Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd [1998] FCA 437

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE - application for adjournment of motion for security for costs - application for an order that affidavits be filed by named companies in relation to their possession, custody and control of documents - principle governing additional production of documents where discovery has not yet taken place - relevance of respondent's application for security for costs. Trade Practices Act 1974 (Cth) - s 51A TRUTH ABOUT MOTORWAYS PTY LIMITED -v- MACQUARIE INFRASTRUCTURE INVESTMENT MANAGEMENT LIMITED NG 833 of 1997

FOSTER J 8 APRIL 1998 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 833 of 1997

BETWEEN: TRUTH ABOUT MOTORWAYS PTY LIMITED

Applicant

AND: MACQUARIE INFRASTRUCTURE INVESTMENT MANAGEMENT LIMITED

Respondent

JUDGE: FOSTER J

DATE OF ORDER: 8 APRIL 1998

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The application for an order for affidavits to be furnished be dismissed. 2. The motion for security for costs be adjourned until after the pleadings have been satisfactorily completed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 833 of 1997

BETWEEN: TRUTH ABOUT MOTORWAYS PTY LIMITED

Applicant

AND: MACQUARIE INFRASTRUCTURE INVESTMENT MANAGEMENT LIMITED

Respondent

JUDGE: FOSTER J

DATE: 8 APRIL 1998

PLACE: SYDNEY

REASONS FOR JUDGMENT (Extempore) On 2 April this year I commenced hearing an application for security for costs brought by the respondent in these proceedings. The matter occupied some time on that day but it was unfortunately not completed, and was adjourned for further hearing today. At the commencement of today's proceedings, counsel for the applicant, which is the respondent to the notice of motion for security, indicated that he wished to make an application for the adjournment of the application for security for costs until some currently unspecified date in the future. The application was made in conjunction with a notice of motion issued on 7 April 1998 for hearing at 10.15am today. A number of matters are sought in that notice of motion but the only order relevant for the purpose of this decision is order 3, as follows:- "That each of the following companies: (a) The Respondent (b) Airport Motorways Group Pty Ltd (c) Long Technical Pty Ltd (d) Symonds Travers Morgan Pty Ltd file and serve within 10 days of the date of this order an Affidavit setting out when the documents referred to in the Affidavit of Dr Kaye sworn on 6 April 1998 as alleged not to have been produced were last in the possession, custody and control of each company, and what happened to each of the documents." The basic submission made on behalf of the respondent is that the absence of these alleged documents from the case at this stage constitutes severe prejudice to it in the conduct of its opposition to the security for costs application. Accordingly, it seeks, in effect, a dual order that the current application for security be adjourned until such time as the documents specified in order 3 be produced in accordance with an order that is today sought from me. At any rate the proceedings in relation to the adjournment application have occupied virtually the whole of today. Consequently, there will have to be an adjournment of the further hearing of the security for costs application. The only outstanding question in those circumstances is whether I should make the order to which I have made reference or some similar order. I would not be proposing to deal with the question of costs of today's application today, in any event. A large number of matters have been agitated before me during the course of today's hearing and I have been taken to decisions of the court in matters that might be said to be somewhat similar. The major claim made by the respondent in support of the application that I make an order for the affidavits referred to, is that, as I apprehend it, it is abundantly clear there has been a failure to produce documents which have been the subject of earlier subpoenas directed to the companies in question. The form of subpoena that had been issued was directed to the proper officer of the relevant company. It required the production of "all original and copy documents in the period 1 January 1994 to 4 March 1998 relating to the traffic volumes that could be expected to use the proposed Eastern Distributor." Clearly, the documents sought were related only to matters that bore upon expected traffic volumes in that traffic artery. In addition to those subpoenas that were issued on 5 March 1998 there have been, to my recollection, in the course of these interlocutory skirmishes which have been taking place before me, calls made upon notices to produce in similar form. I have had placed before me by the applicant in the security for costs application, a number of documents which have been collected in two bundles. The first exhibit is Exhibit 1. It is called the "Adjournment Bundle". It produces in photocopy form schedulised documents which have been produced in response to subpoenas since 2 April 1998. Additionally, there is a bundle referred to as the "Black Hole Bundle" which is Exhibit 2. It takes this rather curious name from the fact that a major allegation made in support of my ordering the affidavits in question, is that there is a period of time, being that time approximately between September 1995 and August 1996, when the companies, which are the subject of these subpoenas, have either failed to produce at all, or failed to produce in any significant quantity, documents in answer to the requirements of the subpoena or notices to produce. This "black hole" has been graphically depicted for me, although in shades of white rather than black, in a document which is annexed to one of the affidavits. I have, as a result of the submission being framed in this way, been taken not only to affidavit material to which I will make reference later in these reasons, but also to the Government-generated document of the Auditor-General of NSW, described as the "Permanent Audit Report: Review of the Eastern Distributor", which is Exhibit 5 in this application. I was taken to this Report, in the first instance, by counsel for the applicant in the security for costs application, who sought to indicate from various paragraphs in it - which I shall not set out in these short reasons - in association with a press release issued from the office of the Minister of the Crown who had responsibility in this area, that the hole of whatever colour was edged about by the fact that, for more or less the entirety of the relevant period, the whole project was under a question mark, insofar as a significant aspect of its financial structure was threatened by a change of heart in the Federal Government as to whether or not some significant taxation allowance would be made in respect of it. This threat, it was put to me, could well account for the paucity, if not the absence, of documents during this period relating to or bearing upon traffic volumes, since traffic volume considerations were obviously significant in the plan of the enterprise, and they would not reasonably have been the subject of consideration and certainly would not have been responsible for the generation of relevant documentary material, during a period when the whole enterprise was itself under threat of closure. As against that view, I have been taken by counsel for the respondent to the security for costs application to other portions of the document which would indicate that at least some aspects of matters in relation to the progressing of the enterprise remained under consideration. The relevant portions to which I have been taken in support of both sides of the case in relation to this adjournment application may be categorised accurately, I think, as not being specific in character; I am simply asked to draw inferences one way or the other. So far as the case of the applicant in the main proceedings is concerned, it is currently supported by two affidavits of Mr Rowland John Kaye, an engineer, who is put forward as an expert, able to give relevant opinions in relation to matters concerning the design and use of motorways and tollways. He gave a report annexed to an affidavit sworn 30 March 1998. He gave it on the basis of material that had at that point of time been made available to him as a result of the production of documents in response to subpoenas and otherwise. Mr Kaye makes references in the earlier part of his opinion, which I could probably describe as compendiously stating the view that he expresses his opinion on the basis of the material that has then been made available to him. However, he provides fairly forthright views under the headings in the body of his report. One heading reads, "Capacity constraints not adequately modelled"; another heading is "Inaccuracies introduced by treatment of 'section m' capacity constraint"; and yet another is "Absence of Sensitivity and Risk Analyses". These opinions, although they have been prefaced, as I have indicated, by remarks as to their being based upon the material available, do not suggest that the available material in any way prevents him from arriving at the fairly clear, concise and critical opinions that he expresses. In a later affidavit, filed since these proceedings commenced, Mr Kaye says that the absence of "all or almost all documents in the period October 1995 to September 1996" from three of the companies in question, has severely prejudiced his ability to analyse the traffic forecasts set out in the respondent's prospectus. (I have not yet mentioned the central role that this prospectus plays in this litigation. It is, of course, the basis of the substantial claim that is made.) He also says: "In particular, I may have been denied access to the documents in that period and containing or relating to:" a number of matters which can be summarised as the following: (a) discussions between the parties during the relevant period relating to the rationale for or criticism of, the expansion factors; (b) the development of the analysis of the effects of the forecasted traffic congestion in the Domain Tunnel; (c) correspondence between the Roads & Traffic Authority and the subpoenaed parties relating to any inconsistencies or inaccuracies that may have been found in the traffic volume forecasting methodologies during the critical period; and (d) certain other matters. In addition to such complaints of that general nature, reliance is placed upon a particular fact, namely, that as recently as yesterday evening, certain documents were discovered and produced which it is acknowledged could have been the subject of the subpoena. They were produced, apparently, to the solicitors for the applicant and were accompanied by a letter providing an explanation, which appears to be couched in sensible terms, as to why they had not been turned up earlier in response to the subpoena. I can see no reason why that explanation should not be accepted as genuine. It is, after all, made by a firm of solicitors who are officers of the court. Also, I have had placed before me a document which is, in form, a photocopy. The submission is made that this document, which is addressed by one of the relevant companies to another relevant company, was only to be found as a photocopy in the file of the sending company whilst the original was not to be found in the file of the company that would have received it. I am asked to draw the inference that (a) the document was received and, (b) either inadvertently or deliberately, it was not produced in response to the subpoena. It is not a document that bears any indication of its having been sent by facsimile transmission, and is handwritten. I do not find myself able to draw any particular inference about it, certainly not the inference that is suggested to me. Basically, this application is founded upon principles which find expression in one of the rules of Court, namely, where it is made apparent after discovery having taken place, that there must necessarily be documents which have not been discovered and which should have been discovered, the Court can make appropriate orders for expanded or additional discovery. This case has not reached the stage of discovery taking place. However, it is not inappropriate, in my view, that that principle, or some analogous principle, be appealed to in the situation where the applicant in these proceedings is resisting an application for security of costs, and is basing its resistance largely upon the strength of the case that it seeks to mount, in circumstances where it concedes, apparently, that it would not be able to provide security if ordered in any significant sum. However, even if, as I consider it to be the case, the appeal is made to this principle, I am very far from satisfied it has been demonstrated that the principle should be applied in the present situation. I am not persuaded that documents which relate to the traffic volumes have been withheld in answering the subpoena and notices to produce, in the manner to which I have made reference. Consequently, I am not disposed to make the order that affidavits be furnished as claimed. I would say this, however: it is apparent that the security for costs application is one of significance, insofar as if it is granted it may have the effect, perhaps will have the effect, of bringing this litigation to an end. Consequently, it is an application to be approached very seriously by all concerned. I am not persuaded, as I have said, that there has been any deliberate failure at all to answer these subpoenas. However, the very terms of the letter that accompanied the documents which were discovered and produced yesterday, indicates that there are difficulties involved, within organisations of the type and size of those concerned here, in tracking down material which may answer the very broad description in the subpoena. I should say, in that regard, that there has been no application made to set aside this subpoena and it continues to remain in force. Obviously the Court will expect that efforts will continue to be made, in addition to those which clearly have already been extensively made, to ensure that there are not in existence any outstanding documents which answer the terms of that subpoena, and I would expect that efforts be made in that regard during the period of the inevitable adjournment that must follow. As the matter is to be adjourned it is most apposite that I revert to a matter that I raised earlier, both in the proceedings today, and in the previous hearing. I am not satisfied that the pleadings in this case properly produce in a precise form the issues for determination by this Court. I cannot stress strongly enough that I am not conducting some form of inquiry into the Eastern Distributor. The Court will be interested in determining issues properly raised before it and nothing else. I had occasion to make criticisms when the matter was before me previously, and that criticism properly resulted in an amended statement of claim. Paragraph 14 of that amended statement of claim sets out the causes of action upon which this litigation is sought to be based. It includes a portion of the prospectus which consists of only four lines. Paragraphs 15, 16 and 17 follow upon the setting out of that portion of the prospectus. Allegations are then made in paragraph 17 that the statements quoted in paragraph 14 were false and misleading, and some reasons are given for that by way of particulars. In paragraph 18, the allegation is made that the respondent did not have reasonable grounds for making each of the statements quoted in paragraph 14. And paragraph 19 indicates that, in those circumstances, s 51A of the Trade Practices Act 1974 (Cth) is relied upon in aid of a claim. In my view, and I raise this because of the Court's responsibility for case management, paragraph 14 and paragraph 17 read together do not indicate the specific representations said to arise from that portion of the prospectus pleaded in paragraph 14. That is, it is not clear which representations the statement of claim wishes to describe as being misleading or deceptive. Indeed, paragraph 17 uses the word "false" in describing them. Although these paragraphs have been pleaded to by way of a defence, I accept that that has occurred because I gave a direction previously that a defence should be filed in answer to the amended statement of claim. That does not alter the fact that, in my view, the statement of claim, and consequently the defence, are defective to raise the issues that this Court will necessarily have to decide. It may well be, having regard to the reversal of onus involved in s 51A, that some pleading by way of reply may be needed to fully bring this matter to issue. Now, I want this problem attended to. The parties should address those matters and complete these pleadings within the next fourteen days. When that is done my Associate can be notified, and if I have seen there is no longer a pleading problem, I will then take submissions from the parties as to when a suitable date may be selected for the finalisation of the security application. This can be done by telephone to my chambers.