Commonwealth v ADI Limited

TODD HYDRAULIC PTY LIMITED TRADING AS "ENZED FREMANTLE" ACN 009 084 986

JETROCK PTY LIMITED (IN LIQUIDATION) TRADING AS "THE HOSE DOCTOR" ACN 080 369 268

TODD HYDRAULIC PTY LIMITED TRADING AS "ENZED FREMANTLE" ACN 009 084 986

PARKER ENZED TECHNOLOGY PTY LIMITED ACN 005 879 130

PARKER ENZED TECHNOLOGY PTY LIMITED ACN 005 879 130

TODD HYDRAULIC PTY LIMITED TRADING AS "ENZED FREMANTLE" ACN 009 084 986

CGU INSURANCE LIMITED (FORMERLY KNOWN AS COMMERCIAL UNION ASSURANCE COMPANY OF AUSTRALIA LIMITED) ACN 004 478 371

ROYAL AND SUN ALLIANCE INSURANCE AUSTRALIA LIMITED ACN 005 297 807

FAI GENERAL INSURANCE COMPANY LIMITED (IN LIQUIDATION) ACN 000 827 855

HIH CASUALTY AND GENERAL INSURANCE COMPANY LIMITED (IN LIQUIDATION) ACN 008 482 291

SEVENTH CROSS-RESPONDENT IN THE SEVENTH CROSS-CLAIM

JETROCK PTY LIMITED (IN LIQUIDATION) TRADING AS "THE HOSE DOCTOR" ACN 080 369 268

JETROCK PTY LIMITED (IN LIQUIDATION) TRADING AS "THE HOSE DOCTOR" ACN 080 369 268

HIH CASUALTY AND GENERAL INSURANCE COMPANY LIMITED (IN LIQUIDATION) ACN 008 482 291

SECOND CROSS-RESPONDENT IN THE TENTH CROSS-CLAIM JUDGE: MOORE J

THE COURT ORDERS THAT:

1. The parties bring in short minutes to give effect to these reasons for judgement within seven days.
2. Costs of the application by the Commonwealth seeking general discovery be costs in the cause. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

PARKER ENZED TECHNOLOGY PTY LIMITED ACN 005 879 130

TODD HYDRAULIC PTY LIMITED TRADING AS "ENZED FREMANTLE" ACN 009 084 986

JETROCK PTY LIMITED (IN LIQUIDATION) TRADING AS "THE HOSE DOCTOR" ACN 080 369 268

TODD HYDRAULIC PTY LIMITED TRADING AS "ENZED FREMANTLE" ACN 009 084 986

PARKER ENZED TECHNOLOGY PTY LIMITED ACN 005 879 130

PARKER ENZED TECHNOLOGY PTY LIMITED ACN 005 879 130

TODD HYDRAULIC PTY LIMITED TRADING AS "ENZED FREMANTLE" ACN 009 084 986

CGU INSURANCE LIMITED (FORMERLY KNOWN AS COMMERCIAL UNION ASSURANCE COMPANY OF AUSTRALIA LIMITED) ACN 004 478 371

ROYAL AND SUN ALLIANCE INSURANCE AUSTRALIA LIMITED ACN 005 297 807

FAI GENERAL INSURANCE COMPANY LIMITED (IN LIQUIDATION) ACN 000 827 855

HIH CASUALTY AND GENERAL INSURANCE COMPANY LIMITED (IN LIQUIDATION) ACN 008 482 291

SEVENTH CROSS-RESPONDENT IN THE SEVENTH CROSS-CLAIM

JETROCK PTY LIMITED (IN LIQUIDATION) TRADING AS "THE HOSE DOCTOR" ACN 080 369 268

JETROCK PTY LIMITED (IN LIQUIDATION) TRADING AS "THE HOSE DOCTOR" ACN 080 369 268

HIH CASUALTY AND GENERAL INSURANCE COMPANY LIMITED (IN LIQUIDATION) ACN 008 482 291

REASONS FOR JUDGMENT 1 An issue has arisen in these proceedings about the extent to which parties should give discovery to various other parties. The proceeding concerns an action by the Commonwealth of Australia against four respondents who were involved, directly or indirectly, in the refurbishment of a diesel engine on a naval vessel, the HMAS Westralia. On 5 May 1998, during the refurbishment a fire occurred in the engine room causing loss of life and extensive damage to the vessel. What caused this fire, who was responsible and what losses were suffered by the Commonwealth as a consequence of the fire are at the heart of this litigation. Various insurance companies have been joined in the proceedings as cross-respondents to a number of cross-claims. 2 The matter is not without its complexities. First, the Commonwealth entered into a deed of indemnity with the first respondent, ADI Limited ("ADI") in 1999 when the Commonwealth sold its interests in ADI. While some rights and obligations under the deed are in issue in these proceedings, the deed provides that the Commonwealth will indemnify ADI for all uninsured losses with respect to all claims and all causes of action and all liability to the Commonwealth arising from the fire of 5 May 1998. The deed goes on to provide, however, that the Commonwealth can make claims against ADI in relation to losses it suffered from the fire. ADI is obliged, under the deed, to seek to recover against insurers. The existence of the deed is raised by various insurers in defending claims made against them by ADI. 3 Secondly, the circumstances of the fire have, as I presently apprehend it, been extensively canvassed before a Naval Board of Inquiry as well as, more recently, a Coronial interest by a Western Australian magistrate. While I have not read either the Board's report or the Coroner's report, I apprehend from comments made by counsel in these proceedings that there may be a divergence between the conclusions reached. While the proceedings were commenced sometime ago, many months were taken up in a mediation I ordered. I ordered mediation on the assumption that issues of fact may have been settled by the Naval Board of Inquiry and a mediation could focus on the nature and extent of the liabilities of the parties by reference to those facts. However, the mediation was not successful. 4 The Commonwealth submits that all parties should give general discovery to all other parties. This includes the insurers who are cross-respondents to cross-claims by ADI. Some parties, including the Commonwealth, volunteer general discovery. Other parties, while not opposing general discovery by those who volunteer it, submit that their obligation should be more limited. Notable amongst that latter group is ADI (and insurers against which it maintains cross-claims). During the course of the argument on what form discovery should take, some of the parties who had volunteered general discovery sought to retreat from that position, seemingly on the basis that there was a prospect other parties might not be required to give general discovery. 5 In this Court, at least since 1999, there has been a clear bias against ordering general discovery though the facts of a particular case may warrant such an order being made. First, O 15 r 15 of the Federal Court Rules provides, in effect, that any order concerning discovery should only be made if the Court is satisfied that the order is necessary at the time it is made. Indeed, this condition on the exercise of the power is expressed as a prohibition subject to a qualification. The Court must not make a discovery order unless it is satisfied that the order is necessary. Secondly both authority and a Practice Note issued by the Chief Justice (Practice Note No.14 issued 3 December 1999) point to the power to order discovery being exercised cautiously and general discovery not being ordered other than in a clear case where such an order is warranted. These matters were canvassed by a Full Court inReading Entertainment Australia Pty Ltd v Birch Carroll & Coyle Ltd [2002] FCAFC 109 and it is clear from the judgement of Beaumont J (Tamberlin J agreeing) that the approach I have just outlined, is to be adopted when considering what order should be made requiring discovery. Beaumont J also affirmed (at [70]) the continuing applicability of O 15 r 15 to any order for discovery and also endorsed the observations of Lindgren J in Trade Practices Commission v CC (New South Wales) Pty Limited (1995) 58 FCR 426 (at 436-7) as to what is constituted by notions of "reasonably necessary" for any order of discovery to be made. 6 ADI and other parties opposing an order that they give general discovery have identified categories of documents which they contend comprehend all relevant documents. During argument on what form discovery should take, counsel for ADI added to and modified the proposed categories. Observations of counsel for the Commonwealth about the inadequacy of the categories contributed to that process. 7 The Commonwealth identified various reasons why general discovery should be ordered. They include potential delay if discovery is given by categories, potential disputes the Court will need to resolve and potential additional costs incurred in resolving those disputes or at least in the on going review by the parties of the categories and their sufficiency. These matters may arise in what is undoubtedly complex litigation involving a multiplicity of parties. It is possible that some, or indeed perhaps all, of the Commonwealth's concerns will materialise. However, I am not affirmatively satisfied at this stage of the proceedings that they will. Accordingly, in these circumstances, I am not prepared to order general discovery as the Commonwealth contends. 8 With one qualification, which I refer to shortly, the parties should agree on categories. I will adjudicate on any dispute about categories if agreement cannot be reached, though my expectation is that agreement should be reached having regard to the limited areas of difference apparent by the end of the hearing. I should indicate, however, that the parties cannot discount the possibility that, notwithstanding this judgement, if the areas of dispute are too great and the resolution of those disputes is likely to be protracted, general discovery might be ordered. 9 Consistent with principle, I should not order general discovery by any party (including the Commonwealth) who has volunteered to do so if they wish to resile from the commitment. If, after this judgement, any party (including the Commonwealth) remains willing to give general discovery (perhaps because it is more convenient to do so), that can be reflected in the orders. All parties should give discovery by 19 November 2004. 10 The qualification referred to earlier concerns documents brought into existence after this litigation was commenced. The draft list of categories proposed by ADI requires discovery only of documents in the categories which came into existence before these proceedings were commenced (on 23 April 2001). I accept, as the solicitor representing the second respondent (Parker Enzed Technology Pty Ltd) pointed out, this limitation on the obligation to give discovery is reflected in Pt 23 r 1(b) of the Supreme Court Rules 1970 (NSW) in the definition of "excluded documents" (the definition includes any document which wholly came into existence after the commencement of the proceedings) which operates, in this respect, in conjunction with Pt 23 r 3(5)(a). While I can conceive of situations where it might be appropriate to limit discovery in this way, it is not apparent to me it should qualify the obligation to give discovery in this matter. The rationale of limiting discovery in this way, as advanced by the solicitor for the second respondent, was that since these proceedings had been commenced, there have been a number of other proceedings (including the Board of Inquiry and the Coronial inquest) which would have generated a significant quantity of privileged documents. Implicit in the submission, as I understood it, was that the parties should not be required to list these documents as documents in respect of which a claim of privilege was made, which is the primary obligation imposed by O 15 r 6. There is some sense of addressing this practical problem. I would make an order, if all parties agreed, that all parties should be relieved of the burden of listing privileged documents when giving discovery. In the absence of agreement, I would hear the parties on what qualifications, if any, should operate in relation to documents created after these proceedings were commenced. 11 I propose to order that the parties bringing short minutes to give effect to these reasons. The primary responsibility for doing so should be assumed by ADI. The costs of this application should be costs in the cause. If there are any outstanding issues concerning categories, I will deal of them at the hearing scheduled for 8 September 2004. If such a hearing is necessary, ADI should notify me 14 days before the hearing of all outstanding issues concerning discovery. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

Counsel for the Applicant: J A Timbs QC

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the First Respondent: A S Martin SC

Solicitor for the First Respondent: Deacons

Solicitor for the Second Respondent: Corrs Chambers Westgarth

Solicitor for the Third Respondent: Hicksons

Counsel for the First to the Fifth Cross-Respondents in the Sixth Cross-Claim: A J Bowen

Solicitor for the First to the Fifth Cross-Respondents in the Sixth Cross-Claim: Henry Davis York

Counsel for the Sixth Cross-Respondent in the Sixth Cross-Claim: A T S Dawson

Solicitor for the Sixth Cross-Respondent in the Sixth Cross-Claim: Minter Ellison

Counsel for the Second Cross-Respondent in the Seventh Cross-Claim: T Clarke

Solicitor for the Second Cross-Respondent in the Seventh Cross-Claim: Vardanega Roberts

Solicitor for the Second Cross-Respondent in the Tenth Cross-Claim: Ebsworth & Ebsworth

Date of Hearing: 28 July 2004

Date of Judgment: 5 August 2004