[4] Affidavit of Matthew Slack sworn 6 September 2016, 'MS-6' [3.2] ‑ [3.3].
[5] Affidavit of Matthew Slack sworn 6 September 2016, 'MS-9'.
[6] Affidavit of Matthew Slack sworn 6 September 2016 [25.5].
[7] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [2016] WASCA 14 [66] (Mitchell J).
[8] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [70] ‑ [71].
[9] Clause 4.1a of the Development Deed, annexed to the affidavit of Timothy Paul O'Leary affirmed on 1 November 2016, 'TPO-2', page 55.
[10] Clause 2.5 of the Development Deed, annexed to the affidavit of Timothy Paul O'Leary affirmed on 1 November 2016, 'TPO-2', page 55.
[11] As those terms are defined in the Development Deed.
[12] Clause 4.2c of the Development Deed, annexed to the affidavit of Timothy Paul O'Leary affirmed on 1 November 2016, 'TPO-2', page 56.
[13] Clause 4.2f of the Development Deed, annexed to the affidavit of Timothy Paul O'Leary affirmed on 1 November 2016, 'TPO-2', page 56.
[14] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [111] (Mitchell J).
[15] Waller v Waller [2009] WASCA 61 [2].
[16] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [120].
[17] Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33 [82] ‑ [83].
[18] Kelbush Pty Ltd v Australia and New Zealand Banking Group Ltd [121] (Mitchell J), see also [2] ‑ [6] (Martin CJ).
[19] Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2007] FCA 2065 [37].
[20] Affidavit of Matthew Slack sworn 6 September 2016, 'MS-8'.
[21] Affidavit of Matthew Slack sworn 6 September 2016,'MS-8'.
[22] Affidavit of Matthew Slack sworn 6 September 2016, 'MS-9'.
[23] Affidavit of Matthew Slack sworn 6 September 2016, 'MS-10' and 'MS-11'.
[24] Affidavit of Matthew Slack sworn 6 September 2016, 'MS-12' ‑ 'MS-16'.
[25] Affidavit of Matthew Slack sworn 6 September 2016, 'MS-17'.
(2002) 26 WAR 33