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Interline Hydrocarbon Inc v Brenzil Pty Ltd

 

[2005] QSC 109

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Interline Hydrocarbon Inc v Brenzil P/L & Anor [2005] QSC 109

PARTIES:

INTERLINE HYDROCARBON INC
(plaintiff)
v
BRENZIL PTY LTD (ACN 051 348 353)
(first defendant)
and
NATIONWIDE OIL PTY LTD (ACN 066 383 364)
(second defendant)

FILE NO:

6229 of 2000

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court, Brisbane

DELIVERED ON:

6 May 2005

DELIVERED AT:

Brisbane

HEARING DATE:

5 November 2004

JUDGE:

Douglas J

ORDER:

Further submissions invited.

CATCHWORDS:

PROCEDURE – JUDGMENTS AND ORDERS – ACTIONS ON JUDGMENTS – IN GENERAL – where prior court order stipulated that any further experts’ reports on which the parties intended to rely should conform with the Federal Court Practice Direction giving guidelines for expert witnesses – where a second experts’ report subsequently produced – where defendants seeking an order that a further report be delivered that complies with the Federal Court Practice Direction – whether the second report was in compliance with the Practice Direction

PROCEDURE – COSTS – SECURITY FOR COSTS – PLAINTIFF – where plaintiff impecunious – where plaintiff incorporated in the United States of America – where plaintiff relying on parent company to meet its liabilities – where parent company has provided an undertaking to meet the costs of the litigation – where parent company had already paid $100,000 security in 2001–2002 – where plaintiff claiming that it was the defendant against corporate aggression – where defendants seeking further security to the value of $340,000 – where estimates of trial length are substantially different – where no wholly scientific manner of determining appropriate quantum of further security – whether the plaintiff should make further contributions by way of security and if so in what amount

PROCEDURE – SUPREME COURT PRACTICE – QUEENSLAND – PRACTICE UNDER RULES OF COURT – PLEADING – GENERALLY – where parties agreed to dispense with filing a request for trial – where defendants contend that no leave was required to lodge a Further Amended Defence and Counter-Claim – where defendant contends that limitations period under the Trade Practices Act 1974 (Cth) has not yet started to run – whether the amendment was made in time – whether plaintiff required to file and serve a reply to the further amended defence and counter-claim.

Australian Securities and Investments Commission v Rich [2005] NSW SC 149, referred to

Interline Hydrocarbon Inc v Brenzil Pty ltd [2003] QSC 322, referred to

Makita (Australia) Pty Ltd v Sprowles [2001] 52 NSWLR 705, followed

Sydmar Pty Ltd v Statewise Developments Pty ltd (1987) 73 ALR 289, cited

Trade Practices Commission v Arnotts Ltd (No. 5) [1990] 21 FCR 324, applied

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, cited

Evidence Act 1995 (NSW)

Trade Practices Act 1974 (Cth), s 87(1CA)

Uniform Civil Procedure Rules 1999 (Qld), r 376, r 379, r 380

COUNSEL:

D Williams for the applicant

JC Bell QC with D Kelly for the defendants

SOLICITORS:

Bennett & Philp for the applicant

McCullough Robertson for the defendants

  1. Douglas J:  This application raises three issues: whether the plaintiff should deliver a further amended experts’ report to conform properly with the Federal Court’s Practice Direction “Guidelines for Expert Witnesses” dated 15 September 1998; whether the plaintiff should provide further security for costs; and whether it should deliver a reply to the further amended defence and counterclaim filed 23 September 2004. 

Background

  1. The plaintiff alleges that a waste oil refinery located at Wetherall Park in Sydney was designed, constructed and assembled by it pursuant to an agreement with the second defendant, Nationwide Oil Pty Ltd (“Nationwide”) referred to as the “Unit Purchase Agreement”. It seeks damages for breach of that agreement from the second defendant reflecting an amount alleged to be owing under it.
  1. The proceedings also involve a claim by the plaintiff for royalties alleged to be payable in respect of products produced by the refinery. The plaintiff claims this contractual entitlement pursuant to an agreement with the first defendant, Brenzil Pty Ltd (“Brenzil”) referred to as the “Licence Agreement” and an agreement with Nationwide referred to as the “Sub-licence Agreement”.
  1. The defendants defend the claim on the grounds that the refinery was not constructed and assembled by the plaintiff in accordance with the Unit Purchase Agreement. Accordingly, the defendants argue that there are no products being produced by “a unit” within the meaning of the Unit Purchase Agreement.
  1. The defendants plead a number of breaches of contract and, by amendment, misleading and deceptive conduct by the plaintiff as justifying them in seeking to have their agreements with the plaintiffs declared void, a declaration that no royalty payments are payable by the second defendant to the plaintiff as well as damages. In seeking declarations that the agreements are void the defendants wish to avoid further payment under the Unit Purchase Agreement as well as the Licence and Sublicence Agreements. 
  1. The defendants also seek to set off the amount of their counter-claim for damages for breach of contractual warranties, negligent mis-statement and misleading and deceptive conduct in respect of the performance characteristics of and technology used in the refinery.

A.Further Experts’ Report

  1. On 24 September 2003 Mackenzie J ordered that any further experts’ reports on which the parties intended to rely should conform to the Federal Court Practice Direction giving guidelines for expert witnesses. He did this when adjourning the trial of this matter, partly because the evidence in the plaintiff’s experts’ report produced for that trial advanced a factual argument that was not covered by the plaintiff’s pleadings. The plaintiff’s reply has since been amended to allege, among other things, that the second defendant’s pre-treatment processing of used oil in the equipment supplied by the plaintiff was significantly different to the pre-treatment process recommended by the plaintiff, leading to the shortfall in production complained of by the defendants. This now seems to be the main focus of their argument against the defendants.
  1. The first experts’ report provided by the plaintiff referred to its own experience in building and operating five other plants of the type in question in other parts of the world. Mackenzie J said of that aspect of the report:

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

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

  1. His Honour’s order also provided that:

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

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

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

  1. When that direction is considered in conjunction with the Federal Court’s Practice Direction it seems clear that it was intended to ensure that any subsequent experts’ report identified the instructions received by the experts, their assumptions and the facts relied upon by them to express their opinion.
  1. On 1 October 2003 the plaintiff’s solicitors notified the defendants’ solicitors that the plaintiff did not intend to adduce evidence at the trial or to amend its pleadings to make any claim based on the operation or design of the overseas plants. On 10 September 2004 the plaintiff delivered an amended experts’ report which did delete specific reference to overseas plants but, it is submitted by the defendants, fails to conform with the Federal Court Practice Direction in four respects. 

Facts, matters and assumptions

  1. The first complaint relates to the obligation by the experts to summarise the facts, matters and assumptions upon which the report proceeds. The second report seeks to discharge that obligation at p. 44, para 2 by stating:

“The material facts upon which this report is based are as set out in the report and otherwise in the briefing material contained in the 3 folders of material commonly known to the parties as the red white and blue folders (and which we are informed by Bennett & Philp have been disclosed by the plaintiff to the defendants) together with copies of the pleadings between the parties as at April 2003.”

  1. The defendants’ complaint about that passage is that such a global approach makes it virtually impossible for the defendants and the Court to know precisely what facts the experts had in mind when expressing the views contained in their second report. The complaint has substance.  As Beaumont J said in Trade Practices Commission v Arnotts Ltd (No. 5) [1990] 21 FCR 324, 330:

“In my opinion, these authorities establish that there is a rule of evidence at common law that, except in a straight-forward uncomplicated case, where the facts are admitted and readily identified, the opinion of an expert is admissible only where the premises, that is to say, the facts upon which his or her opinion is based, are expressly stated.  It follows that, in a complex case, where facts are not readily identifiable it is not permissible to put the whole of the transcript and documentary evidence to the witness en bloc.” (My emphasis.)

  1. See also the discussion of that decision and other decisions to similar effect by Heydon JA in Makita (Australia) Pty Ltd v Sprowles [2001] 52 NSWLR 705, 736744.  At 743-744 Heydon JA expressed the principle, apparently for the purposes of the common law as much as for the Evidence Act 1995 (NSW), as follows:

[85] In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of “specialised knowledge”; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be “wholly or substantially based on the witness’ expert knowledge”; so far as the opinion is based on facts “observed” by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on “assumed” or “accepted” facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert’s evidence must explain how the field of “specialised knowledge” in which the witness is expert by reason of “training, study or experience”, and on which the opinion is “wholly or substantially based”, applies to the facts assumed or observed so as to produce the opinion propounded.  If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert’s specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight.  And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ’s characterisation of the evidence in HG v The Queen (at 428, [41]), on ‘a combination of speculation, inference, personal and second-hand views, as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise’.”

  1. That decision of Heydon JA as one of a three member Court of Appeal, where the other two members did not rely explicitly on his Honour’s reasons, was discussed extensively by Austin J in Australian Securities and Investments Commission v Rich [2005] NSW SC 149 at [296]-[305].  Australian Securities and Investments Commission v Rich has been made the subject of an appeal to the New South Wales Court of Appeal where, I understand, argument has been heard and the decision reserved.  Nonetheless, the careful analysis by Heydon JA of the common law decisions is persuasive in supporting the conclusion expressed by him at [85] of Makita
  1. It was submitted to me that I should not resolve this issue at this stage as it was essentially one for the trial judge to determine whether the report was admissible. The object of the Federal Court practice direction is, however, to ensure that expert evidence provided to the court is properly based on identified facts. In a case such as this where the factual basis for any opinion evidence is complex, and may require extensive examination by opposing experts, which would probably be impossible to do “on the run” during a trial, it should be made as clear as possible from the start what are the facts on which the opinion expressed is based. It is not sufficient simply to assert that they can be found in a collection of bulky documents. That makes it impossible for the court to determine whether the opinion is based upon facts that have been proved or to determine properly upon what facts it is based. It also permits and encourages the witness to select for himself which of the evidence he accepts and which he rejects; see Makita at 736, [75]. 

The plaintiff’s “experience”

  1. The second complaint the defendants make of the second report is that the authors still refer to the plaintiff’s “experience” with other production plants in support of the opinions contained in the report without identifying the facts, matters and assumptions upon which the report proceeds in relation to that alleged experience. For similar reasons to those I have just expressed I believe that the report should make explicit the link between the “experience” referred to and the conclusions reached.

Reasons for the opinions

  1. The third complaint is that the second report does not give reasons for each opinion expressed in it. The example relied upon in particular is contained at p. 16 para 4.3.3 of the second report:

“Overall then the plant design is based partly on established and accepted chemical engineering practice, supported in the case of equipment suppliers usually by extensive experience; and partly on Interline’s own, specific experience in the matter.”

  1. In criticising this passage the defendants argue that the first report relied, for this conclusion, on the fact that the plaintiff had built and followed the operation of five other plants of that type at the time of the contract. The passage relying on the experience with those plants was deleted from the second report but the conclusion remained with these nebulous references to equipment suppliers’ “extensive experience” and the plaintiff’s own “specific experience”. It suggests a conclusion similar to that reached by Austin J in ASIC v Rich at [316] that there will be cases where failure to disclose that certain information was considered but disregarded will amount to failure to make full disclosure of the reasoning process by which the expert reached a certain opinion and hence inadmissibility of the opinion evidence on that ground.  His Honour analysed the obligation of an expert to disclose his or her reasoning process at [306]-[312] and whether the report should refer to information considered and rejected or discounted at [313]-[317].  He concluded at [317], in the context set by the Evidence Act 1995 (NSW), that “the disclosure of the reasoning process may well involve dealing with why material that might appear relevant was thought not to be so, or was given little weight”.  
  1. With the factual background here, the original use of the plaintiff’s specific experience with five plants, the apparent abandonment of that approach only to be replaced by nebulous references to equipment suppliers’ “extensive experience” and “Interline’s own, specific experience” suggests strongly that the reasoning process leading to that approach should be explained. If the plaintiff’s experience with five plants is now not thought to be relevant why is that so? The answer may be that the second defendant’s pre-treatment processing of used oil in the equipment supplied by the plaintiff was the real and only problem but if that is so then it should be made clear.

No matters of significance withheld

  1. The fourth complaint of the defendants is that the Federal Court Practice Direction requires the expert to declare that no “matters of significance” which the expert regards as relevant have, to the expert’s knowledge, been withheld from the Court. It seems, as I have said, that the second report was amended by deleting explicit reference to the other plants designed by the plaintiff, leaving in references to general experience, but that that has been done in circumstances where the plaintiff’s solicitor has sworn that the second report has not changed in substance from the first report. The defendants would have me infer from those facts that the experts cannot properly make the declaration that no matters of significance have been withheld from the Court without explaining why those parts of their first report that have been deleted were removed. The reasons of Austin J in the passage at [316] of ASIC v Rich just referred to support that conclusion.
  1. For these reasons it seems to me that the first order sought by the defendants for the delivery of a further report complying with the Federal Court practice direction should be granted.

B.Security for Costs

  1. There is no doubt that the plaintiff company is impecunious. It is a company incorporated in the United States of America and entered into a Chapter XI arrangement with its major creditor on 9 September 1998. Its assets are worth less than its liabilities, they are not situated in Australia and it seems to be operating at a loss. It has been relying upon its parent company, Interline Resources Corporation (“Resources”) to meet its liabilities. That company has provided an undertaking through its directors to pay any costs order made against the plaintiff, to execute a judgment by concession and allow that to be entered into the Utah Supreme Court for the contingent liability for a costs order in this action, not to raise any objection to the jurisdiction of a Utah court to enforce a costs order arising from these proceedings and not to sell, dispose of, pledge, charge or otherwise encumber an office building said to be its principal asset before the payment of the contingent award of costs. The evidence suggests the office building spoken of is worth approximately USD$450,000.00.
  1. Resources has paid the plaintiff’s legal expenses so far and has also provided $100,000.00 previously ordered as security for costs in June 2001 and July 2002. It has been able to raise funds on the security of the office building in Utah of approximately USD$530,000.00 which it wishes to use for business purposes, which have been described variously as the reconstruction of a gas plant facility and the funding of an oil and gas well drilling programme.
  1. The plaintiff also claims that the second defendant’s failure to pay royalties has deprived the plaintiff of income which would be available otherwise to meet an order for security for costs. It further contends that its worst case is likely to be that the royalties claim it makes will be matched by the defendant’s counter-claim “in which case a costs order against the plaintiff for the entirety of the action is unlikely”.
  1. The plaintiff also asserts that much of the cost likely to be incurred in the conduct of the trial is related to issues raised on the counter-claim, in particular the allegations in paras 19-22 of the Further Amended Defence and Counterclaim that the unit supplied by the plaintiff was unable to meet performance criteria leading to the production of unsaleable asphalt and the allegations that question the process engineering and design of the refinery supplied by the plaintiff. Those allegations are extensive and are set out in paras 30-45 of the Further Amended Defence and Counterclaim in a cause of action pleaded under the Trade Practices Act 1974 (Cth) that the plaintiff asserts has been brought out of time.  I shall deal with that issue later.
  1. The allegation is that the engineering processes envisaged by the contract to be supplied by the plaintiff in order to process used oil were described as the “Mellen process”, that the plaintiff had lost the right to use that process but that it represented to the defendants that it had developed and could supply “New Interline Technology” which worked much better than the Mellen process.  Those representations are said to have been made misleadingly and deceptively in contravention of the Trade Practices Act and to have caused the second defendant to elect not to terminate the Unit Purchase and Sub-licence agreements. 
  1. Generally, the submission was that the second defendant by withholding royalties had forced the plaintiff to commence proceedings and that the second defendant was the true “aggressor” in a commercial sense, particularly because of these newly- pleaded aspects of its defence and counterclaim.
  1. The defendant’s delay in making the application was also criticised but it was raised by them in correspondence dated 20 October 2003 and pursued by further correspondence on 10 August 2004, apparently after estimates of the length of the trial had expanded from five days to between 20 and 25 days. The current estimate of the length of the trial by the defendants is 25 to 30 days.
  1. The plaintiff also submits that, if it is ordered to pay, for example, a further $100,000.00 as security for costs, there is a real prospect that it would be unable to engage senior counsel to conduct the matter and will be limited to engaging junior counsel, thus stifling the prosecution of its action.

Is the plaintiff really a defendant?

  1. The issue whether the action is properly characterised as one where the defendants are the aggressors in a commercial sense was addressed partly by Mackenzie J in his Honour’s reasons for judgment delivered 24 September 2003, Interline Hydrocarbon Inc. v Brenzil Pty Ltd [2003] QSC 322 at [1]  where he said that the applications there were in an action for recovery of monies allegedly due as royalties but where issues concerning the performance of an oil recycling plant were said to be critical to the extent of the alleged debt.  The defendants also rely on a passage at [10] to the effect that the plaintiff’s experts’ report went to the heart of its case. 
  1. Where, as here, the plaintiff’s entitlement to the royalties or the damages it seeks requires it to establish that it has performed its side of the bargains alleged, it does not seem to me to be correct to characterise its claim simply as defensive. In my view many of the issues raised by the defendants’ Amended Defence and Counter-claim are ones which also arise in the plaintiff’s claim in the sense that it will be necessary for it to establish that it has performed its obligations under the contract properly. The plaintiff’s submission is, however, that even if there was some overlap of the issues dealing with the question of the capacity of the refinery, the counter-claim raised independent claims in respect of the production of asphalt residue of poor quality, technical problems of individual items of plant equipment and, more recently, the allegation of the representations with respect to the replacement of the Mellen technology with the New Interline Technology. Those issues seem to me to be relevant to this question but go more to the question of the amount of security to be ordered than to whether there should be an order in some further amount.
  1. It seems to me that it remains appropriate to treat the plaintiff as a company which should be required to provide further security because of its impecuniosity and its status as a foreign corporation. It is not properly characterised as a defendant simply responding to a situation where the defendants are commercial aggressors whose counterclaim has become the dominant part of the proceedings; cf. Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289, 302.

Resources’ offer and the possibility that the action will be stifled

  1. The offer by Resources to execute a judgment by confession and not to sell, dispose of, pledge, charge or otherwise encumber its office building is not enough to meet the defendants’ legitimate concerns. The object of providing security for costs is to protect the defendants from the inability of a company in the plaintiff’s position to pay if it loses its action, normally by the making of a payment into court, or the provision of some other security acceptable to the court. Although the company behind the plaintiff, Resources, appears to be willing to use its assets to support the plaintiff’s potential liability, the security proposed is unsatisfactory in that it would be difficult for this Court to supervise adherence to the terms of the proposed undertakings.
  1. Nor is there any evidence that other persons such as the shareholders of Resources who might be the ultimate beneficiaries of this action, are willing to put their assets into play. In those circumstances, it seems to me that security in a more normal form should be provided. In the absence of such evidence that those ultimate potential beneficiaries are willing to undertake to stand behind the plaintiff, I am not satisfied that an order granting security would frustrate the litigation.

Delay

  1. The delay asserted by the plaintiff must be seen in the context of the change of approach adopted by it in respect of its evidence when the matter was listed earlier for trial, namely that the problems experienced by the second defendant were due to its method of pre-treatment. Its current experts’ report was only delivered in September 2004, the earlier version having been delivered in July 2003, in which it propounded the new theory of the case. Security had been provided earlier than that in the sum of $100,000.00 and the second defendant raised the prospect of a further application for security by a letter sent 20 October 2003. This application for further security was made after a further letter of 10 August 2004 “seeking further security as a result of the trial’s likely expansion in length”. It does not seem to me that, in those circumstances, the delay should be regarded as significantly prejudicial to the plaintiff. It has always been aware of the need to provide security, has done so in the past and is in the situation where the theory it is propounding has changed as has the likely length of the trial.

The amount of security

  1. The next issue to consider then is the amount of security to be provided. The defendants have asked for further security in the sum of a further $340,000.00 on the basis of an assessment by a costs assessor, Mr Graham, that the total costs which might be recovered by the defendants on a standard basis for their costs incurred and to be incurred would be $443,342.05. As I said earlier, $100,000 has already been provided. The new assessment has been made on the basis that the issues likely to be determined at the trial have become significantly more complex since the delivery of the amended pleadings and experts’ reports and since the provision of additional security by July 2002.
  1. Mr Graham has not conducted a costs assessment in relation to the professional fees and costs incurred by the first and second defendants to date, but estimated them at $86,657.95 for professional fees and outlays to 19 October 2004. His total estimate for pre-trial expenditure on fees and costs is $210,024.95. In respect of the costs of the trial, his estimate totals $233,317.10, based on an estimated 24-day trial.
  1. The plaintiff’s criticism of the estimate began with the submission that only 40% of it should be attributed to the defendant’s costs of its defensive aspect of the case. On the view I have taken, however, it is not appropriate to treat the defendants as, effectively, commercial aggressors and it does not seem to me to be appropriate to proceed from the assumption that only 40% of the costs likely to be met by the defendants can be attributed to the defence of the plaintiff’s claim against them.
  1. In my view it is more appropriate to regard the defence and counter-claim generally as defensive but to acknowledge that the claims of breach of the Trade Practices Act, particularly in respect of the use of the New Interline Technology, and perhaps in respect of the “asphalt residue” representation are not purely defensive.  On the material I have it is difficult to estimate the relative importance of the evidence on those issues and what proportion of the hearing time will relate to them, but they seem to be reasonably substantial issues. 
  1. The plaintiff also submitted that I should order security only up to the commencement of the trial and that there was no clear evidence about the likely length of the trial in any event. The plaintiff’s estimate is that the trial would take between 10 and 12 days. The defendants’ estimate is that it will take approximately 20 to 30 days. It has made earlier estimates that were substantially shorter. Their current estimate is said to have been made on the basis that the plaintiff will need to call at least three witnesses and one expert and the defendants will call at least five witnesses and one expert, and where the evidence to be led even by the parties’ nonexpert witnesses will include detailed technical material explaining the history of the waste oil plant, its operation and design from its initial construction and commissioning to its present operation.
  1. It is clear from the experts’ reports provided so far that there is much factual material relevant to the issues in the case, but the estimates of the likely length of the trial do not descend into any significant detail about the reasons why it would take so much time to receive the evidence of approximately 10 witnesses. Accordingly, although I am willing to order security in an amount beyond the first day of the trial, I am not convinced that it should be ordered for the period of 24 days estimated by Mr Graham. 
  1. Mr Philp, the plaintiff’s solicitor, has also detailed a large number of criticisms of the estimates of costs made by Mr Graham in respect of individual items. His calculations arrived at a total of almost $70,000.00 as the amount of additional security needed and attributable to the cost of defending the original claim. As I have said, that was based on the assumption that most of the defence and counter-claim was aggressive rather than defensive and on the view that security should only be ordered up to and including the first day of the trial.
  1. I am satisfied that the estimates made by Mr Graham of the items likely to be incurred as standard costs up to the trial and during the trial are, on the whole, reasonable, but I am not satisfied that I should set the amount of security by reference to the likelihood that the trial will take 24 days. The matter has not yet been mediated, if that is to occur, and the estimates of the likely length of the trial have varied considerably over time.
  1. In my view, an appropriate figure to order by way of further security at this stage is $200,000.00. In arriving at that figure it has been impossible for me to be wholly scientific because of the uncertainties involved in prediction and in allocating costs to the essentially defensive aspects of the defence but, notionally, I have allowed a further $80,000 for pre-trial costs associated with the defence of the plaintiff’s claim and $120,000 in respect of the trial.

C.Delivery of a Reply to the Further Amended Defence and CounterClaim filed 23 September 2004

  1. The defendants delivered a further amended defence and counter-claim on 23 September 2004.  They contend that no leave is required for that step.
  1. They had, in July 2004, served a further amended defence and counter-claim which sought to introduce a new cause of action pursuant to the Trade Practices Act 1974 (Cth) arising in respect of the alleged representation made by the plaintiff on 31 March 1998 that it had tested “New Interline Technology” under the operating conditions of a working plant and those tests produced superior results.  The plaintiff asserts that the pleading introduces a new cause of action into the counter-claim which requires the leave of the court, that the claim was also statute-barred and that the amendment was made after both parties consented to dispensing with filing a request for a trial date. 
  1. Rule 380 of the Uniform Civil Procedure Rules 1999 provides that an amendment after the filing of the request for trial may only be made with the leave of the Court.  That the parties agreed to dispense with filing a request for trial does not have the effect that a deemed request has been made.  Accordingly, it does not seem to me that leave was needed for the service of the further amended defence and counter-claim in July 2004 because of the terms of r. 380.  At that stage the defendants submit that the relevant period of limitation of six years provided by s.87(1CA) of the Trade Practices Act had not commenced to run.  Their estimation is that it would not have commenced to run until in or about August 1998 when the second defendant began to commission the plant and test operationally the “New Interline Technology”; see para. 44 of the further amended defence and counter-claim.  There was no prayer for relief contained in the July version of the further amended defence and counter-claim.  That was corrected by the version delivered on 23 September 2004.  That does not seem to me to be a major concern, taking into account the discretion given to the Court by r. 376 to allow amendments to add a cause of action.
  1. In those circumstances it does not seem to me to be appropriate to determine a limitation question of that type at the interlocutory stage. The defendants’ submission is that the limitation period will commence to run from the time when the disadvantageous character or effect of the alleged misleading or deceptive representations became reasonably ascertainable by them. That is not a factual issue that should be determined at this stage; see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, 527, 533. 
  1. That issue, whether the amendment has been made within time, is, therefore, one which should be litigated. It would have been more appropriate for the plaintiff to apply to disallow the amendment under r. 379 if it wished to raise the limitation issue at this stage. In the circumstances it seems to me that the appropriate attitude to adopt is to accede to the defendant’s request for an order that the plaintiff file and serve a reply to the further amended defence and counter-claim. The only prejudice to the plaintiff asserted was that if this cause of action had been pleaded in 2000, the plaintiff would have had the opportunity to terminate the sub-licence agreement and commence proceedings for breach of contract in respect of unpaid royalties. As far as I can see, there was nothing to stop the plaintiff from doing that in any event.

Orders

  1. Accordingly, I propose to make orders generally in the terms sought by the defendant, subject to my view about the amount of security to be provided, further submissions about the dates by which security should be provided, when the further experts’ report should be delivered and when the reply should be delivered. I shall also hear submissions as to costs.
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Editorial Notes

  • Published Case Name:

    Interline Hydrocarbon Inc v Brenzil P/L & Anor

  • Shortened Case Name:

    Interline Hydrocarbon Inc v Brenzil Pty Ltd

  • MNC:

    [2005] QSC 109

  • Court:

    QSC

  • Judge(s):

    Douglas J

  • Date:

    06 May 2005

Litigation History

No Litigation History

Appeal Status

No Status