Metro Environmental Logistics Pty Ltd v Newcastle Port Corporation

The substantive proceedings

1. The plaintiff sues Newcastle Port Corporation for damages, being loss of an opportunity to make profits of at least $100 million or, alternatively, wasted expenditure and costs of some $4.3 million. The plaintiff contends that it was established to develop projects to import sand by sea into Sydney. From 2015 to 2019, demand for sand in metropolitan Sydney grew due to increased building and construction projects, while the supply of sand from local sources was reduced by the depletion of existing sand deposits. Importing sand into Sydney by sea was less costly than transporting sand by road. As a consequence, there was a market demand for the importation of sand by sea into Sydney.
2. For several years, the plaintiff worked with Newcastle Port Corporation to develop Glebe Island into a commercial port to import sand by sea from Tasmania for distribution by road to concrete batching facilities for use in building and construction projects in metropolitan Sydney. In 2015, the plaintiff and Newcastle Port Corporation entered into a heads of agreement for a 30 years lease and licence of berths on Glebe Island. In December 2018, the parties executed an agreement for lease. However, the defendant terminated the agreement. The plaintiff contends that Newcastle Port Corporation engaged in unconscionable conduct and sues for damages.

The subpoena

1. The subpoena were issued by the Court in November and December 2022 at the request of the plaintiff, in like terms to: 1. Allsands Pty Ltd, which operates a sand quarry in Kurnell; 2. Aus-10 Rhyolite Pty Ltd and Hy-Tec Industries Pty Ltd (together referred to as Hy-Tec), which supplies premixed concrete, aggregate and sand; and 3. Williamtown Sand Syndicate Pty Ltd trading as "Newcastle Sand", which operates a quarry in Williamtown, north of Newcastle.
2. Allsands accepted that the ordinary rule is that costs follow the event and, in this case, that the Court would make an order that it pay Metro's costs of the motion as agreed or assessed. I agree that such an order is appropriate. This leaves Hy-Tec and Williamtown.
3. The subpoena was served on Williamtown and Hy-Tec on 2 December 2022. The subpoenas were relevantly identical and it is convenient to set out the subpoena to Hy-Tec: SCHEDULE The documents or things you must produce are as follows: 1. All documents constituting any contract or agreement for the sale or purchase (or potential sale or purchase) of Fine Sand for each Quarry Site owned or operated by Hy-Tec Industries, entered into in the Period. 2. Documents recording the weekly, monthly or annual volume (in tonnes) of Fine Sand sold by Hy-Tec Industries for each Quarry Site owned or operated by Hy-Tec Industries, during the Period. 3. Documents constituting a list or schedule recording any purchasers of Fine Sand sold by Hy-Tec Industries for each Quarry Site owned or operated by Hy-Tec industries, during the Period. 4. Documents recording the prices ("ex-bin" or "free on truck") charged or offered by Hy-Tec Industries for Fine Sand for each Quarry Site owned operated by Hy-Tec Industries, in the Period, including any price lists. 5. Documents constituting any price list, schedule or quote recording any prices, rates, charges, surcharges, levies or tolls payable for the transport of Fine Sand into or within the [Greater Sydney Region]. 6. All documents recording the Fine Sand deposits or reserves of Hy-Tec industries for each Quarry Site owned or operated by Hy-Tec Industries, that supplies sand into the [Greater Sydney Region]. 7. All documents recording any applications in the Period, for reserve extensions or to increase sales or outputs made in respect of any of Hy-Tec Industries' Fine Sand deposits for each Quarry Site. "Period" was defined as 2015 to date.

Williamtown complaints

1. On 12 December 2022, Williamtown's solicitor advised the plaintiff, on a without prejudice basis and on the condition that the subpoena was withdrawn, that Williamtown was "willing to consider the provision of some limited information … if we can get a clearer understanding of how the information is relevant to the proceedings." Otherwise, it was said that the subpoena requested extensive, commercially sensitive information "which our client is not prepared to produce." The plaintiff's solicitor immediately replied, advising that the subpoena would not be withdrawn but agreeing to stand the subpoena over for seven days to discuss the provision of documents, "It is certainly our intention to work with you to have any issues resolved …"
2. On 14 December 2022, the plaintiff's solicitor set out a proposal to address any issues that Williamtown may have in complying with the subpoena by providing the schedule to the subpoena in soft copy. Williamtown was invited to mark-up the schedule to indicate how the volume of material needed to be reviewed to comply with the subpoena could be reduced, and to indicate the types of documents which Williamtown said may respond to the terms of the categories. Williamtown was also asked to indicate how long it would take to search for the documents pursuant to the proposed amendments to the schedule to the subpoena. The plaintiff would then consider the marked-up schedule and respond.
3. Williamtown did not engage with this suggestion. On 19 January 2023, the plaintiff's solicitor followed up its request for a marked-up schedule, noting that the subpoena was listed for return on 23 January 2023. Williamtown responded without prejudice save as to costs, advising that Williamtown "is not prepared to provide commercially sensitive or confidential information." As such, Williamtown was not prepared to provide any documents in answer to paragraph 1, 2 or 3 of the schedule to the subpoena but was prepared to advise its total number of annual sales volumes for 2022. There were no documents to produce in answer to paragraphs 4 and 5. The information sought in paragraphs 6 and 7 were said to be publicly available. If this proposal was not acceptable, then Williamtown intended to file a motion to set aside the subpoena.
4. On 20 January 2023, the plaintiff advised, unsurprisingly, that Williamtown's proposal was not acceptable, where it was no answer to a subpoena that the documents were confidential and where a confidentiality regime could be implemented. Questions were posed about the limited production proffered by Williamtown and the plaintiff offered to have the subpoena stood over for a further week to resolve the issues raised.
5. On 22 January 2022, Williamtown replied, requesting a copy of the pleading and that the subpoena be stood over for a lengthier period. Williamtown did not substantively engage with the plaintiff's questions but simply advised that its position remained unchanged and compliance costs "would be substantial". The plaintiff promptly replied, agreeing to stand the matter over for the longer period requested, to provide a copy of the pleadings and, if it would assist, to discuss Williamtown's ongoing concerns by telephone. Williamtown did not embrace this invitation.
6. On 30 January 2023, having review the pleadings, Williamtown's solicitor queried the relevance of the information sought, repeated its confidentiality concerns, and repeated that the compliance cost would be substantial. The solicitors did not, however, engage with the substance of the schedule to the subpoena.
7. On 2 February 2023, the plaintiff's solicitor replied at length, stating that the information sought under the subpoena was relevant and necessary to expert evidence and quantification of the plaintiff's loss and damages. In particular, the information sought established the market for the sale of sand in the Greater Sydney Region, including potential customers, prices and sales volumes for fine sand. The information assisted by establishing the relevant market that the plaintiff could have participated in, had it not lost the opportunity to do so on account of the defendant's conduct. As to Williamtown's confidentiality concerns, the plaintiff's solicitor provided a proposed confidentiality undertaking. The plaintiff also offered to narrow the period for which it was seeking documents to 2017 to date, noting that the subpoena only sought contracts in relation to the supply of Fine Sand (as defined).
8. On 3 February 2023, Williamtown offered to produce a limited amount of material: agreements with its three biggest customers; annual sales volumes from 2019 (where Williamtown's quarry did not become operational until April 2019); and a report detailing the annual weighted price per tonne for fine sand sold from 2019 to 2022. A more onerous confidentiality undertaking was sought, including a full indemnity supported by personal guarantees of the plaintiff's directors, for any loss or costs incurred in relation to a breach of the confidentiality regime, any application to the Court in the event that the plaintiff intended to use the documents in the proceedings, or any claim brought against Williamtown by its customers for breach of confidentiality in disclosing the documents.
9. The plaintiff engaged with Williamtown's proposal on 6 February 2023: the plaintiff was not prepared to limit production to Williamtown's three biggest customers but was amenable to a restriction of the period covered by the subpoena. An amended confidentiality undertaking was offered but the proposed indemnity and guarantees were (understandably) declined.
10. On 9 February 2023, Williamtown responded, proposing to provide details of sales above 10,000 tonnes but to redact customer names. Williamtown insisted on the indemnity and personal guarantee. Williamtown's solicitors estimated that its costs of complying with its proposed scope of the subpoena would be $5,000 to $7,500 plus GST; the plaintiff was required to pay these costs as a condition of production of the documents.
11. The plaintiff (understandably) declined the same day. The plaintiff repeated that the information sought was necessary to establish the potential market for its sand, had its business come into existence. The potential market comprised actual customers in the market and the prices they may have been prepared to pay for the plaintiff's product, which included consideration of transport costs for these customers.
12. Williamtown rejoined, disputing the legitimate forensic purpose asserted by plaintiff, which was said "in no way necessitates disclosure of all the customer-specific information demanded by your subpoena. … [Williamtown's offer] is an offer which your client would be well advised to accept. … If your client does persist in seeking such records, it can only be for an illegitimate purpose." The confidentiality regime proposed was said to offer no comfort. Williamtown did, however, withdrew its requirement for an indemnity or guarantee. Williamtown advised that, if its offer was not accepted, then a motion would be filed to set aside the subpoena on the grounds of oppression and a lack of legitimate forensic purpose. Costs would be sought on an indemnity basis.
13. On 15 February 2023, the plaintiff's solicitor maintained that the documents were sought for a legitimate forensic purpose. While there was no real doubt that a market for natural fine sand existed, the issue for the plaintiff was to establish how much it would have been able to sell into the market. This required consideration of such matter as the customers, their location, the volume of sand purchased and the price they were prepared to pay. The documents called for went directly to these matters. As to the suggestion of oppression, the plaintiff was and remained willing to engage in discussion in relation to the scope of the subpoena to minimise the burden on Williamtown to comply with the subpoena while ensuring that the necessary documents were produced. Further, the plaintiff offered to revise the confidentiality regime, removing one of its directors from access to the material and limiting production to the plaintiff's legal representatives and experts only. Williamtown was not assuaged, suggesting that the plaintiff had simply refused to engage with its various offers.

Williamtown's motion

1. Williamtown's motion was filed on 21 February 2023, supported by an affidavit from its solicitor, Aimee Travis, and director, Darren Williams. The subpoena was sought to be set aside in toto.
2. Ms Travis estimated that the cost of compliance with the subpoena was between $421,000 and $496,000 plus GST. Some 652,000 documents were now thought to require review. This truly staggering suggestion invites incredulity. Some - but not nearly enough - light was shed on why this was said to be so by Mr Williams, who explained that the company does not have a single repository for all of its documents, which totalled some 652,000 documents. Mr Williams considered it was necessary to review each and every document that the company has created in order to comply with the subpoena. Mr Williams suggested that the plaintiff should prove its case by publicly available material.
3. In response to Williamtown's evidence, the plaintiff's solicitor, Jason Munstermann, swore an affidavit which, with annexures, fills a lever-arch folder. In short, Mr Munstermann explained his client's claim for loss and damage and the material which the plaintiff's experts - a forensic accountant and a sand expert - had advised that they required in order to complete their tasks. The solicitor explained why publicly available material was insufficient for the experts' purposes. The relevance of the information sought by the subpoena was set out at length, as were the reasons why the limited production proffered by Williamtown was insufficient to permit the experts to complete their work. The solicitor also described a proposed confidentiality regime.
4. On 12 April 2023, the plaintiff and Williamtown's counsel conferred but were unable to agree on a reduced form of production in answer to the subpoena. Whilst Williamtown had no documents answering paragraph 3 of the subpoena, Williamtown offered to prepare such a report and suggested that the plaintiff "acting rationally" should embrace this suggestion. Beyond this, Williamtown described the plaintiff's proposals for more limited compliance as "a capitulation, and a recognition that the subpoena as originally drafted was oppressive." A different confidentiality regime was also put forward.
5. Further correspondence ensued in respect of category 4. Williamtown offered without prejudice to create a report setting out the prices charged in answer to category 3, not to produce documents in answer to category 4, for the experts to give an undertaking not to use the information after the proceedings had concluded, and for each party to pay their own costs of the motion.
6. To this, the plaintiff said it was grateful for the offer of the preparation of a report, but did not require Williamtown to prepare a document "from scratch." If Williamtown had no document to produce in response to category 3, then that was that. The plaintiff sought further information in respect of the documents which may fall within categories 1, 2 and 4.
7. Williamtown responded on 18 April 2023 on a without prejudice basis. In short, Williamtown explained the difficulties in producing the documents sought and offered to prepare a report instead. The plaintiff requested that the substantive response be provided on a "open basis." Williamtown declined. The plaintiff replied that there was a question of fact as to the kind of documents created by Williamtown and the volume of that documentation, being a matter solely within Williamtown's knowledge. The plaintiff sought to clarify what documents existed and could be produced in response to particular categories to clarify for the Court the differences between the parties and to narrow the matters that remained in dispute in relation to compliance with the categories. Williamtown obliged.
8. On 8 May 2023, the plaintiff's solicitors wrote again, setting out the likely scope of production in answer to the subpoena, thought to total an estimated seven documents. Accompanying this email was a detailed table summarising the position taken by the parties in respect of each category. On reviewing the table, Williamtown's solicitor replied that it appeared that the plaintiff had rejected its offer to prepare a report as it was thought that the report would not be admissible in evidence. Williamtown offered to swear an affidavit explaining how the report had been compiled, with a view to ensuring that the report would be admissible.
9. The plaintiff's solicitor replied, saying that this was not the first time that this difficulty with Williamtown's proposal had been identified, but set out various matters which it was thought that any affidavit would have to address in order for the report to be admissible. Williamtown's comment was sought on these matters, noting that the data underlying the report would also need to be made available to the defendant so that the accuracy of the reports could be tested.
10. Mr Williams then swore a second affidavit setting out why it was said that the subpoena was oppressive. Mr Williams said he did not understand why the plaintiff refused to accept the offer to prepare a report.
11. On 18 May 2023, the plaintiff's solicitors wrote again, noting that Mr Williams' second affidavit disclosed that the report would be based on the collective memory, experience and personal knowledge of four people within the company. As such, and unfortunately, the proposed report and evidence of Mr Williams was likely to be admissible. Where Williamtown had not answered the plaintiff's questions about the proposed affidavit, the plaintiff was concerned as to the likelihood of Williamtown working co-operatively with the plaintiff to prepare admissible evidence, particularly where Williamtown continued to maintain, as part of its offer, that the report would not disclose any information in relation to its customers or the prices charged to any particular customer.
12. To this, Williamtown's solicitor replied that they would not be answering any further questions about their evidence. Williamtown rejected proposed consent orders where Williamtown's proposed confidentiality undertaking was not included and there was no order to pay Williamtown's costs of the motion and its costs of production (of course, the latter order was not necessary where a subpoenaed party's entitlement to be reimbursed for its reasonable costs of complying with a subpoena is provided by the Uniform Civil Procedure Rules).
13. To this, the plaintiff advised that it had amended the confidentiality regime to provide that any confidential information was only to be shared with one director of the plaintiff, being Arthur Psaltis. The plaintiff did not agree to pay Williamtown's costs of the motion and proposed that this be dealt with on the papers. Williamtown rejected this proposal, putting forward an alternate confidentiality regime. Further, Williamtown said it was not interested in a settlement that did not include payment of its costs of the motion, where it was said that the plaintiff had effectively capitulated.

Hy-Tec

1. Little is known of Hy-Tec's initial response to the subpoena, save that it appears that Hy-Tec objected to production of documents due to confidentiality concerns. The plaintiff proposed a confidentiality regime and invited Hy-Tec to mark-up the schedule to the subpoena with proposed amendments which would reduce the task of complying with the subpoena. On 8 February 2023, Hy-Tec retained solicitors, who informed the plaintiff's solicitor that they had instructions to file a notice to set aside the subpoena.
2. On 22 February 2023, Hy-Tec filed a motion to set aside the subpoena in part. In support of the motion, Hy-Tec's director, David Cilento, swore an affidavit, setting out the companies' record keeping systems and estimating that the cost of complying with the subpoena was thought to exceed $300,000. This estimate appears to have been arrived at by assuming that, rather than produce the contracts sought by the subpoena, the companies would have to seek out a range of other documents which, together, might comprise a contract such as quotes, delivery dockets and informal records "written in a notebook, on a scrap of paper, a coaster or a serviette." It is of course, fairly simple, to contend that a subpoena is oppressive if the means by which a party proposes to comply with the subpoena are not particularly sensible.
3. In any event, Hy-Tec did seek to engage with the plaintiff in respect of the schedule to the subpoena and how it might be amended to accommodate Hy-Tec's concerns. On 11 April 2023, Hy-Tec's solicitor emailed the plaintiff's solicitors without prejudice, asking whether he would like to discuss a way forward that involved a significant narrowing of the categories and a confidentiality regime. The plaintiff's solicitor responded positively. "There does not, however, appear to have been any response from Hy-Tec's solicitor.
4. On 18 May 2023, the plaintiff provided Hy-Tec with proposed orders in respect of its motion. Hy-Tec marked-up the proposed orders, with the plaintiff suggesting further amendments on 22 May 2023, being the evening before the hearing of the motion.

The hearing

1. The remaining points of difference between Hy-Tec and the plaintiff's respective positions was resolved without undue difficulty during the course of the hearing. More specifically, Hy-Tec's complaint about category 1 led to a refinement of the category. Hy-tec's proposed refinement of other categories was not accepted. Hy-tec's request for the plaintiff's representative to give a more onerous confidentiality undertaking was not accepted either. Hy-Tec's proposed confidentiality regime proved unworkable and was abandoned in favour of the traditional regime proffered by the plaintiff.
2. Williamtown's submissions as to the suggested oppressive nature of the subpoena were not accepted. Beyond effectively transferring the amendments to Hy-Tec subpoena to Williamtown's subpoena, no further success was achieved on arguing the motion, either as to the scope of the subpoena or the confidentiality regime sought, save that the expert was required to give an undertaking not to use the material after the proceedings were concluded. The plaintiff did however say that it would accept a report prepared by Williamtown, as has been earlier canvassed, but up to date rather than ending in 2022. Williamtown acceded to this.

Hy-Tec's costs

1. Hy-Tec submitted that it had been successful in setting aside the subpoenas in part and, as a consequence, the plaintiff should pay its costs of the motion. Hy-Tec submitted that it had "achieved overwhelming success," by comparing the schedule of the summons as issued with the consent orders ultimately made. Hy-Tec made detailed submissions setting out the plaintiff's "flawed approach from the outset."
2. The plaintiff made an offer at the conclusion of the hearing that each party bear their own costs of the motion. That offer having been rejected, the plaintiff now sought an order that Hy-Tec pay its costs of the motion having regard to the protracted and frustrated history of the plaintiff's efforts to agree to call on the subpoena in a limited form in order to address Hy-Tec's concerns.
3. In order to determine whether Hy-Tec's submissions should be accepted, the Court would be required to effectively determine the merits of Hy-Tec's motion to set aside the subpoena. I am disinclined to do so where the parties have effectively resolved the motion by agreement. The plaintiff's accedence to Hy-Tec's requests to reduce the scope of the subpoena should not be taken as an acceptance that the schedule to the subpoena should be set aside but merely, as a practical matter, to accept lesser production.
4. The correspondence does indicate that the plaintiff sought to engage with Hy-Tec at all times and struggled to obtain meaningful engagement. That said, I do not wish to discourage subpoenaed parties from negotiating at all - where Hy-Tec has distinguished itself as being the most reasonable subpoenaed party - by ordering that it pay the plaintiff's costs of the motion. I consider that the appropriate order is that each party should pay their own costs of the motion.

Williamtown's costs

1. Williamtown sought costs on an ordinary basis, in part, and on an indemnity basis commencing from when the Court concludes that the plaintiff first unreasonably rejected one of Williamtown's offers to resolve the matter.
2. The plaintiff submitted that the result was that Williamtown's motion was dismissed, subject to minor amendment of category 1 and an additional undertaking given by the plaintiffs' experts. Williamtown should therefore be ordered to pay the plaintiff's costs on the ordinary basis.
3. I have been unable to identify a point in time at which I consider that the plaintiff has acted unreasonably by not accepting Williamtown's various proposals. I have, however, identified several occasions where Williamtown's response to service of the subpoena has not been particularly reasonable. Williamtown steadfastly refused to produce documents which it regards as confidential and commercially sensitive. That, of course, is not a proper basis on which to resist compliance with a subpoena; such concerns are routinely addressed by confidentiality regimes. Further, Williamtown initially sought an indemnity and personal guarantees from the directors of the plaintiff and payment of the anticipated costs of compliance as a condition of production. I am mindful that this conduct largely pre-dated the filing of the motion. After the motion was filed, Williamtown's evidence of the cost of compliance with the subpoena invited incredulity. Williamtown also asserted that the plaintiff's purpose in issuing the subpoena was illegitimate, in the absence of any clear basis for what is a serious allegation.
4. It is certainly the case that, in April 2023, Williamtown's counsel engaged in discussion as to how to resolve areas of disagreement and put forward various pragmatic solutions, albeit that each proposal had its problems, as identified by the plaintiff's solicitor. The parties were unable to resolve these problems, which appeared to depend on the plaintiff's agreement to pay Williamtown's costs of the motion and Mr Williams' continuing cooperation in swearing an affidavit to support the admissibility of any report prepared by Williamtown. Williamtown's position was barely advanced by the conclusion of the hearing. Overall, having regard to these matters, I consider that Williamtown ought pay the plaintiff's costs of the motion.

Orders

1. For these reasons, I make the following orders: 1. Order Allsands Pty Ltd to pay the plaintiff's costs of its motion filed on 14 February 2023. 2. Order Williamtown Sand Syndicate Pty Ltd to pay the plaintiff's costs of its motion filed on 21 February 2023. 3. In respect of the motion filed by Aus-10 Rhyolite Pty Ltd and Hy-Tec Industries Pty Ltd on 22 February 2023, order that the applicants and respondent bear their own costs of the motion.

Amendments 21 June 2023 - Typographical error on coversheet DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 June 2023