Interline Hydrocarbon Inc v Brenzil P/L & Anor [2003] QSC 322

Supreme Court of Queensland|2003-09-24|Before: Mackenzie, J

2. The plaintiff have leave to file and serve its Reply and Defence to Counterclaim dated 21 August 2003

3. Within 14 days the plaintiff notify the defendants whether it intends to rely on facts with regard to other plants with which the plaintiff has been involved and if so:

(a) notify them of the nature of such facts; and

(b) make any necessary further amendments to the pleadings.

4. The plaintiff make disclosure in accordance with the Uniform Civil Procedure Rules with regard to further issues raised pursuant to order 3 hereof within 21 days of complying with that paragraph

5. If pursuant to order 3, the plaintiff advises that no further amendments to pleadings are necessary the following directions shall apply:

(a) the defendants serve within 7 days of such notification any request for further and better particulars of the reply dated 21 August 2003;

(b) the plaintiff provide further and better particulars within 14 days of receipt of any request pursuant to order 5(a);

(c) the defendants deliver any further experts' reports and file and serve any further amendments to the defence and counterclaim within 14 days of delivery of the further and better particulars;

(d) the experts for each party confer with each other within 21 days of delivery of the defendants' further expert reports with a view to limiting the matters in issue between them;

(e) following the conference between the experts, any further experts' reports upon which either party wishes to rely shall be delivered to the other party or parties within 14 days of the completion of the conference

6. If the plaintiff notifies the defendants that it intends to rely on facts with regard to other plants with which the plaintiff has been involved in accordance with order 3 the following directions shall apply:

(a) the defendants serve any request for further and better particulars of the further amended pleadings within 21 days of completion of the disclosure provided for in order 4;

(b) the plaintiff, within 14 days of receipt of a request for particulars under order 6(a), provide the further and better particulars;

(c) the defendants deliver any further experts' reports upon which they intend to rely within 14 days of delivery of the further and better particulars referred to in order 6(b) and file and serve any further amendments to the defence and counterclaim or any pleading in answer to the amended reply and defence to counterclaim dated 21 August 2003 or any further amended pleading;

(d) the experts for each party confer with each other within 21 days of delivery of the defendants further experts' reports with a view to limiting the matters in issue between them: provided that for the purpose of calculating the period of 21 days the period commencing Saturday 20 December 2003 and concluding on Sunday 11 January 2004 shall not be counted as part of the period of 21 days: but exclusion of that period for calculation purposes does not preclude the experts from mutually agreeing to confer during that period;

(e) following the conclusion of the conference between the experts, any further experts' reports upon which either party wishes to rely shall be delivered to the other parties within 14 days

7. Each experts' report shall conform to the Federal Court Practice Direction "Guidelines for Expert Witnesses in Proceedings in the Federal Court of Australia" dated 15 September 1998, a copy of which shall be provided to any expert that a party proposes to call as a witness

9. Liberty to apply on 3 days' notice to other parties

PROCEDURE - COURTS AND JUDGES GENERALLY - COURTS - ADJOURNMENT - where trial date set for 27 October 2003 - where issue as to whether the plant met the specifications agreed at the time of construction - where expert reports sought as to such - where parties to exchange reports by agreed date - where defendants complied four months out of time - where no undue delay - where reports gave rise to amended pleadings - where possible need for further expert investigations - where appointment of court appointed expert contemplated - where such would require agreement between parties as to conditions of any experiments - whether trial should be adjourned

Scott v Numurkah Corporation [1954] HCA 14; (1954) 91 CLR 300

[1] MACKENZIE J: The present applications are in an action for recovery of moneys allegedly due as royalties but where issues concerning the performance of an oil recycling plant are said to be critical to the extent of the alleged debt. After management on the supervised case list the matter was set down for trial on 27 October 2003 with 2 weeks being set aside.

[2] The defence and counterclaim puts in issue whether the plant met the specifications agreed upon at the time of construction of the plant. Immediately relevant events probably begin on 22 November 2002 when a consent order was made that the plaintiff's experts' inspection occur by 30 January 2003, with experts' reports to be exchanged by 15 March 2003. The plaintiff's inspection occurred within the prescribed period. However on 10 March 2003 the defendants advised that they would not be in a position to comply with the order to exchange experts' reports by 15 March 2003.

[3] It also turned out that the plaintiff's experts' report was not ready by the due date. It advised the defendant on 31 March 2003 that the report was expected within the next couple of days. It was actually finalised and delivered in mid April 2003. The plaintiff immediately requested exchange of experts' reports.

[4] On 15 April 2003 the defendants advised that they anticipated having their expert's report by mid June, explaining that it had been difficult to locate an independent expert in the extremely specialised field prepared to give evidence. One expert had relinquished the brief because he could not devote the attention required to it. Two others had rejected it after preliminary discussions. The process of locating and briefing another expert was continuing. It cannot in my view therefore be characterised as a case where the defendants have been demonstrably dilatory or neglectful of their obligations although it is noted that there was a suggestion from the plaintiff that one person originally suggested was not truly independent and that otherwise the attempt to progress the matter on the part of the defendants had been half-hearted.

[5] The defendants had suggested in their letter of 15 April 2003 that if the plaintiffs made their experts' report available immediately it may narrow the issues in dispute and save time in preparation of their experts' report. However, the plaintiff adhered to the position that the experts' reports should be exchanged at the same time in its response of 24 April 2003. Another aspect of alleged dilatoriness arose in the context of whether the defendants had had adequate notice of the thrust of the plaintiff's experts' report. On 8 May 2003, an application to dispense with a request for a trial date form was filed. It was accompanied by an affidavit exhibiting two pages of the plaintiff's experts' report particularly referring to asphalt. One of the defendants' complaints concerns unsaleability of the asphalt produced in the plant, on quality grounds, contrary to their expectations.

[6] According to the two pages of the report the problems were due in large part to the second defendant's processing choices, mainly mild pre-treatment conditions and, to a lesser extent, replacement of steam stripping with high temperature boiling. There followed some short discussion of the suggested effects of the processing method used. In paragraph 57 of the affidavit the effect of the extract from the report was summarised as being that the poor quality of the asphalt was due in the largest part to the second defendant's own processing choices (In other correspondence, there is also an assertion that as early as January 2003, the plaintiff's representatives "all but told" the defendants of a "key problem" in the way they had chosen to operate the plant). Paragraph 57 concluded by saying that in providing a copy of the 2 page extract from the plaintiff's experts' report the plaintiff in no way waived any of its rights attaching to it with respect to the exchange of expert reports as required in the orders of the court and any claims of privilege with respect to the report.

[7] The plaintiff was undoubtedly entitled to withhold the report until the defendants were ready to exchange their report for it. The plaintiff had to consider the question of possible disadvantage if the exchange of information did not occur in that way. However, to suggest that the defendants were guilty of undue delay in dealing with what is now clearly the plaintiff's case is another matter.

[8] While the pages supplied gave a hint of the reasons why the plaintiff's experts thought the problems were occurring, other parts of the report set out the theory in considerably more detail. Mr O'Donnell QC also submitted that, in addition to the issues of temperature during pre-treatment and use of boiling rather than steam strapping, another issue, drawing off different proportions of oils, was suggested as one that affected quality. This was not mentioned in the pages supplied. Had the report been made available in full the defendants would have been explicitly confronted by what was only broadly alluded to in the pages supplied. Any concern that the receipt of the 2 pages did not elicit an inquiry as to what they meant has to be balanced against the fact that the solicitors had been told quite expressly that they would not be getting the full report until the defendants' report was ready to be exchanged. In the circumstances the submission that the defendants are guilty of a period of delay in addressing the real case of the plaintiff is blunted.

[9] The full report was provided to the defendants on 17 July 2003. After considering it and obtaining the advice of counsel the defendants' solicitors raised the issue of whether the theory proposed by the plaintiff's experts was covered by the pleadings. On 18 August 2003 the plaintiff advised that it would amend its reply, saying that it had been waiting to get the defendants' report before proceeding any further in that regard and, in particular, to see whether or not there were going to be any amendments to the counterclaim. The further amended reply was delivered on 21 August 2003.

[10] One form of relief sought by the defendants is that the plaintiff's experts' report in so far as it relates to the pre-treatment process be disallowed. By the end of the hearing it was accepted that this was an impractical outcome. For the reason that the report goes to the heart of the plaintiff's case and to exclude it would be to risk doing injustice to the plaintiff and because of the history of the matter, it is not an acceptable option.

[11] One other aspect of the plaintiff's experts' report is that there is reference in it to successful construction by the plaintiff of other plants of a similar nature in other parts of the world. It is not entirely clear, even at this stage, precisely what use the plaintiff intends to make of that information. However, the defendants are concerned that if it is to be used at all, it will be necessary for their expert to satisfy himself that the plants are truly comparable with the plant in question. There is some force in this proposition since, if the argument is to be run that because the other plants operate at the suggested temperatures and work successfully in other respects the plant in question must be deficient because it is not operated in that way, the question of comparability becomes critical.

[12] In my view it is incumbent upon the plaintiff to indicate clearly the purpose if any for which this evidence is to be used. If it is not to be used to found an inference as to the efficacy of the experts' theory that issue disappears. However, it is not entirely clear to me that the issue of the other plants will be abandoned, since, as I understand it, chemical engineering is not an exact science and elements of "intelligent empiricism" and experience in plant design are said to be relevant to designing a plant effectively. If any reliance is to be placed on facts related to experience with other plants, the need to further amend may need consideration, and if there is, further disclosure may be necessary.

[13] Another proposal, this time emanating from the defendants, is for the appointment of a court appointed expert to report on an experimental operation of the plant in the way suggested by the plaintiff's experts. Leaving aside any statutory modification, the relevant principle stated in Scott v Numurkah Corporation [1954] HCA 14; (1954) 91 CLR 300 is that it is essential before a demonstration experiment or reconstruction is ordered that there is agreement between the parties or evidence that the conditions under which it will be conducted are the same as those postulated to be relevant to the issue in the case or at least that any variations are defined in a manner enabling them to be assessed and accounted for and are not such as might render the demonstration experiment or reconstruction impractical. The proposal is that specifications for how such a test would be run would be prepared and submitted to the plaintiff for comment.

[14] Such indications as there are suggest that getting agreement on this issue will not be easy. The evidence before me is inadequate to establish that the preconditions for a useful experimental operation of the plant would be satisfied. On the evidence as it stands it is of no utility to make an order in that respect at this time, although nothing would preclude the defendants from carrying out such tests as they think may shed light on their prospects of success. However, a late decision to do so would not, of itself, be a compelling reason to delay the trial further.

[15] The principal issue is whether the trial should be adjourned. That will have the effect of vacating ten days of sitting time which has been allocated for some time. However, there are distinct disadvantages in forcing a case that has not reached a sufficient state of readiness to go to trial. It was submitted that while a large sum of money remains unpaid if royalties are payable it is not a case where there is any concern that the defendants will not be able to meet any damages of the order claimed even if the plaintiff is wholly successful.

[16] On the one hand it is submitted for the plaintiff that the trial should not be adjourned. It would not be difficult for a person with appropriate expertise to inspect the plant and form an opinion as to the impact of the changed pre-treatment procedure and other changes in the process by applying principles of chemistry and chemical engineering which would be well known to such an expert. On the other hand the expert currently employed by the defendants has recommended that the expertise of a design engineer would be needed to assess some aspects of the plaintiff's experts' report. The person currently engaged is a process engineer at an oil plant. It appears that he feels that it is beyond his expertise to analyse computer data relied on by the plaintiff's experts. If this is so, the likelihood of the trial being properly prepared by the appointed time is questionable.

[17] It is impossible to know on the information before me whether one or other of these views is to be preferred. The wider issue of whether it will be necessary to consider what happens in other plants is as yet unresolved as well. If that issue remains alive, it is almost inevitable that there will be further delay. Resolution of that issue seems to be, in practical terms, the first step in the process of finally defining the issues at trial. It also seems desirable that at the earliest practical opportunity the experts confer with a view to attempting to limit the areas actually in issue between them. One thing that is agreed is that it would be appropriate for the experts' final reports to be formatted in a way which complies with the Federal Court Practice Direction relating to expert witnesses. Because of the uncertainties about the final shape of the case, the fact that attendance of expert witnesses will have to be arranged, and in all probability people connected with the case may have to travel from the United States it is inevitable that the balance of convenience is that the trial be adjourned to a date to be fixed now rather than on the eve of the trial if, as I am persuaded, the odds that the case will be ready for trial at the appointed time are not good.

1. The trial of this action, appointed to commence on 27 October 2003 is adjourned to a date to be fixed.

2. The plaintiff have leave to file and serve its Reply and Defence to Counterclaim dated 21 August 2003.

3. Within 14 days the plaintiff notify the defendants whether it intends to rely on facts with regard to other plants with which the plaintiff has been involved and if so:

(b) make any necessary further amendments to the pleadings.

4. The plaintiff make disclosure in accordance with the Uniform Civil Procedure Rules with regard to further issues raised pursuant to order 3 hereof within 21 days of complying with that paragraph.

5. If pursuant to order 3, the plaintiff advises that no further amendments to pleadings are necessary the following directions shall apply:

(a) the defendants serve within 7 days of such notification any request for further and better particulars of the reply dated 21 August 2003;

(b) the plaintiff provide further and better particulars within 14 days of receipt of any request pursuant to order 5(a);

(c) the defendants deliver any further experts' reports and file and serve any further amendments to the defence and counterclaim within 14 days of delivery of the further and better particulars;

(d) the experts for each party confer with each other within 21 days of delivery of the defendants' further expert reports with a view to limiting the matters in issue between them;

(a) the defendants serve any request for further and better particulars of the further amended pleadings within 21 days of completion of the disclosure provided for in order 4;

(b) the plaintiff, within 14 days of receipt of a request for particulars under order 6(a), provide the further and better particulars;

(e) following the conclusion of the conference between the experts, any further experts' reports upon which either party wishes to rely shall be delivered to the other parties within 14 days.

9. Liberty to apply on 3 days' notice to other parties.

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