Transfield Philippines Inc v Luzon Hydro Corporation [2002] VSC 215

Supreme Court of Victoria|2002-05-28|Before: Byrne J

ARBITRATION - practice and procedure - subpoena - whether validly issued in Victoria - whether too wide.

Before the court are two applications concerning subpoenas to produce documents issued in connection with an international arbitration between Transfield Philippines Inc ("TPI") and Luzon Hydro Corporation ("LHC"). The subpoenas issued pursuant to s. 17(1) of the of Victoria, are directed to four companies within the Transfield Group, and the three persons who are directors of one or more of those companies.

The first application brought by LHC by summons filed on 9 May 2002, seeks an order pursuant to s. 18(1)(a) that one of the corporate persons named, Transfield Holdings Pty Ltd, produce to the court, certain documents described in the schedule to the schedule to its subpoena.

The second is an application brought by the seven persons named in the subpoenas seeking to set them aside pursuant to Rule 42.07. These subpoenas include that mentioned in the LHC summons. The subpoenas in question are as follows:

The contract contains in Clause 20.4, an agreement referring disputes to arbitration in Singapore before a three person arbitral tribunal, such arbitration to be conducted pursuant to the ICC Rules of Arbitration. As provided by Article 18 of the ICC Rules, terms of reference were drawn up on 10 May 2001, and signed by the parties and the arbitrators. The terms include an acknowledgment that the place of arbitration is Singapore[1], and that the law of the contract is the law of the Philippines[2]. There is also a disputed contention that Australian law may also be applicable[3]. The terms also show that the amounts in dispute are substantial, about US$40M on the claim and about US$60M on the counterclaim.

Procedural rules which were agreed by the parties or, failing this, settled by the arbitral tribunal pursuant to Article 15(1) of the ICC Rules are set out in Clause 11 of the terms. The arbitral tribunal has, by Clause 11.7, the power to order a party to produce documents. Clause 11.10 of the terms of reference is in the following terms:

"The parties agree that in respect of any hearings held in Melbourne, Australia, the Commercial Arbitration Act 1984 of Victoria will apply, subject to any modifications made by the Turnkey contract."

Two of three members of the arbitral tribunal are resident in Victoria and it was contemplated by the parties and their legal advisers that the arbitration hearing would be conducted in Melbourne, Australia. All interlocutory hearings to date have been conducted in Melbourne. At the directions hearing on 15 March 2002, the hearing of the arbitration was fixed to commence on 4 February 2003, although this may have been subsequently changed to an earlier date.

In his letter dealing with this matter, the chairman of the arbitral tribunal referred to the venue for the hearing in the following terms:

"The tribunal has given further consideration to the issue of venue. It is mindful of the parties' preference for hearings to be held in Melbourne for reasons of convenience. However, there are other considerations apart from convenience which are relevant. In the first place, the contract and the terms of reference clearly designate Singapore as the arbitral seat. Secondly, the integrity of the arbitral proceedings must be considered. In this regard, the tribunal notes that there have been suggestions of recourse to the courts to review particular decisions of the tribunal. In accordance with international practice and the contractual designation as the seat, it is entirely appropriate that any judicial supervision should be exercised by the courts in Singapore. Accordingly, the tribunal is presently minded to hold the liability hearing in Singapore. The parties are invited to make brief submissions on the question of venue. Any submissions must be received no later than Monday 8 April 2002."

On 8 April 2002, the chairman advised the decision of the tribunal was for the hearing to be in Singapore to commence in early 2003.

I mention this because counsel for the persons named submitted that this decision, transferring the place for the hearing to Singapore, had the consequence that Clause 11.10 of the terms of reference no longer had any applicability. Of the seven subpoenas only one, that addressed to Transfield Holdings Pty Ltd, was issued before the date of this decision to change the venue.

In my opinion, where, as here, the hearings for interlocutory matters are to be conducted in Melbourne, the agreement recorded in Clause 11.10 of the terms of reference requires that the local court and the local law should govern those interlocutory hearings. Any other course would be productive of great inconvenience. It would mean that the parties would be obliged to resort to the Singapore court for orders in aid of interlocutory processes, which are to be carried out in and from Melbourne. Such a conclusion, in my view, does not detract from the proper decision of the arbitrators to conduct the hearing itself in Singapore to ensure that recourse to the court, in order to review decisions made at the hearing in Singapore, should be to the Singapore court.

I conclude, therefore, that the subpoenas were properly issued out of this court or returned before the arbitral tribunal at its hearings in Melbourne.

It was next contended on behalf of the persons named that the subpoenas are too wide and fishing and they were in the nature of discovery and, further, that they require production of documents which are relevant to no issue and are unnecessarily and unreasonably burdensome.

Following the directions hearing of 15 March, the arbitral tribunal on 25 March, directed that subpoenas be returnable on 1 May 2002 in Melbourne. Both parties as a consequence issued a number of subpoenas pursuant to this direction and most were responded to. On the following day, the tribunal issued a draft procedural timetable, which included the following:

Discovery is to be by request not later than 2 September 2002, with the documents to be produced by 16 September. The hearing, as I have mentioned, is to commence at the beginning of 2003 on matters of liability at least.

Following the directions hearing on 1 May at which Transfield Holdings did not appear, leave was granted to LHC to issue further subpoenas returnable on 28 May. LHC availed itself of this opportunity issuing subpoenas including those presently in dispute.

Arising out of this I mention two matters which are of significance. First, the tribunal in this case has taken the step, unusual in litigation, of directing that subpoenas be issued before pleadings are delivered, before discovery is had, and a long time before the trial. The tribunal has also made it clear that the subpoena process is to be completed in the very near future. I make no criticism of this procedure which is within its competence. It does, however, bear upon my approach to the application to set aside the subpoenas. It seems unlikely that those concerned had in mind that the subpoenas issued at this early stage should play a role rather akin to a third party discovery process as is the practice in New South Wales.

Second, the procedures with which I am concerned are directed to corporations and persons which are associated with a party. They are not strangers to the arbitration in any real sense.

I turn now to the issues as yet unjoined which appear to arise in the arbitration. The disputes arise out of the Turnkey agreement made on 26 March 1997, between TPI and LHC for the construction of the Baycomb AC Hydro-Electricity Project on the Baycomb River in the Philippines. According to the terms of reference, the issues between the parties are fairly conventional, although the sums in issue are very large. There are claims and cross-claims arising out of the fact that the project was brought to completion after the target completion date of 1 June 2000. There are claims by LHC that the work was not carried out in accordance with the contractual design. A claim is made by TPI for damages because LHC did not accept its right to premature determination for force majeure pursuant to Clause 19.5 following a typhoon. There are also some miscellaneous claims by TPI for variations and the like. Finally, there is a very non-specific claim for misleading and deceptive conduct brought by TPI.

I turn now to the schedule of the documents in the subpoenas which follow a fairly standard form, that is, each of the subpoenas adopts the same form of the criticisms of TPI about this form, counsel for LHC said that they were surprising, since TPI's own subpoenas which were issued on 4 April, and which were answered were apparently copied from those which TPI now says are an abuse of process. My task, however, is to apply the law and not to decide this issue on some tit for tat basis. The fact that TPI adopted this form, however, is a powerful indication that it, like LHC, sees the topics by which the documents are identified as topics relevant to the issues in the arbitration. I bear in mind, however, that the TPI subpoenas were issued by a party with a different perspective, for example, regarding professional indemnity insurance.

The subpoenas, albeit wide, are not in the nature of discovery for they do not require the persons named to identify the issues in the arbitration. It was not suggested that they were issued for an improper or collateral purpose.

The important issue which remains is whether they are of such width, and so oppressive that they are an unreasonable burden upon the persons named having regard to the likely value of the documents in the arbitration[4]. It is for LHC to justify its process. Furthermore, its process must be assessed in accordance with the ordinary principles applicable to subpoenas. I bear in mind, however, the particular differences of the arbitral process, and more particularly the way this particular arbitration is being conducted. Where it is possible to do so I would prefer to strike out parts of the subpoena which appear to require production of documents which are beyond the relatively low threshold of relevance required for this process, unless it is appropriate to strike out the whole of the process. For this purpose I have looked again at material before me and considered afresh what was urged on the part of the contending parties.

To my mind LHC has failed to discharge the burden which it bears with respect to parts only of the subpoenas. I will strike out these parts for reasons which were mentioned in the course of argument, and which I will not now repeat. I will not set aside the whole of the subpoena process. The parts which I will strike out are the following parts of the schedule in each case: Paragraphs (b), (d), (e), (j), (k), (l) and (n), in the subpoenas directed to the corporate person named, and the equivalent paragraphs in the subpoenas directed to the natural persons named.

I leave to the arbitral tribunal the task of restricting access to documents produced into its custody, if this be necessary to protect the confidentiality of information.

I have not overlooked the other submissions put on behalf of the persons named. I will not recount them in detail. I am satisfied that the resources available to the persons named, and their familiarity with the project and the familiarity of those advising them sweeps away much of the argument based upon impracticality. In any event, they are entitled pursuant to Rule 42.08 to seek the payment of the costs of compliance. Finally, one must have regard to the enormity of the sums and issues in the arbitration, and the way in which the arbitral tribunal is seeking the parties to approach the process of arbitration.

The consequence of my conclusion that paragraphs (k) and (l) should be struck out bears upon the LHC application. The correspondence before me suggests that the only documents within the description of the schedule held by Transfield Holdings are those within paragraphs (k) and (l), or perhaps Paragraph (k) alone.

I nevertheless consider that the events attending the call upon that subpoena demonstrate that Transfield Holdings showed scant respect for the arbitral tribunal, an attitude which this court deplores. It may be that LHC will accept that Transfield Holdings has no documents to produce. If it does not accept this, I will, if requested, direct that that company attend before the court and then and there make formal response to the subpoena.

Accordingly I propose the following orders. First, with respect to each of the subpoenas addressed to the companies, that paragraphs (b), (d), (e), (j), (k), (l) and (n) and the equivalent paragraphs in the subpoenas directed to the Messrs Belgiorno-Nettis be struck out, otherwise the application of TPI be refused. With respect to the application of LHC I will enquire what is counsel's preference.

[4] South Pacific Hotel (1984) 1 NSWLR 710 at 719-20.

Arbitration Act 1984

At a glance

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