FEDERAL COURT OF AUSTRALIA NT Power Generation Pty Ltd v Power & Water Authority [1999] FCA 1184 NT POWER GENERATION PTY LIMITED (ACN 061 314 921) v POWER AND WATER AUTHORITY and GASCO PTY LIMITED (ACN 009 627 801) D5 OF 1999 MANSFIELD J BRISBANE (Heard in Darwin) 27 AUGUST 1999 IN THE FEDERAL COURT OF AUSTRALIA NORTHERN TERRITORY DISTRICT REGISTRY D 5 OF 1999 BETWEEN: NT POWER GENERATION PTY LTD (ACN 061 314 921) Applicant AND: POWER AND WATER AUTHORITY First Respondent GASCO PTY LTD (ACN 009 627 801) Second Respondent JUDGE: MANSFIELD J DATE: 27 AUGUST 1999 PLACE: BRISBANE (Heard in Darwin) REASONS FOR DECISION 1 The respondents have sought leave to amend their amended defence filed in this matter on 8 July 1999 ("the defence"). I will refer to the proposed amended defence as "the proposed defence". The hearing of this matter commenced on 3 August 1999, but has now been adjourned to resume (subject to hearing one further witness in the meantime) on 11 October 1999. In significant respects, the application to amend the defence is opposed, largely because it is said that the respondents seek to withdraw admissions. 2 In ruling upon the application, I propose to apply the principles as expressed by the Full Court in Celestino v Celestino (Spender, Miles and von Doussa JJ, unreported, 16 August 1990). In summary, they are (1) in deciding upon such an application, the Court should endeavour to decide the rights of the parties upon the real issues in the case, provided the amendment to the pleading can be done without injustice (Cropper v Smith (1884) 26 Ch D 700 per Bowen LJ at 710-711). (2) The application of that principle assumes that some error on behalf of the party seeking the amendment has been made or demonstrated, and generally speaking, the withdrawal of an admission in pleadings will require an explanation for the making of the admission, if necessary based upon "evidence of a solid and substantial character". (3) In such circumstances, the withdrawal of the admission will nevertheless not be allowed unless no injustice will be occasioned to the other party which cannot be met by an appropriate order for costs. 3 Celestino involved a dramatic attempt to withdraw an admission. It was a claim for damages for personal injuries sustained in a vehicular accident. The defendant, having been professionally advised, admitted liability. At the commencement of the trial to assess the damages, the defendant sought to withdraw that admission. The proposed further amended defence, in respect of which leave to amend in presently sought, does not present any such stark circumstance. 4 The High Court in The State of Queensland v J L Holdings Pty Ltd (1996) 189 CLR 146 has reaffirmed the applicability of the principle in Cropper, per Dawson, Gaudron and McHugh JJ at 154 and per Kirby J at 167-172. The proposition that the ultimate aim of a court is the attainment of justice, and that that aim should inform decisions as to whether amendments to pleadings should be allowed, has been recognised in many decisions. See eg. Clough and Rogers v Frog (1974) 48 ALJR 481 and The Commonwealth v Verwayen (1990) 170 CLR 394 per Dawson J at 456 and per Toohey J at 464. 5 I will address the opposed amendments sought in sequence. The statement of claim was amended in some significant respects by leave on 18 August 1999. I shall call that document 'the statement of claim'. If it is necessary to refer discretely to the initial statement of claim filed on 12 March 1998, I shall call it 'the earlier statement of claim'. Paragraph 12(b) 6 The proposed defence seeks to amend the assertion about the effect of the Competition Principles Agreement (as defined in the defence). Instead of saying that it obliged the government of the Northern Territory to reform existing legislation that restricts competition, it seeks to assert that the government may become obliged to do so. 7 I propose to allow that amendment. It relates to the construction and operation of the Competition Principles Agreement. The Court cannot be obliged to adopt a construction of that Agreement which is not correct, by reason of the parties' pleadings. It is an agreement of moment beyond the parties. No particular prejudice to the respondent can arise from the proper construction of the agreement, and it has not been shown that the form of the proposed defence will cause it any such prejudice. Paragraph 15 8 The statement of claim alleges that, by reason of the facts alleged in pars 5-14, the first respondent had a substantial degree of market power in the Electricity Supply Market (as defined). The defence admitted that the first respondent has had that market power in that market "by reason of the matters admitted above". It has admitted the facts alleged in pars 5, 6, 7, 9, 10, 11 and 14 and in part the facts alleged in pars 12 and 13. The proposed defence seeks to maintain the admission, but only "by reason of the matters admitted in par 14 above". The facts alleged in pars 5, 6, 7, 9, 10 and 11 are still admitted. 9 The significance of the proposed defence is to remove the acknowledgment that the facts which are said to give rise to the existence of the market power of the first respondent include the facts admitted in pars 5, 6, 7, 9, 10 and 11 of the defence. They wish to be able to submit that that market power does not arise out of the existence of statutory regulatory functions. They also contend that, in part, the proposed amendment is a consequence of the applicant amending par 10 of the statement of claim to remove reference to s 29 of the Electricity Act (NT). The applicant submits, inter alia, that the respondents wish to avoid acknowledging that ownership of the infrastructure is a factor giving rise to the first respondent's market power (par 9). 10 I propose to allow that amendment. To the extent that statutory regulatory functions may give rise to power in a market (pars 5, 6 and 7 and before the amendment to the statement of claim pars 10 and 11), in my view that is a matter for argument once the background facts are established. There is no real issue about them. I do not think I should put the respondents in a position where they may not put that argument, because of the defence. If such statutory powers are so relevant, I do not think that the applicant will be materially disadvantaged by the issue having to be argued. In addition, as is apparent from the applicant's opening and the amendment to par 10 of the statement of claim, the applicant as well as the respondents have revisited the question of the significance of the statutory provisions to the issues in the case. The respondents would, as a matter of fairness, be given leave to amend the defence in response to the amended par 10 of the statement of claim. It is not fair that, necessarily, that leave should not extend to those parts of the defence which refer to par 10 other than where it is directly pleaded to in par 10 of the defence. I think it appropriate that the question of the significance of the Electricity Act (NT) having been raised, the respondent should be entitled to revisit its defence to the extent it proposes. I do think that the applicant will be prejudiced by that ruling in any significant way. 11 That does not deal with the reference to pars 9, 12 and 13. It is a question of fact as to whether a substantial degree of power in a market exists. That fact is still admitted. It was not put that the conclusion in par 15 of the statement of claim, in so far as it relies on par 9, is disputed by the respondents. The identification of the market, and the assessment of the degree of power in that market, are part of the same investigative process: Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1989) 167 CLR 177 at 187-190, and 198-200. The applicant presently has the benefit of the acknowledgment of the relevance of the facts in par 9 to those questions. As it is not clear that the respondents have any substantial ground for disputing that relevance, and the reason for the acknowledgment having been made in error is not established, I would not allow the amendment to that extent except for one consideration. That is that the allegation in par 9 is, or may be, a compendious one. It may not be fair to the applicant, or to the respondents, to tie them to a pleading which might carry a significance by treating par 9 in an isolation which was not intended. If the admission were shown by the applicant to have an especial significance which evidence could not now reasonably address, I would need to consider that further, but I do not think that that is the case. 12 I also do not consider that removal from par 15 of reference to pars 12 and 13 is of particular significance. The statement of claim alleges substantial barriers to entry to and exit from the market identified and nominates those barriers. The defence admits the existence of substantial barriers to entry, but denies the nominated barriers. It identifies the reason why those barriers to entry exist. I do not think that, in those circumstances, the reference to pars 12 and 13 in par 15 of the defence could be of particular help to the applicant, and I am not of the view that the proposed defence will work any injustice to the applicant. Paragraphs 21, 26(b) and 26(c) 13 The proposed defence seeks to alter qualified admissions, accompanied by denials, into a general non-admission. They concern the applicant's intention. The respondents are concerned that, as expressed, the present pleading is unqualified as to time or content, and wish to adopt the position of putting the applicant to proof. 14 I do not allow those amendments. I do not think that there is any real issue as to the applicant's intention, or that the respondents' position is in any material way harmed by the existing pleading. The applicant will have to prove its intention as the defence now stands. The Court will have to make findings on that evidence. The defence does not mean that the applicant's intention at material times will not have to be considered in the light of the evidence as a whole. Paragraph 23(b) 15 The respondents, in the course of submissions, did not pursue the claim to withdraw par 23(b) in its entirety but pointed out some ambiguity in the word "identified" and sought leave to substitute the word "communicated". The applicant acknowledged that that was what it understood the defence to mean. I will give leave to amend the defence accordingly. Paragraph 23(c) 16 In the proposed defence, this paragraph is numbered as par 23(b) but, as par 23(b) is to remain, it will be renumbered 23(c). Consequential renumbering will have to be made to pars 23(c) and (d) in the proposed defence. 17 I propose to allow this amendment. In part, that is for the same reasons as given in respect of par 12(b). In part, also, it is consequential upon the applicant's amendment to par 10 of the statement of claim and the parties' further focus on the significance of the provisions of the Electricity Act (NT). It also identifies an additional matter which it is clear is at the forefront of one of the respondents' defences to this action, so it does not involve any matter which will take the applicant by surprise. To that extent, it does not involve any withdrawal of an admission. 18 The applicant contended that one feature of the prejudice which it might suffer if this amendment is allowed is that my ruling on the respondents' claim that certain discovered documents were privileged from production on the ground of public interest immunity (ruling made on 18 August 1999) was made on a version of the pleadings which was no longer applicable, and on the terms of the proposed defence might have been different. It is not apparent to me at present that the proposed defence would affect in a substantial way my reasons for that ruling. However, I have not heard the parties fully on that issue. To the extent necessary, I give the applicant leave to revisit that ruling to the extent that the proposed defence might give rise to different considerations in the balancing process. Paragraphs 24 and 25 19 Paragraphs 24 and 25 of the statement of claim allege that the conduct of the first respondent asserted in par 23 was an exercise of its market power or the taking advantage of its market power for purposes proscribed by s 46 of the Trade Practices Act 1974 (Cth). Paragraphs 24 and 25 of the defence, and of the proposed defence, deny those allegations. By pars 24 and 25 of the defence, the respondents also "refer to and repeat pars 4(b), 12, 13, 16, 17 and 23 hereof". Those references are now sought to be removed. 20 In the defence, par 4(b) denies that there was at material times an electricity infrastructure market (as defined). I have referred to the effect of pars 12 and 13 above. Paragraphs 16 and 17 deny the alleged barriers to entry into and exit from the electricity infrastructure market. Paragraph 23 acknowledges that the applicant has not been granted access to the first respondent's infrastructure to sell electricity, and has not been told the terms upon which it might be granted that access. It explains why that is so, namely (as now to be pleaded) that the first respondent has deferred any decision to do so whilst the Northern Territory government determines how it will implement policies to comply with the Competition Principles Agreement. 21 It is difficult to see how those references, as part of the response to pars 24 and 25 of the statement of claim, constitute admissions of assistance to the applicant. The references are in part to denials elsewhere in the defence. I have considered the applicant's contentions as to the significance of pars 24 and 25 of the defence referring to pars 12, 13 and 23. Those references, in so far as they contain positive assertions, do not, in my view, really enhance the applicant's claim in pars 24 and 25 in such a way that their removal would materially disadvantage the applicant. They may simply draw attention to matters which the respondents may rely upon as explaining why the first respondent's conduct was not an exercise of market power. I do not therefore think the proposed defence does amount to the withdrawal of an admission, or does prejudice the applicant. The matters asserted by the respondents in pars 12, 13 and 23 (albeit to be amended by the leave I propose to give), if they do amount to the exercise of the market power alleged or to the taking advantage of that market power, may be relied upon for that purpose in any event. If those matters provide the explanation why there has been no conduct by the first respondent in contravention of s 46 of the Trade Practices Act, that contention also will be able to be made. 22 I accordingly give the leave sought in respect of those paragraphs. Paragraph 27(c) 23 Paragraph 27 of the statement of claim alleges that the first respondent at material times was aware of the facts alleged in pars 8, 9, 10, 11, 12, 13, 19, 21 and 26 of the statement of claim. Paragraph 27(c) of the defence admits that the respondents were aware of the matters alleged in par 19, and refers to and relies upon par 26(a) of the defence. Paragraph 27(e) of the defence admits awareness of the facts alleged in pars 26(a)-(d) of the defence. Paragraph 19 of the statement of claim is admitted. It asserts that the applicant since 20 July 1998 has owned the Mt Todd Power Station. 24 Paragraph 27(c) of the proposed defence seeks to substitute a plea of non-admission of the facts alleged in par 19 (and pars 8, 21 and 26). It does therefore seek to withdraw an admission concerning par 19 of the statement of claim. That is a matter of fact, rather than a complex issue about the legal meaning or consequences of other material. The reason why the admission was made, but is now sought to be withdrawn, is not explained by any evidence. It is not the sort of admission which legal advisers would address without instructions. Nor do the terms of the proposed defence indicate that there is any real issue on par 19 of the statement of claim. 25 In my view, this amendment in so far as it concerns par 19 should not be allowed. Paragraph 26(c) of the defence should stand. 26 Paragraph 27(c) of the proposed defence also includes an amended response to the references to pars 21 and 26 presently in pars 27(d) and (e) respectively of the defence. I have not allowed the proposed amendments to pars 21 and 26(b) and (c). In those circumstances, I do not allow the proposed amendment concerning those references. 27 Leave to amend par 27 of the defence is therefore given by (a) substituting for pars 27(a) and 27(b) the proposed pars 27(a) and 27(b) (b) adding a new par 27(f) in the following terms: "(f) they do not admit that they were at all material times aware of the matters alleged in paragraph 8 of the Statement of Claim." but pars 27(c), (d) and (e) of the defence are to remain. The proposed par 27(c) in the proposed defence is not allowed. Order 28 Accordingly, I give leave to the respondents to file and deliver an amended defence in terms of the amended defence except that the proposed amendments contained in pars 21, 26(b), 26(c) and 27(c) of the proposed defence are not allowed and leave is further given to add a new par 27(f) to the defence in the following terms: "(f) they do not admit that they were at all material times aware of the matters alleged in paragraph 8 of the Statement of Claim." I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield. Associate: Dated: 27 August 1999 Counsel for the Applicant: Mr A Bannon SC and Mr A Henskens Solicitors for the Applicant: Colin Biggers & Paisley Counsel for the Respondents: Mr L Foster SC; Mr J V Nicholas and Mr A I Tonking Solicitors for the Respondents: James Noonan Dates of Hearing: 18 & 19 August 1999 Date of Decision: 27 August 1999