Westfield Management Ltd v Brisbane Airport Corporation Ltd

REASONS FOR JUDGMENT 1 This is an application by the applicants that the first respondent make further and better discovery. 2 On the hearing of the notice of motion some issues were resolved. Two issues remained for determination. 3 The first concerned the question whether or not the first respondent ought to produce for inspection parts of the documents of the Board of the first respondent and of its senior management which have been covered over or removed from the document on the basis that those parts were not relevant to the matters in issue in the proceedings. The second concerned documents relating to the cost of construction of a building described as DFO2 in the first respondent's further amended defence. 4 The applicants allege in their third amended statement of claim that the first respondent, as the airport operator company for the Brisbane Airport within the meaning of the Airports Act 1996 (Cth) ('the Airports Act'), proposes to develop and operate a commercial, retail and tourism centre on 80 hectares of the Brisbane Airport site, which development is known as the Gateway Park Development: par 6. The Gateway Park Development is said to include the elements pleaded in par 7. One of those elements is pleaded as a 'tourism precinct' said to include, among other things, 'an outlet shopping precinct': par 7(a). 5 The applicants allege and it is their pleaded case that: '9. In view of its nature, scale and location, the development and operation of the Gateway Park Development is not: (a) related to the operation or development of the Brisbane Airport; (b) incidental to the operation or development of the Brisbane Airport; (c) treated under any regulations made under the Airports Act as incidental to the operation or development of the Brisbane Airport' 6 Section 32(1) of the Airports Act provides: '32(1) An airport-operator company for an airport (other than a joint-user airport) must not carry on substantial trading or financial activities other than: (a) activities relating to the operation and/or development of the airport; or (b) activities incidental to the operation and/or development of the airport; or (c) activities that, under the regulations, are treated as activities incidental to the operation and/or development of the airport.' Section 32(1) is pleaded as an operative provision which binds the first respondent: par 8. 7 The applicants plead that by virtue of the matters pleaded in pars 2, 6, 7, 8 and 9 of the third amended statement of claim, the first respondent proposes to carry on substantial trading or financial activities in contravention of s 32(1) of the Airports Act: par 10. 8 The first respondent, by par 6 of its further amended defence, sets out its development objectives and preferred land use in terms of the Master Plan for the Brisbane Airport, including certain decisions it has made, and otherwise denies the allegations in par 6 of the third amended statement of claim. 9 So far as presently relevant, the first respondent pleads in respect of par 6 of the third amended statement of claim: '6(f) on 1st November 2002: (i) it approved expenditure of an amount of up to $9.8M for the construction, by a contractor, of a building at Gateway Park; (ii) it decided that when that building was constructed, it would be sub-leased to an entity unrelated to it, to be used by that entity for factory outlet sales; (fa) on 25 July 2003 it decided to the effect that: (i) it would approve expenditure in an amount in excess of $10,000,000.00 for the construction of buildings or a building larger than the building referred to in paragraph 6(f) of this pleading; (ii) it would prepare and lodge a major development plan in accordance with the Airports Act 1996 in respect of that building; (fb) on 29 August 2003, it decided to the effect that: (i) it would prepare and lodge a major development plan for the building referred to in paragraph 6(f) of this pleading ('DFO1') and a second adjacent building ('DFO2') in accordance with the Airports Act 1996; (ii) if it did not enter into an agreement to lease DFO2 to the Sixth Respondent, it would consider constructing the building referred to in paragraph 6(f) of this pleading without lodging a major development plan; (g) its present proposals, as concepts, are to have constructed at Gateway Park other stand alone buildings for uses including a hotel, a restaurant, a coffee shop, a supermarket, and a medical centre;' 10 It pleads in respect of par 7 of the third amended statement of claim: '7. As to paragraph 7 of the Third Amended Statement of Claim, the First Respondent: (a) repeats and relies upon the matters pleaded in paragraph 6 of this pleading; (b) admits that Gateway Park is situated adjacent to the Gateway Motorway, about 2 kilometres from the Centro Toombul Shopping Centre and about 4 kilometres from the domestic terminal at the Brisbane Airport; (b)[sic]says that Gateway Park is also situated about 2 kilometres from the international terminal at the Brisbane Airport; (c)[sic]otherwise denies the facts alleged in that paragraph.' 11 It pleads in respect of par 9 of the third amended statement of claim: '9. As to paragraph 9 of the Third Amended Statement of Claim, the First Respondent:- (a) denies that Gateway Park involves the carrying on of substantial trading or financial activities and repeats and relies upon the matters pleaded in paragraphs 6 and 7 of this pleading; (b) says that the construction of the golf course, carparks and any stand alone buildings and the sub-leasing of the golf course and any stand alone buildings to entities unrelated to the First Respondent do not constitute the carrying on of trading or financial activities by the First Respondent within the meaning of section 32(1) of the Airports Act; (c) says further, that if, which is denied, either the construction of the golf course, carparks and any stand alone buildings or the sub-leasing of the golf course and any stand alone buildings to entities unrelated to the First Respondent do constitute the carrying on of trading or financial activities within the meaning of s.32(1) of the Airports Act, they are activities:- (i) which are related to the operation or development of the Brisbane Airport; or alternatively, (ii) which are incidental to the operation or development of the Brisbane Airport; (d) admits that if, which is denied, either the construction of the golf course, carparks and any stand alone buildings or the sub-leasing of the golf course and any stand alone buildings as pleaded above do constitute the carrying on of trading or financial activities within the meaning of s.32(1) of the Airports Act, they are not treated under any regulations made under the Airports Act as incidental to the operation or development of the Brisbane Airport; (e) otherwise denies the facts alleged in that paragraph.' 12 The applicants contend that the Federal Court Rules operate to require the whole of a document to be produced for inspection once it is determined that part of the document is discoverable in the proceeding: Australian Competition and Consumer Commission v McMahon Services Pty Ltd [2004] FCA 353 at [12] - [13]. Further, they submit that production of all Board and senior management documents are required to establish that the activities pleaded in pars 6 and 7 of the third amended statement of claim are substantial trading or financial activities of the first respondent which are not related or incidental to the operation and/or development of the Brisbane Airport for the purposes of s 32(1) of the Airports Act. This requires, they submit, a comparison of all past activities of the first respondent relating to its activities as, and since it became, the airport-operator of the Brisbane Airport, with the activities it is alleged in pars 6 and 7 of the third amended statement of claim it is engaging in, or proposes to engage in, to develop and operate the Gateway Park Development as pleaded and particularised. They submit that such a course is required or authorised by the observations of the High Court in R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190 ('Adamson's Case') and State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282. 13 The issue in each of the High Court decisions was whether or not a corporation was a 'trading or financial corporation' within the meaning of that term in s 51(xx) of the Commonwealth of Australia Constitution Act. That question, the Court held, involved a judgment as to the nature of the corporation made after an overview of all the activities of the corporation to determine whether or not they were in nature, trading or financial, and whether they involved a substantial, and not merely a peripheral, activity of the corporation: see Adamson's Case at 208 (per Barwick CJ), 233 (Per Mason J) and 239 (per Murphy J) and State Superannuation Board at 304 (per Mason, Murphy and Deane JJ). 14 There is no issue under s 32(1) of the Airports Act as to whether the first respondent is a trading or financial corporation, or whether the activities pleaded in pars 6 and 7 of the third amended statement of claim, if proved up, 'form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation': per Mason J in Adamson's Case at 233. 15 Whether or not the activities pleaded in pars 6 and 7 of the third amended statement of claim do, or would, contravene s 32(1) of the Airports Act, involves the consideration of a number of issues. 16 The first is whether the first respondent is engaging, or proposes to engage, in the conduct pleaded in pars 6 and 7 of the third amended statement of claim and the first respondent is required to make discovery as to this issue. 17 The second issue is the proper construction of s 32(1) of the Airports Act and, in particular the terms: (i) 'substantial trading or financial activities'; (ii) 'the operation and/or development of the airport'; (iii) 'activities relating to' in par 32(1)(a); (iv) 'activities incidental to' in par 32(1)(b); This issue involves mixed questions of fact and law, but does not raise factual questions relating to the activities of the first respondent: NSW Associated Blue Metal Quarries Ltd v Federal Commissioner of Taxation (1956) 94 CLR 509 at 511 - 512; Hope v Bathurst City Council (1980) 144 CLR 1 at 8 - 9. The second issue involves no question of discoverable documents. 18 The third issue is whether the activities pleaded in pars 6 and 7 of the third amended statement of claim, if proved up as pleaded, fall within s 32(1) of the Airports Act on its proper construction. That is, whether the activities are or would be: (i) the carrying on by the first respondent of substantial trading or financial activities; and (ii) if 'yes' to (i), are or would be activities: (a) relating to the operation and/or development of the airport; or (b) incidental to the operation and/or development of the airport. 19 Whether the activities if proved up would constitute trading or financial activities, depends upon a judgment as to the nature of the activities themselves. Likewise, whether the carry on of those activities is to be regarded as a substantial activity is a question of judgment, having regard to the nature and extent of the activity and the period over which it is to be conducted. For the purposes of s 32 of the Airports Act, the issue is not whether the activity is substantial in comparison to other activities conducted by the first respondent. It is a quantitative and qualitative judgment of the activity pleaded in pars 6 and 7 of the third amended statement of claim standing alone. 20 This third issue does not require the first respondent to make discovery of all Board and senior management documents which relate to the operation and/or development of the Brisbane Airport since the time the first respondent became the airport operator of Brisbane Airport. Other than the activities pleaded in pars 6 and 7 of the third amended statement of claim, there is no contested factual issue raised on the pleadings as to the actual activities engaged in by the first respondent as the airport-operator company for the Brisbane Airport. As is pleaded in par 9 of the third amended statement of claim, what is required in these proceedings is a consideration of whether the Gateway Park development as pleaded in pars 6 and 7, by reason of 'its nature, scale and location', is or is not related to or incidental to the operation of the Brisbane Airport and discovery goes to that issue. 21 The discoverable documents which go to this third issue, beyond those which are discoverable on the first issue, are those of the Board and senior management concerning those activities pleaded in pars 6 and 7 of the third amended statement of claim which relate to, or are incidental to, the operation and/or development of the Brisbane Airport. Thus, documents relating to the operation and/or development of the Brisbane Airport, to which the activities pleaded in pars 6 and 7 of the third amended statement of claim do not relate or are not incidental to, are not discoverable. 22 Although the decision in McMahon Services states the general rule as to production of documents which contain in part discoverable material, it does not preclude the Court making orders modifying the general rule having regard to the circumstances of a particular case: Gray v Associated Book Publishers (Aust) Pty Ltd [2002] FCA 1045 at [16]; Index Group of Companies Pty Ltd v Nolan [2002] FCA 608 at [8]. 23 Here, the material which has been covered up is confidential commercial material relating to the business and financial affairs of the first respondent and the conduct of some of the operations of the Brisbane Airport, eg security arrangements, response to the SARS outbreak and the like. The material is not relevant to the matters in issue and its confidentiality should be maintained. 24 I direct that the first respondent be relieved from any obligation to produce for inspection those parts of documents which have been covered over. Discovery and production of the uncovered sections is sufficient disclosure for the purposes of these proceedings. 25 I turn to the question of the need to discover documents going to the construction costs of the building DFO2 specified in par 6(fb) of the first respondent's further amended defence. 26 The applicants allege in par 26(c) of the third amended statement of claim, that the costs of construction of 'the outlet shopping precinct in the tourism precinct of the Gateway Park Development' will exceed $10 million. 27 The outlet shopping precinct is that pleaded in pars 6 and 7, being part of a proposal for a tourist precinct in the Gateway Park Development as pleaded. The pleading does not identify any particular building or buildings. 28 The first respondent in par 6 of its further amended defence admits that it has a proposal for a building to operate as a direct factory outlet which will cost $9.8 million: par 6(f). That building is DFO1. It admits that there is a second proposal which involves a further building identified as DFO2 as part of the direct factory outlet sales operation: par 6(fb). It pleads that it has made an application under the Airports Act for approval of a major development plan to construct both DFO1 and DFO2. It does not, in par 6, plead any construction cost for DFO2 or for the cost of constructing both DFO1 and DFO2. 29 It is implicit in pars 6(fa) and 6(fb) of the further amended defence, that the construction of DFO1 and DFO2, together as planned, would be a major airport development within the meaning of s 89 of the Airports Act for which approval is necessary under s 90, and the pleading stands as an admission of that fact. 30 The first respondent, by par 26(a) of its further amended defence, re-pleads pars 6 and 7 of the defence in response to the allegations in par 26 of the third amended statement of claim, and in particular to that pleaded in par 26(c). That plea operates as a denial that the proposal for a factory outlet sales centre constituted by DFO1 alone will cost more than $10 million to construct. It operates as an admission that the second proposal constituted by DFO1 and DFO2 is a major airport development which requires approval under the Airports Act. In light of this admission, the cost of construction of DFO1 and DFO2 together and DFO2 alone, is not a live issue. So too the admission in par 26(b) of the further amended defence that the cost of construction of the other elements under consideration and pleaded in par 6(g) of the further amended defence would exceed $10 million, means that the cost of construction of those elements no longer remains an issue. Par 26(c) of the further amended defence only operates to deny the residue of the facts pleaded in par 26 of the third amended statement of claim. None of those remaining disputed facts raises as a relevant issue the cost of construction of the building DFO2. Accordingly, no discovery is required in respect of the likely construction cost of that building. 31 The application for further discovery in respect of the covered parts of the documents discovered to date and the cost of construction of the building identified in the first respondent's further amended defence as 'DFO2' is dismissed. 32 The question of costs of the notice of motion is reserved. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.