Procedure - costs - Subpoena duces tecum in arbitration proceedings - application to set aside made at same time as a like application which failed

• proper apportionment of costs between the two applications. Commercial Arbitration Act 1986ss4, 17; Supreme Court Rules r120, referred to. PMT Partners Pty Ltd (In Liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 69 ALJR 829; Concrete Developments Pty Ltd v Queensland Housing Commission (1961) Qd R 356; Comalco Aluminium Ltd v Howmet Resources Pty Ltd (Queensland Supreme Court, 14 May 1993, unreported); Commonwealth v Jennings Construction Ltd (1985) 1 BCL 252; re Hammond and Waterton (1890) 62 LT (NS) 808; Edmund Barton Chambers (Level 44) Co-op Limited v Mutual Life and Citizens Assurance Co. Limited (1984) Aust and NZ Conv R 544; Thomas Cook Pty Ltd v Commonwealth Banking Corporation (1986) Aust and NZ Conv R 598; AMP Society v Overseas Telecommunications Commission (Australia) (1972) 2 NSWLR 806; Commissioner for Railways v Small [1938] NSWStRp 29; (1938) 38 SR (NSW) 564; Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90; National Employers Mutual General Association Ltd v Waind (1978) 1 NSWLR 372; Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corporation Ltd (1984) 1 NSWLR 710; Lucas Industries Ltd v Hewitt (1978)18 ALR 555, applied. Arensen v Casson Beckman Rutley and Co. (1977) AC 405; Alliance Petroleum Australia NL v The Australian Gas Light Co. (1993) 34 SASR 215, considered.

HRNG ADELAIDE, 9-10 April 1996 #DATE 24:4:1996 #ADD 20:5:1995

Counsel for appellants: Mr D J Bleby QC with Mr N Strawbridge

Solicitors for appellants: Minter Ellison Baker O'Loughlin

Counsel for respondent: Mr J Sulan QC with Ms G Draysey

Solicitors for respondent: Johnson Winter and Slattery

ORDER Dismiss the appeal by BHP Petroleum Pty Ltd, but allow the appeal by BHP Petroleum (Bass Strait) Pty Ltd.

JUDGE1 COX J I agree with the judgment of Debelle J. That means that I would dismiss the appeal by BHP Petroleum Pty Ltd, but would allow the appeal by BHP Petroleum (Bass Strait) Pty Ltd and substitute for paragraph 4 of Bollen J's order of 20 February 1996 the following - 4. That the respondent pay to the applicant BHP Petroleum (Bass Strait) Pty Ltd (a) the whole of its solicitors' costs that are identifiable exclusively as the costs of its successful application; (b) twenty-five per cent of such of its solicitors' costs as relate to items that are common to the applications of BHP Petroleum (Bass Strait) Pty Ltd and BHP Petroleum Pty Ltd; and (c) twenty-five per cent of its costs of the hearing, the costs in each case to be on a party and party basis.

JUDGE2 PRIOR J I agree with the judgment of Debelle J.

JUDGE3 DEBELLE J These are two appeals from orders made in respect of applications to set aside subpoenas issued under s.17 of the Commercial Arbitration Act, 1986.

THE APPEAL BY BHP PETROLEUM PTY LTD 2. This appeal is from a decision dismissing the appellant's application to set aside a subpoena to produce documents served upon it. I will refer to the appellant as "BHP Petroleum". The subpoena had been issued out of this court pursuant to s17 of the Commercial Arbitration Act on the application of the Pipelines Authority of South Australia ("PASA"), which is a party to an arbitration. Section 17 authorises the Court, on the application of a party to an arbitration agreement, to issue a summons to a person to give evidence or produce documents at an arbitration. The broad thrust of BHP Petroleum's submission is that PASA is unable to rely on s17 as the arbitration to which it is a party is not an arbitration being conducted pursuant to an arbitration agreement within the meaning of the Commercial Arbitration Act. BHP Petroleum also submits that the subpoena was invalidly issued and that it is oppressive. I will later note the issues in greater detail. The facts leading to the application to issue the subpoena are as follows.

Santos Limited, Delhi Petroleum Pty Ltd, Santos Petroleum Pty Ltd, Sagasco Resources Ltd, Vamgas Ltd, Australian Hydrocarbons NL and Oil Company of Australia NL extract and produce natural gas from reserves they have discovered. I will refer to them collectively as "the Producers".

PASA is a body corporate established by the Pipelines Authority Act 1967. It has statutory power to purchase natural gas for the purpose of selling it or otherwise disposing of it. PASA has agreed to purchase natural gas from the Producers. The terms on which the Producers sell and PASA buys the gas are contained in a contract made on 11 July 1991 called the "Gas Supply Contract".

Clause 11 of the Gas Supply Contract sets out the terms and conditions relating to the price of the natural gas sold to PASA. It provides for what it calls "pricing periods". The first pricing period is a period from the commencement of the contract, 1 January 1994, until 1 July 1996. Subsequent pricing periods are each consecutive 36 month period from 1 July 1996. The scheme of Clause 11 is to prescribe in Clause 11.2 a price for gas in the first pricing period and to provide in Clause 11.3 the means by which the Producers and PASA may seek a review of the gas price in subsequent pricing periods. Clause 11.3 provides that the Producers or PASA may by notice require that there be a price review for the purpose of determining the price to operate from the beginning of the next pricing period. Upon such notice being given, the Producers and PASA are required to endeavour to negotiate and agree the new price. If they are unable to agree the price within a prescribed time, the parties must then proceed forthwith to have the price determined by arbitration. The procedure is prescribed by Clause 11.3.2 of the contract in these terms: "Upon the giving of such a notice the Producers and PASA shall consult and negotiate in good faith and with all reasonable accommodation to reach agreement on such new price. Should agreement not be reached by the date twelve

(12) months prior to the end of the Terminating Pricing Period then the parties shall proceed forthwith to have such price determined by arbitration under the Commercial Arbitration Act 1986 (South Australia) in accordance with the procedures prescribed hereunder."

Clauses 11.3.3 to 11.3.10 prescribe the arbitration procedure, including the appointment of arbitrators, the powers of the arbitrators, the factors to which the arbitrators are entitled to have regard when making their award, the procedure for the publication of the award, the appointment of an umpire and determination by the umpire if the arbitrators fail to agree, and the date when the price as determined by this process shall take effect.

The Producers and PASA have each given the other notice requiring a price review for the pricing period commencing on 1 July 1996. They have negotiated but have failed to agree the new price. They have referred the question of the new price to arbitration and have appointed arbitrators. The arbitrators are two former judges, the Honourable LJ King QC and the Honourable J Cripps QC. The arbitration commenced in early March 1996.

In reliance upon s17 of the Commercial Arbitration Act, PASA obtained the issue of a subpoena to produce documents addressed to BHP Petroleum. The subpoena sought the production of the following documents: "1. All Board minutes and Board reports brought into existence since 1 July 1994: (a) in relation to the construction of a proposed pipeline connection between Melbourne and Sydney along the east coast of Victoria and New South Wales, concerning the timing of commencement of construction and completion of such pipeline; and (b) concerning any offers or proposals made to any potential purchaser of gas in New South Wales of gas supplied by the Company referred to in sub-paragraph (a).

2. All Board minutes, Board reports and management reports brought into existence since 1 July 1994 concerning or referring to the supply or possible supply of Minerva gas to South Australia dealing with the volume of such gas to be supplied, the demand for such gas and the price of such gas.

3. All Board minutes, Board reports, and management reports brought into existence since 1 July 1995 concerning or referring to arrangements for the supply of gas from the BHP Mitsui Coal Moura Seamgas Demonstration Project to a purchaser or purchasers in Brisbane, Sydney or Adelaide dealing with the volume of such gas to be supplied, the demand for such gas and the price of such gas."

The subpoena was one of a number of subpoenas to produce documents issued by PASA to persons not parties to the arbitration. BHP Petroleum is not a party to the arbitration. It applied to set aside the subpoena. On 20 February 1996 the application to set aside the subpoena was dismissed by Bollen J. BHP Petroleum appeals from the order dismissing its application.

DEFINITION OF AN ARBITRATION AGREEMENT 10. The first issue is whether the provisions of Clause 11.3 of the Gas Supply Contract constitute an arbitration agreement within the meaning of the Commercial Arbitration Act ("the Act"). Section 4 of the Act defines an arbitration agreement to mean "an agreement in writing to refer present or future disputes to arbitration". Two principles relating to definitions in statutes and to this definition in particular were enunciated by Brennan CJ, Gaudron and McHugh JJ in PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service [1995] HCA 36; (1995) 69 ALJR 829 at 834. They are 1. that statutory definitions are construed according to the natural ordinary meaning unless some other course is clearly required, and

2. that limitations or qualifications are not read into a statutory definition unless clearly required by its terms or its context, as for example, if it is necessary to give effect to the evident purpose of the Act.

11. Bollen J held that there was a dispute concerning the price of gas in the next pricing period and that, pursuant to the Gas Supply Contract, that dispute had been referred to arbitration. According to the ordinary and natural meaning of the definition of an arbitration agreement in s.4 of the Act, Clause 11.3.2 of the Gas Supply Contract refers to arbitration what in 1994 was a potentially future dispute, namely, any dispute as to price in future pricing periods. On the face of the matter, the decision of Bollen J appears to be correct. For the reasons which follow, a more detailed examination confirms the correctness of his decision.

12. Mr Bleby QC, who appeared for BHP Petroleum, submitted that there were two reasons why Clause 11.3 did not constitute an arbitration agreement. The first was that Clause 11.3 did not refer a dispute to arbitration but was, instead, a means to complete the contract between the parties. It did no more, he said, than declare the future rights of the parties as distinct from resolving a dispute between them. The second was that, even if Clause 11.3 does provide a means to resolve a dispute, the process of resolving that dispute was not an arbitration properly so called.

13. The Gas Supply Contract contains another provision referring disputes to arbitration. It is clause 23.8. It is expressed to be in addition to the arbitration procedures in clause 11.3. The existence of Clause 23.8 does not, therefore, affect the question whether clause 11.3 is an arbitration agreement, a question which must be determined by reference to the terms of clause 11.3 and the substance of the matter to which it is directed.

A DISPUTE EXISTS 14. The parties to the agreement each seek to review the price for the next pricing period. They are unable to agree upon the new price. There is, as the trial judge said, a difference of opinion between them. That disagreement or difference of opinion is a dispute as that word is ordinarily understood. The noun "dispute" has a relatively wide denotation. It means an agreement, debate, controversy, or quarrel: see Macquarie Dictionary and Oxford English Dictionary. Its meaning ranges from a mere difference of opinion through a logical argument to a heated contention or quarrel. A difference or dispute is none the less so because the divergence of view as to law or fact has been indicated by phrases of courtesy rather than the language of vehemence: Selby v Whitbread and Co (1917) 1 KB 736, 745. The law has not departed from the meaning adopted in ordinary usage. A dispute, therefore, exists where a claim has been made and rejected: Concrete Developments Pty Ltd v Queensland Housing Commission (1961) Qd R 356; Comalco Aluminium Ltd v Howmet Resources Pty Ltd (Queensland Supreme Court, 14 May 1993, unreported) at 20; Commonwealth v Jennings Construction Ltd (1985) 1 BCL 252, 257. A dispute will also exist where a party has advanced a claim which has been denied or simply ignored: John Grant and Sons Ltd v Trocadero Building and Investment Co. Ltd [1938] HCA 20; (1938) 60 CLR 1, 15; Tradax Internacional SA v Cerrahogullari TAS, The M. Eregli (1981) 3 All ER 344; Ellerine Bros (Pty) Ltd v Klinger (1982) 1 WLR 1375, 1383. The view expressed by Lord Dunedin in May and Butcher v The King (1934) 2 KB 17n, at 22 that a failure to agree is a very different thing from a dispute was decided in respect of an agreement to purchase goods where the price had not been agreed. Although applied by Danckwerts LJ in F and G Sykes (Wessex) Ltd against Fine Fare Ltd (1967) 1 Lloyds Rep 53 at 60, the view is not consistent with the decisions just cited and has been doubted extra-judicially: see Mustill and Boyd, Commercial Arbitration, p.97 note 4. PASA and the Producers are unable to agree the price. The effect of their disagreement is similar to a disagreement where one party advances a claim which is rejected. In ordinary parlance as well as in legal terminology, the disagreement as to price is a dispute within the meaning of the Commercial Arbitration Act. There is a present controversy, namely, the price for gas in the pricing period commencing 1 July 1996 and that dispute has been referred to arbitration for determination. In short, the process which Clause 11.3 establishes is designed to resolve the present dispute as to price.

15. The arbitrators are not being asked to complete the contract between the Producers and PASA. This is not, for example, a case where parties have agreed to buy land or a commodity at a price to be fixed by a third party. The Gas Supply Contract has fixed the price and has provided a mechanism for resolving future disputes as to price. In principle, the position is similar to that in a building contract where the price for the building work is fixed and the contract provides that, failing agreement on the price to be allowed for variations, extensions of time, and other contingencies, the dispute shall be referred to arbitrators.

16. Mr Bleby QC submitted that, in the absence of a formulated claim for a nominated price by one party and a formulated response by the other, there could be no dispute. It was essential for the existence of a dispute, he said, that the parameters of the dispute be defined. The argument seeks to restrict the ordinary meaning of the noun "dispute" and must fail. As the authorities already mentioned decide, a dispute exists once a claim is advanced and rejected.

17. The existence of a precisely formulated claim is not necessary to create a dispute. In Arenson v Casson Beckman Rutley and Co (1977) AC 405, Lord Simon and Lord Wheatley decided that an essential prerequisite for an arbitration was that there should be a formulated dispute which is submitted to the arbitrator. The other members of the House of Lords did not find it necessary to express a view. What their Lordships meant by the expression "a formulated dispute" is not clear. In that case, their Lordships were concerned with the question whether a valuer was able to avail himself of the immunity from suit which is afforded to an arbitrator conducting an arbitration. That issue was determined by examining the function being performed by the valuer and it was held that the valuer was not deciding a dispute or difference but avoiding a dispute or difference: see Lord Wheatley at 428. The question whether the decision maker is resolving or deciding a dispute on the one hand or avoiding a dispute or difference on the other has been frequently applied as a test by which to determine whether the decision maker is an arbitrator or a valuer: see, for example, re Carus-Wilson v Greene (1886) 18 QBD7; re Hammond and Waterton (1890) 62 LT (NS) 808; A.M.P Society v Overseas Telecommunications Commission (Australia) (1972) 2 NSWLR 806. It is in this context that the necessity for a formulated dispute must be understood. As I understand the speeches of the Lords Simon and Wheatley, the emphasis was on the requirement of a dispute and not upon the formulation of the claim arising out of that dispute. Their Lordships were concerned that there existed a dispute about an identifiable subject matter. They were not concerned with the necessity for the parties to have precisely formulated their respective positions concerning the dispute, a view which is reinforced by reference to the speeches in Sutcliffe v Thackrah (1974) A.C.727, where the emphasis was upon the existence of a dispute. This conclusion is consistent with the decisions mentioned earlier as to what constitutes a dispute.

18. Mr Bleby QC then referred to the definition of a submission to arbitration in the Arbitration Act 1891. Section 27 of that Act defined a "submission" to mean "a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not". He submitted that the use of the word "dispute" in the Commercial Arbitration Act disclosed an intention to narrow the operation of an arbitration agreement. I do not agree. For the reasons already given, the meaning of the noun "dispute" is wide enough to include "a difference". Commercial lawyers and businessmen would hold the view that a dispute existed in this case. To seek to narrow the meaning of "dispute" in the manner for which Mr Bleby contends would result in an unworkable definition. Where, for example, is the line to be drawn between a mere difference and a dispute? Further, there is no evidence which suggests that the definition of "arbitration agreement" in the Commercial Arbitration Act was intended to narrow the operation of arbitration agreements in the sense suggested by Mr Bleby. Indeed, the purpose of the new legislation was to provide a uniform scheme of arbitration to serve industry and commerce by providing a convenient extra-curial means to resolve disputes of all kinds. Mr Bleby's contention would defeat that purpose.

IS IT AN ARBITRATION? 19. I turn to the question whether the dispute is to be resolved by an arbitration properly so called. When determining this question, it is necessary to look not only at the exact words of the agreement but also the subject matter of the agreement for the purpose of determining what the parties intended: re Hammond and Waterton (supra) at 809; Edmund Barton Chambers (Level 44) Co-op Limited v Mutual Life and Citizens Assurance Co Limited (1984) Aust and NZ Conv R 544 at 546; and Thomas Cook Pty Ltd v Commonwealth Banking Corporation (1986) Aust and NZ Conv R 598 at 601. There is no formula of universal application which will determine whether the decision- maker is an arbitrator and each case must be decided on its own facts: Arenson v Casson Beckman Rutley and Co (supra) per Lord Wheatley at 427. Nevertheless, there are some indicia which, although not conclusive, provide assistance. They are: 1. A dispute must exist. As already noted, a dispute exists between the Producers and PASA as to the price in the new pricing period and that dispute existed before the reference to the arbitrators. Indeed, Clause 11.3.2 makes the dispute a prerequisite to the reference to arbitration. In addition, Clause 11.3.7.3 empowers the arbitrators to require both parties to state their case in writing and to exchange their respective cases. The procedure thus enables a formulation of the respective claims. The process has been implemented and the parties have exchanged what they call Notices of Contention.

2. The agreement refers the dispute to arbitration. The Gas Supply Contract expressly provides in Clause 11.3.2 that the new price shall be "determined by arbitration under the Commercial Arbitration Act 1986 (South Australia) in accordance with the procedures prescribed hereunder". The expression "determined by arbitration" is similar to the expressions "submitted to arbitration" or "referred to arbitration" which are commonly used to indicate an intention that the dispute is to be resolved by arbitration. An instance of the use of the expression "submitted to arbitration" is provided in PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Services (supra). In addition, not only is the dispute to be referred to arbitration but the provisions of the Commercial Arbitration Act are invoked, a fact which reinforces the conclusion that it is the intention of the parties that the dispute should be resolved by arbitration as distinct from any other process. That intention is confirmed by the fact that, as noted below, the procedures prescribed in Clause 11.3 for the conduct of the arbitration are of a kind which require the arbitrators to conduct the arbitration in a manner generally appropriate for a judicial inquiry.

3. The manner in which the dispute is to be determined is relevant: Hammond v Wolt [1975] VicRp 10; (1975) VR 108. It is well established that an arbitration involves an inquiry in the nature of a judicial inquiry: re Carus-Wilson and Greene (supra) per Lord Esher MR at p9; re Hopper (1867) LR 2QB 367, 373; Ajzner v Cartonlux Pty Ltd [1972] VicRp 107; (1972) VR 919 at 928-929; AMP Society v Overseas Telecommunications Commission (Australia) (1972) 2 NSWLR 806 at 814; Hammond v Wolt (supra) 112. Some indicia of a judicial enquiry are: (a) the parties have the right to be heard if they so desire; (b) the parties are each entitled to see and hear the evidence advanced by their respective opponents; (c) the parties have the right to give evidence if they so desire; (d) each party is entitled to test by cross-examination or by other appropriate means the opposing case and to answer the opposing case.

These are characteristics of an arbitration as distinct from other means of extra-curial resolution of disputes. Although it is not necessary that all of these characteristics be present, the fact that they do exist, particularly when combined with the other factors I have identified, points to the conclusion that the process is that of arbitration.

Clause 11.3 prescribes these procedures as well as other procedures which are the usual concomitants of a judicial enquiry. They include: (i) The arbitrators have power to make such orders as are necessary to enable the price review to be determined "on an expeditious, fair and sensible commercial basis": Clauses 11.3.7.1 and 11.3.7.2. (ii) The arbitrators may require both parties to put their cases in writing and to exchange them with the other party: Clause 11.3.7.3. The arbitrators may also require responses to the respective cases to be delivered to the opposing party: Clause 11.3.7.4. The process is akin to the exchange of pleadings or the exchange of points of claim and points of defence. (iii) The arbitrators may make orders requiring the delivery of documents clarifying the issues, discovery of documents, and the delivery of interrogatories: Clause 11.3.7.5. (iv) The parties are at liberty to call oral evidence and tender documents, subject to the power of the arbitrators to determine the issues upon which they wish to hear evidence: see generally Clauses 11.3.7.1 to 11.3.7.13 Witnesses who give oral evidence are subject to cross-examination. Clauses

11.3.7.8 and 11.3.7.9 facilitate proof of documentary evidence of financial and accounting matters. The arbitrators are not bound by the strict rules of evidence but should be conscious of the general policies underlying the rules: Clause 11.3.7.6. The arbitrators may hear oral argument and may indicate those matters upon which they desire to hear oral argument: see Clauses 11.3.7.11 to 11.3.7.13.

The process to be engaged in by the arbitrators is quite unlike a valuation where the person appointed may decide the matter from his own experience and expert knowledge and may make his own investigations: AMP Society v Overseas Telecommunications Commission (supra) at 825. The arbitrators can be chosen from any field. They might be accountants, economists, engineers, barristers, retired judges or any other person competent to discharge the task. They need not have any special knowledge of the oil and gas industry or of prices for oil and gas or be an expert in those fields. The inference is that the arbitrators will be required to hear evidence from witnesses and the submissions of the parties for the purpose of determining whether the price determined by the valuer should be altered. 4. The description of the decision-makers as arbitrators is a relevant but not a conclusive factor: Edmund Barton Chambers (Level 44) Co-op Limited v Mutual Life and Citizens Assurance Co Limited (supra) where Moffitt P said (at p546): "A description of the person in question as an arbitrator will be of substantial, even critical importance in favour of there being an intention that he shall so act but may not be conclusive. On the other hand, a requirement that the person in question is to have the qualifications of a valuer (architect or engineer) will give some support for the view that the person is to act as such, but will be far from conclusive, in that it is not uncommon for a valuer to be selected to act as an arbitrator in the true sense because he is expert in the field in which he is required to arbitrate."

See also Thomas Cook Pty Ltd v Commonwealth Banking Corporation (supra) at 603. I do not think too much weight can be attached to the title given to the decision-maker. As Greer J noted in Taylor v Yielding (1912) 56 Sol J 253: "You cannot make a valuer an arbitrator by calling him so, or vice versa".

Nevertheless, when the fact that the decision-maker is called an arbitrator is combined with other factors, it may indicate that a true arbitration is intended.

Finally, as Jacobs P pointed out in AMP Society v Overseas Telecommunication Commission (Australia) (supra) at 814, the question is not whether the parties intended arbitration but whether there is a subject matter of arbitration, that is, a subject matter in the nature of judicial enquiry. That factor is satisfied here. Clause 11.3.10 of this contract provides the criteria by which the price will be determined. There is first the overriding requirement that the arbitrators shall have regard "to all economic and all other relevant factors existing at the time". In addition, their attention is directed to specific factors in subclauses of Clause 11.3.10. These include - changes in capital and operating costs, - the market value of gas in the South Australian market, - the economic effects of gas prices upon commercial and industrial consumers of gas and electricity, - the equivalent price which the producers are selling gas or natural gas to any other person, and - the equivalent price which it pays or is paying to any other person for the purpose of gas or natural gas.

Although it is not expressly stated in the contract, it is readily apparent from the recitation of these criteria that the arbitrators are required to determine a fair market price. The object of Clause 11.3.10 is to provide the criteria by reference to which the price will be fixed. It requires the arbitrators to act objectively and not capriciously or subjectively: c.f. Queensland Electricity Generating Board v New Hope Collieries Pty Ltd (1989) 1 Lloyds Rep. 205, 210. The question of price is not at large. There is, therefore, an issue which is to be determined in a judicial manner by reference to specified criteria.

In this case, it is the combined effect of a number of facts which point to the conclusion that arbitration is the means intended for the resolution of disputes as to price. They are the fact that there is a dispute, that the dispute is to be submitted to arbitration, that the Commercial Arbitration Act is invoked, the fact that the dispute is to be determined by persons called arbitrators, the process prescribed is in the nature of a judicial inquiry, and the issues are capable of judicial inquiry.

Mr Bleby submitted that, as the arbitrators are being asked to fix the price for the next pricing period, they are not resolving a dispute by determining the rights of the parties but declaring the rights of the parties for the next pricing period. He relied on the observations of Zelling J in Alliance Petroleum Australia NL v The Australian Gas Light Co (1993) 34 SASR 215 at 244: "This arbitration will result in legislation for the future, not the decision of disputes, present or future, relating to existing rights. No doubt the arbitrators have to decide judicially in the sense that they must give the parties a

fair hearing but they are not being asked to pronounce on a dispute as to existing rights; they are laying down either a

price or a formula for a price legislatively for the future. Halsbury's Laws of England (4th ed.) vol. 2, par. 503, s.v.

"Arbitration" states: "The dispute or difference which the parties to an arbitration agreement agree to refer must consist of a justiciable issue triable civilly"; and there are numerous examples given on both sides of the line in relation to the general definition. In my opinion, the arbitration in the instant case does not consist of a justiciable issue triable civilly. Courts pronounce on the existing rights of the parties, they do not give advisory opinions and they do not act legislatively."

The other members of the Court were King CJ and Wells J. King CJ did not find it necessary to deal with the issue. Wells J was attracted to that view but did not express a final view. With respect, I cannot share the view of Zelling J. The passage in Halsbury's, Laws of England, on which Zelling J relied does not appear in the fourth edition of that work but in paragraph 10 of volume 2 of the third edition. The sentence quoted by Zelling J is immediately succeeded by the following comment: "A fair test of this whether the difference can be compromised lawfully by way of accord and satisfaction."

The passage in the fourth edition is in paragraph 603 of Volume 2 and is expressed in these terms: "The dispute or difference must relate to a matter capable of being tried in civil proceedings between the parties and capable of being compromised by accord and satisfaction."

The later passage more correctly describes the present position. The only authority cited in both the third and fourth editions for the proposition is Bacon's Abridgement under the heading "Arbitrament and Award A". The passage in Bacon's Abridgement notes the requirement that a dispute must exist and that the dispute must be capable of being decided in a civil proceeding. In other words, there must be a dispute capable of being decided in a judicial manner. Bacon's Abridgement is an old text. The copy I have examined is the third edition published in 1768. Much judicial ink has been spent on the topic since to the effect that a mere arbitration requires that there be a dispute capable of being determined in a manner which is generally consistent with a judicial inquiry. The courts have been concerned to distinguish a true arbitration from a valuation. Both the Producers and PASA have called upon the arbitrators to decide the dispute as to price. That is a dispute which is capable of determination in a judicial manner and the arbitrators are directed by clause 11.3 to do so. The process is quite unlike a valuation. Further, the dispute is capable of being resolved by accord and satisfaction in that it is still open to the parties to agree the price.

The fact that the arbitrators are fixing the price for the next pricing period does not, of itself, mean that they are legislating the price for the future. There are several reasons for that conclusion. First, there is a dispute. The arbitrators are not acting of their own volition but only after they have been called upon by the parties to decide the dispute. Next, the arbitrators are required to determine the price in accordance with the criteria specified in clause 11.3.10. This is quite unlike the legislative process or even the valuation process. Both a legislator and a valuer are not necessarily bound by specified criteria. In this respect, it is to be noted that the price review clause being considered by Zelling J did not require the arbitrators to have regard to all of the criteria specified in clause 11.3.10. The price review clause in that case required the parties to negotiate and in doing so to have regard "to all economic and other relevant factors existing at the time and in particular but without in any way limiting the scope of the review to the effects of inflation and any increases in capital and operating costs." If they failed to agree a price, the matter was referred to arbitration by two arbitrators. The contract was silent as to the matters which should be considered by the arbitrators. Although it is reasonable to infer that the arbitrators should have regard to the same factors as the parties, the position, nevertheless, remains that the factors to be considered by the arbitrators were not spelled out in the same detail as in clause 11.3.10. Finally, courts as well as arbitrators make decisions which in a sense declare the rights of the parties for the future. Even awards of damages and decisions granting compensation are in a sense declarations of rights for the future. What is relevant in this context is that these declarations are made to resolve a dispute. The Court is declaring the obligations of one party to the other for the purpose of resolving the dispute. The arbitrators are being required to undertake a like task.

It has long been recognised that issues such as the price of land or a commodity, a fair rent, and compensation may be determined in an arbitration properly so-called. Decisions to this effect include re Hopper (supra); re Carus-Wilson and Greene (supra) 7; AMP Society v Overseas Telecommunications Commission (Australia) (supra); Edmund Barton Chambers (Level 44) Co-operative Ltd v Mutual Life and Citizens Assurance Co Ltd (supra). When determining issues such as the market price for land or fixing rent, arbitrators will have regard, among other things, to sales of comparable land or to rents for comparable premises: Edmund Barton Chambers (Level 44) Co-operative Ltd v Mutual Life and Citizens Assurance Co Ltd (1986) 6 NSW LR 322. It is possible also to determine the market price of a commodity by reference to prices prevailing elsewhere. Courts determine similar issues in a like manner. The task is not far removed from assessment of claims for damages. A task more closely related to that before the arbitrators in this case is the determination of claims for compensation following the compulsory acquisition of land or the determination of appeals against assessment of the value of land for rating and taxing purposes. This task is undertaken by the Land and Valuation Division of this Court and by courts in other jurisdictions. In proceedings of this kind, courts are called upon to determine the value of the relevant parcel of land, an issue determined in part by reference to sales of comparable land: Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418. The arbitrators in this case will in all likelihood apply a like process and have regard to prices for comparable gas elsewhere in Australia as well as to other relevant factors. When determining such matters, arbitrators like Courts declare the rights of parties in the sense that they declare what the price, the rent, or the compensation shall be. But, if in doing so, they are acting in a judicial manner and the subject matter of the dispute is capable of judicial inquiry, the process is an arbitration as distinct from a valuation or other dispute resolution process.

For all of these reasons, Clause 11.3 of the gas supply contract constitutes an arbitration agreement within the meaning of the Commercial Arbitration Act. PASA was, therefore, entitled to rely on s17 of the Act to issue this subpoena.

THE VALIDITY OF THIS SUBPOENA 35. BHP Petroleum Pty Ltd challenges the validity of the issue of the subpoena on the following grounds: 1. That the affidavit filed in support of the application for the subpoena did not show that the documents nominated in the subpoena were relevant in the appropriate sense to the matters in issue in the arbitration.

2. That the subpoena is oppressive in that it is too wide and too vague. 3. That the subpoena was issued for fishing or other\improper purposes.

WAS RELEVANCE PROVED? 37. Two issues were argued under this heading. The first was whether PASA had proved that the documents listed in the subpoena were relevant to the issues in the arbitration. The second was whether PASA was able to prove that fact after the subpoena had been issued.

Rule 120 of the Supreme Court Rules prescribes the procedure for obtaining subpoenas under the Commercial Arbitration Act. It is necessary to file an affidavit seeking the issue of the subpoena and "setting out the matters justifying its issue": Rule 120.02. Upon such an affidavit being filed, the Registrar may issue the subpoena. If the Registrar is not satisfied that it is proper to issue the subpoena, he may require the party seeking its issue to obtain the leave of the Court to do so by an ex parte application made on the affidavit: Rule 120.02(2). In this case an affidavit was filed on behalf of PASA seeking the issue of the subpoena. The subpoena was issued. After BHP Petroleum had applied to set aside the subpoena and had filed an affidavit in support of its application, a further affidavit was filed on behalf of PASA supplementing the affidavit initially filed. Mr Bleby submitted that Rule 120.02 required a party seeking the issue of a subpoena to prove all matters, including relevance, justifying the issue of the subpoena in the first affidavit. It was not open, he said, for that party to file a further affidavit supplementing the earlier affidavit. The effect of his submission is that the failure to prove relevance invalidated the issue of the subpoena.

The purpose of Rule 120.02 is not immediately apparent. Such an affidavit is not required in an ordinary civil action for a subpoena to a witness or for a subpoena to produce documents. A subpoena will be issued on the filing of a praecipe: Rule 81.04. The requirement for an affidavit justifying the issue of a summons under s.17 of the Commercial Arbitration does not exist in the Rules of the Supreme Courts in other jurisdictions in Australia. Instead, in those courts where Rules regulate the issue of subpoenas under the Commercial Arbitration Act, the Rules invoke the procedure which applies in ordinary civil actions: see, for example, Part 72A.7 of the Rules of the Supreme Court of New South Wales and Order 81D Rule 7 of the Rules of the Supreme Court of Western Australia. It can only be presumed that the purpose of Rule 120.02 is to prevent a person from being unnecessarily subjected to the obligation to comply with a subpoena. But it cannot be overlooked that a person served with a subpoena pursuant to s.17 of the Commercial Arbitration Act may apply for an order setting aside the subpoena.

Whatever the purpose of Rule 120.02, it plainly requires the parties seeking the issue of a subpoena to make out a sufficient case for its issue. How then is that task discharged? On one view, if the subpoena is to produce documents, it would be sufficient to prove the fact of the arbitration, the parties to it, the issues in the arbitration, the documents which are sought, and to assert that the documents are relevant to the determination of the issues in the arbitration. On another view, the affidavit should go further and prove the facts which justify the assertion that the documents are relevant. It is this latter view for which Mr Bleby contends. One factor which points to the conclusion that the latter is the preferred course is the fact that, if the Registrar refers the question of the issue of the subpoena to a Judge, the party will have to rely on the affidavit already filed. I do not think it necessary to determine this question because, on any view, the first affidavit justified the issue of the subpoena.

A party seeking to uphold the issue of a subpoena seeking documents must prove that the documents have an apparent relevance to the issues in the arbitration: Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90, 103. I think it is appropriate to borrow from the principles relating to the law of discovery for the purpose of determining what is sufficient to discharge the task of proving an apparent relevance. It will be sufficient if the applicant for the subpoena proves that the documents will throw some light on the issues in the arbitration. In this context it must be remembered that the Court is not in a position to determine whether the documents required are in fact relevant. The Court cannot be sufficiently apprised of the issues in the arbitration to determine that question. It will have to rely on what is proved by the affidavits.

The first affidavit filed on behalf of PASA to justify the issue of the subpoena was affirmed on 25 January 1996, by Mr Rydon, a member of the firm of solicitors acting for PASA. In broad terms, he deposed

• that the producers in PASA were parties to the Gas Supply Contract;
  • that the Gas Supply Contract provided a means of reviewing the price from the beginning of the next pricing period;
  • that the next pricing period commenced on 1st July 1996;
  • that the Producers and PASA had each given the other notice seeking a price review and had been unable to agree the price for the next pricing period;
  • that the Gas Supply Contract provided for the question of price to be referred to arbitration in the absence of agreement by the parties;
  • that arbitrators had been appointed; and
  • to the terms of clause 11.3.10 which he summarised in these terms: "Clause 11.3.10 of the Gas Supply Contract provides, inter alia, in terms that in carrying out a price review the Arbitrators shall have regard to all economic and other relevant factors including the market value of gas in the South Australian market which shall be assessed with particular regard to the most economic of the energy alternatives available to gas consumers in South Australia and with regard to the economic effects to gas prices upon

commercial and industrial consumers of gas and electricity in South Australia."

The final paragraph of the affidavit asserted that the documents described in the subpoena "are relevant to the issues referred to" in paragraph 12 of the affidavit. The Gas Supply Contract was exhibited to the affidavit.

Each of the paragraphs in the subpoena refer to documents which deal with matters which might affect the price of gas sold out of Moomba and into Adelaide. The price of gas in South Australia like any other commodity is affected by prices prevailing in other markets. The extent to which prices in those other markets will affect the price in South Australia will depend on a range of factors including the availability of that gas to the market in South Australia. The documents referred to in paragraphs 2 and 3 of the subpoena refer to projects which have on their face a more apparent relevance to the availability of gas to the South Australian market than the documents referred to in paragraph 1. Nevertheless, it does not follow that the documents mentioned in paragraph 1 are not relevant since the price of gas in the Eastern States of Australia might well have a capacity to affect the prices prevailing elsewhere in Australia. In short, the documents referred to may throw some light on the assessment of the fair market price of gas in South Australia. That is all that this Court needs to determine. The question whether documents are relevant in a substantive sense and are of assistance to the arbitrators is for the arbitrators, not the Court, to determine. The first affidavit of Mr Rydon, therefore, sufficiently established the relevance of the documents.

Mr Bleby submitted that the documents could not be relevant because, he said, they only touch upon possible future events, namely, the proposed pipeline between Melbourne and Sydney, the supply or possible supply of Minerva Gas to Adelaide and the possible future supply of gas from the Moura project. These arguments must fail. Although the price to be determined by the arbitrators is to operate from 1st July 1996 it does not necessarily follow that it is not relevant to have regard to events which might occur thereafter. Those events might have a capacity to affect existing prices, in particular the price at 1st July 1996. The extent to which, if at all, they might have some bearing on the gas price as at 1st July 1996 will be a matter for the arbitrators to determine.

I do not think that the party seeking to uphold the issue of a subpoena is precluded from adducing further evidence to supplement the affidavit initially filed. The initial affidavit might have been quite sufficient to justify the issue of the subpoena but might be inadequate for the task of upholding the subpoena, particularly in light of evidence of the party seeking to set it aside. Thus, irrespective of what Rule 120.02 requires to be proved in the affidavit justifying the issue of the subpoena, a party seeking to uphold a subpoena in the face of an application to set it aside is entitled to adduce such further evidence to justify the relevance of the subpoena. I am unable to detect anything in the terms or spirit of Rule 120.02 which would prevent the party seeking to uphold the subpoena from adducing further evidence.

On 2nd February 1996 BHP Petroleum applied to set aside the subpoena. In an affidavit sworn in support of that application, Mr Price, the Gas Marketing Manager, Marketing Division, of BHP Petroleum stated, among other things, why BHP Petroleum believed that the documents referred to in paragraph 2 were not relevant. He deposed to the discovery of the Minerva Gas Field in April 1983, to the fact that BHP Petroleum had concluded that at this stage it is not economically viable to sell gas from the Minerva Gas Field to Adelaide, and that "it is not envisaged that BHP Petroleum will sell Minerva Gas to the Adelaide market" within the next pricing period. He questioned whether the documents sought were relevant. He deposed also to the confidential nature of the documents and to the fact that disclosure could be highly prejudicial to BHP Petroleum.

In relation to the documents sought concerning the BHP Mitsui Coal Moura Seamgas Demonstration Project, a project located at Moura in Queensland, Mr Price said that it would not be possible to transfer gas from that project to Adelaide because no pipeline currently existed between South East Queensland and South West Queensland. He referred to a plan showing gas fields and existing pipelines. He also questioned the relevance of the documents and stated that the documents were confidential.

In an affidavit in response, Mr Rydon deposed to telephone conversations on 17th, 18th and 19th January 1996 with solicitors for BHP Petroleum in which there had been discussion concerning the documents sought by PASA. He proved a letter dated 22nd January 1996 sent to him by the solicitors for BHP Petroleum in which they confirmed their understanding of the documents sought by PASA. The relevant part of the letter is in these terms: "We confirm that representatives from BHPP wish to discuss with representatives of your client the rationale behind your client issuing the subpoenas. We understand that the rationale is, as explained by your David Rydon and Tim Alexander, your client's perception that the South Australian gas market and the Eastern Australian gas market will be integrated. This integration will lead to an increase in competition and therefore affect the price of gas. BHPP's representatives also wish to discuss what questions of fact are in issue, so that they can then consider whether BHPP has any documents they are obliged to disclose. If so, questions of timing, cost, confidentiality and prejudice can then be considered."

Mr Rydon said that he accepted that the letter correctly summarised the general effect of the discussions in 17th, 18th and 19th January. There were further discussions and exchange of correspondence between the parties but that did not assist any resolution of the issues between them.

Whatever doubts might have existed as to the relevance of the documents are removed by Mr Rydon's second affidavit and, in particular, the letter exhibited in the affidavit dated 22nd January 1996 from the solicitors for BHP Petroleum. The recitation of what that letter calls "the rationale" for the subpoenas is a clear indication of the relevance of the documents sought.

IS THE SUBPOENA OPPRESSIVE? 52. The relevant principles are well settled. They are set out in the reasons Jordan CJ in Commissioner for Railways v Small [1938] NSWStRp 29; (1938) 38 SR (NSW) 564, 573: "A writ of subpoena duces tecum may be addressed to a stranger to the cause or to a party. If it be addressed to

a stranger, it must specify with reasonable particularity the documents which are required to be produced. A subpoena

duces tecum ought not to be issued to such a person requiring him to search for and produce all such documents as he may have in his possession or power relating to a particular subject matter. It is not legitimate to use a subpoena for the purpose of endeavouring to obtain what would be in effect discovery of documents against a person who, being a stranger, is not liable to make discovery. A stranger to the cause ought not to be required to go to trouble and perhaps to expense in ransacking his records and endeavouring to form a judgment as to whether any of his papers throw light on a dispute which is to be litigated upon issues of which he is presumably ignorant".

The courts recognise that the party who issues a subpoena will in many cases not be aware of the precise description of a particular document or documents or whether a particular document or documents are in the possession of the person to whom the subpoena is addressed, or even if it exists, or is unaware of its contents: National Employers Mutual General Association Ltd v Waind (1978) 1 NSW LR 372, 382. If the identity of a document or class of documents is known, they should be specified with as much precision as possible. But if not known, the subpoena will be valid if it refers to the documents sought with reasonable particularity, that is to say, the Court will determine whether the terms of the document convey to the recipient in relatively clear language the document or class of documents called for: Southern Pacific Hotel Services Inc. v Southern Pacific Hotel Corporation Ltd. (1984) 1 NSW LR 710, 720-721. In this respect a degree of generality in the description of documents may, according to circumstances, be compatible with reasonableness: Lucas Industries Ltd v Hewitt (1978) 18 ALR 555, 570. In addition, a person to whom a subpoena is directed is required to read it sensibly and with reference to the circumstances as known to him: Lucas Industries Ltd v Hewitt (supra) at 571.

This subpoena refers to three classes of documents, namely, board minutes, board reports and management reports. There is no complaint about the expression "board minutes" but, Mr Bleby submits, the reference to "board reports" and "management" reports are so vague and uncertain as to be oppressive. For the reasons which follow, I do not agree.

The fact that reports are prepared by management or by persons outside the company for boards of directors of companies is well known. It is equally well known that, as a general rule, boards of directors do not prepare reports unless it is a report of a committee of the board to the full board. The expression "board reports" would in ordinary parlance signify all reports to the board of BHP Petroleum prepared by management or persons outside the company. The expression, therefore, defines with reasonable particularity a particular kind of document.

The expression "management reports" is ambiguous. It could refer to reports prepared by management or reports to management by subordinate employees or by persons outside the company. Ambiguity is a form of oppression. A person who fails to comply with the subpoena is liable to be punished for contempt: R v Daye (1908) 2 KB 333, provided a clear case for contempt is made out: Horne v Smith [1815] EngR 483; (1815) 6 Taunt 9; 128 ER 935; see also O'Born v Commissioner for Government Transport (1960) 77 WN (NSW) 81. In addition, a party may be liable for damages at the suit of a party who has obtained the issue of a subpoena: see Halsbury's Laws of England, (4th ed.) Vol 17, para 263. Thus the subpoena should avoid ambiguity.

But this subpoena is not oppressive on any ground other than ambiguity. Had paragraphs 2 and 3 sought "all reports prepared by or for management" relating to the gas projects identified in those paragraphs, it would not have been oppressive. The documents called for are reports. The field of reports which are sought in the subpoena is identified with a reasonable degree of precision to three specific topics. In relation to the Minerva project, the subpoena seeks reports brought into existence since 1st July 1994 concerning or referring to the supply or possible supply of Minerva gas to Adelaide. Similarly, the management reports concerning the Moura Gas Project are identified with reasonable precision. They are limited to documents which have come into existence since 1st July 1995 concerning the supply of gas from that project to a purchaser in Brisbane, Sydney and Adelaide. In each instance there is a time limit as to when the documents were created and a reasonably clear description of the subject matter.

On an application to set aside a subpoena, the Court is concerned to ensure that the parties have not abused the right to obtain the subpoena: Raymond v Tapson (1882) 22 Ch D 430; Purnell Bros Pty Ltd v Transport Engineers Pty Ltd (1984) 73 FLR 160, 175. Ambiguity aside, this subpoena is neither oppressive nor an abuse of process. Where an obvious amendment would cure an ambiguity, it might be appropriate for the Court to amend the subpoena on the application of the party who obtained its issue. There is nothing in the terms or the spirit of s.17 of the Commercial Arbitration Act or in the Supreme Court Rules which tells against such a course. The purpose of the subpoena is to facilitate the proper administration of justice between parties: Lucas Industries Ltd v Hewitt (supra) at 570. If the Court does not permit an amendment, the party can again apply for the issue of a subpoena in terms which are satisfactory. It would defeat the interests of justice, if not to engage also in an excess of legalism, to deny the power to amend to cure an ambiguity. However, the power to amend should not be lightly exercised. It is not the task of the Court to redraw the subpoena in order to make it unobjectionable. The power should be exercised only where the amendment is obvious, readily cures the ambiguity and the subpoena is not otherwise oppressive. If it applies to do so, I would permit PASA to amend its subpoena by deleting the words "management report" and substituting therefor the words "all reports prepared by or for management". It would, I think, be desirable that PASA serve a fresh subpoena in the amended form. Alternatively, BHP Petroleum may be prepared to answer the subpoena in accordance with the views just expressed.

PROTECTION OF CONFIDENTIAL DOCUMENTS 59. In support of the submission that the subpoena was oppressive, Mr Bleby referred to the confidential nature of the documents sought and to their obvious commercial sensitivity. The parties to the arbitration are either competitors with BHP Petroleum or parties who might purchase its gas. Disclosure, therefore, has a capacity to prejudice the commercial interests of BHP Petroleum. The fact that documents are confidential or commercially sensitive does not, standing alone, mean that a subpoena is oppressive. Subpoenas not infrequently require production of confidential documents, albeit less frequently, of commercially sensitive documents. The risk to the confidentiality of the documents must be tolerated in the interests of the administration of justice: Alliance Petroleum Australia NL v Australian Gas Light Co (1982) 34 SASR 215 at 239. In any event, it must be remembered that the documents are to be produced to the arbitrators not to PASA as the party who issued the subpoena: see s.17 of the Commercial Arbitration Act. The return of the subpoena is the appropriate time to determine claims for confidentiality and make orders to protect confidential documents: c.f. Southern Pacific Hotel Services Inc. v Southern Pacific Hotel Corporation Ltd (supra) at 715. The arbitrators can make appropriate orders to protect the confidentiality. On production of the documents to them, the arbitrators can determine whether the documents are confidential, whether they should be disclosed and, if so, the terms in which they will be disclosed including requiring undertakings as to confidentiality from those inspecting the documents.

60. A subpoena might be oppressive where it can be shown that the documents are sought for some improper or spurious purpose say, in order to inspect documents in connection with other proceedings, or for some private purpose, or in collusive proceedings to give the documents some publicity: National Employers Mutual General Association Ltd v Waind (supra) at 382. BHP Petroleum has not shown any improper or spurious purpose. Instead, it limits its submission to the fact that the documents are commercially sensitive and contends that that fact should be placed in the balance when considering the question of oppression. But, as already noted, the arbitrators can take appropriate steps to protect any confidential material. For these reasons the subpoena is not oppressive.

IS THE SUBPOENA FISHING? 61. It is well settled that a subpoena cannot be used for the purpose of mere fishing: Hunt v Wark (1985) 48 SASR 489, 493. There must be some reason to suppose the documents sought will be capable of being used as evidence. Mr Bleby submitted that the subpoena was being used for the purpose only of fishing. The fact that it was fishing was apparent, he contended, from the vague and imprecise way in which the subpoena was expressed and the confidential nature of the documents. There is nothing in the materials which suggests that PASA is fishing. The subpoena identifies three express topics in relation to which specific kinds of documents are sought. The projects referred to in the subpoena exist. There is in fact a proposal to construct a gas pipeline between Sydney and Melbourne, and the Minerva and Moura Gas Projects are on foot. The documents are identified with reasonable particularity. The expression "fishing" is usually used to characterise the activity of someone seeking to find whether anything exists and is speculating as to its possible existence. That is not the position in this case. In the course of his submission, Mr Bleby shifted ground and said that by fishing he meant no more than that PASA sought the documents for purposes not necessarily connected with the arbitration. He did not point to any fact to justify the assertion. Nor is there anything in the documents which confirms it. The challenge on this ground also fails.

62. For all of these reasons, upon PASA applying to amend the subpoena in the manner proposed in these reasons, I would dismiss the appeal.

THE APPEAL BY BHP BASS STRAIT PTY LTD 63. PASA had also obtained the issue of subpoenas addressed to BHP Bass Strait Pty Ltd ("BHP Bass Strait") and to Esso Australia Resources Ltd ("Esso"). Both BHP Bass Strait and Esso objected to the subpoenas and both succeeded on their applications that the subpoenas be set aside. Their applications were heard at the same time as the like application by BHP Petroleum. The same counsel appeared for both BHP Petroleum and BHP Bass Strait. The same firm of solicitors acted for both. Esso's application was, however, entirely separate from the other applications. Esso was represented by a different firm of solicitors and by separate counsel.

Both Esso and BHP Bass Strait applied for orders that PASA should pay their costs on a solicitor and client basis. The trial judge held that it was not appropriate to make such an order. The costs, he said, should be party and party costs. He ordered that PASA should pay Esso its costs and that PASA should pay one quarter of the costs of BHP Bass Strait. BHP Petroleum was ordered to pay the costs of PASA.

BHP Bass Strait appeals against the order for costs. It seeks an order that PASA should pay the whole of its solicitors' costs and that portion of the costs of the hearing which relates to its application to set aside the subpoena. It applies for those costs on a party and party basis.

Although heard at the same time, the application made by BHP Bass Strait to set aside the subpoena was separate from the application made by BHP Petroleum. It was supported by separate affidavits. It is possible to identify those costs which were incurred by BHP Bass Strait which were separate and apart from the costs incurred by BHP Petroleum. It appears, nevertheless, that there may be a degree of overlap with costs incurred by BHP Petroleum and Mr Bleby acknowledged that possibility. He submitted that that could be resolved on the taxation of the costs. I think that is a sanguine view.

Although I am very mindful of the reluctance of an appellate court to interfere with an order for costs, I would vary the order to enable BHP Bass Strait to recover the whole of its solicitors' costs which are identifiable as the costs of its successful application. There is no reason why those costs should not be recovered in full on a party and party basis. The costs were necessarily incurred and to order recovery of part only of those costs is contrary to the principle that a successful party recover the whole of its costs. There is nothing which justifies a departure from that principle other than the fact that the applications were heard together and some part of the solicitors' costs might overlap with the unsuccessful application of BHP Petroleum. The order ought, therefore, to have allowed BHP Bass Strait its identifiable solicitors' costs of and incidental to the application. To the extent that the solicitors' costs relate to items which are common to the applications by both BHP Petroleum and BHP Bass Strait, BHP Bass Strait should recover one quarter of those costs. The extent to which the costs of the hearing should be apportioned was a matter which Bollen J was in a better position to judge than this Court. I would not, therefore, interfere with the exercise of his discretion to order one quarter of the costs of the hearing.

For those reasons, I would allow the appeal against the order as to costs, set aside the order and in lieu thereof make an order that PASA should pay the following costs of BHP Bass Strait as taxed or agreed: (1) that part of the solicitors' costs which wholly relate to the application;

(2) one quarter of the solicitors' costs which partly relate to the application and partly relate to the application by BHP Petroleum; and