FEDERAL COURT OF AUSTRALIA Petrotimor Companhia de Petroleos S.A.R.L. v Commonwealth of Australia [2002] FCA 18 PRACTICE & PROCEDURE – application to set aside notice to produce – notice to produce requesting documents from applicant – where strike out application on foot – whether notice to produce for legitimate forensic purpose. PETROTIMOR COMPANHIA de PETROLEOS S.A.R.L. AND OCEANIC EXPLORATION COMPANY v COMMONWEALTH OF AUSTRALIA, JOINT AUTHORITY ESTABLISHED PURSUANT TO THE TREATY OF 11 DECEMBER 1989 BETWEEN AUSTRALIA AND INDONESIA, PHILLIPS PETROLEUM (91-12) PTY LIMITED, PHILLIPS PETROLEUM COMPANY ZOC AND PHILLIPS PETROLEUM TIMOR SEA PTY LIMITED NO. N 1224 OF 2001 BEAUMONT J 21 JANUARY 2002 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1224 OF 2001 BETWEEN: PETROTIMOR COMPANHIA de PETROLEOS S.A.R.L. FIRST APPLICANT OCEANIC EXPLORATION COMPANY SECOND APPLICANT AND: COMMONWEALTH OF AUSTRALIA FIRST RESPONDENT JOINT AUTHORITY ESTABLISHED PURSUANT TO THE TREATY OF 11 DECEMBER 1989 BETWEEN AUSTRALIA AND INDONESIA SECOND RESPONDENT PHILLIPS PETROLEUM (91-12) PTY LIMITED THIRD RESPONDENT PHILLIPS PETROLEUM COMPANY ZOC FOURTH RESPONDENT PHILLIPS PETROLEUM TIMOR SEA PTY LIMITED FIFTH RESPONDENT JUDGE: BEAUMONT J DATE OF ORDER: 21 JANUARY 2002 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Until further order, the applicants are not required to produce the documents called for in the third to fifth respondents' notice to produce dated 21 November 2001. 2. The notice of motion filed by the applicants, dated 13 December 2001, be stood over generally with liberty to restore on three days' notice. 3. Liberty to any party to apply be reserved. 4. There be no order for the costs of the motion to date. 5. The parties file and serve written submissions on or before 4 February 2002 on the question whether a direction should be given under s 20(1A) of the Federal Court Act in relation to the issue of justiciability. 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 N 1224 OF 2001 BETWEEN: PETROTIMOR COMPANHIA de PETROLEOS S.A.R.L. FIRST APPLICANT OCEANIC EXPLORATION COMPANY SECOND APPLICANT AND: COMMONWEALTH OF AUSTRALIA FIRST RESPONDENT JOINT AUTHORITY ESTABLISHED PURSUANT TO THE TREATY OF 11 DECEMBER 1989 BETWEEN AUSTRALIA AND INDONESIA SECOND RESPONDENT PHILLIPS PETROLEUM (91-12) PTY LIMITED THIRD RESPONDENT PHILLIPS PETROLEUM COMPANY ZOC FOURTH RESPONDENT PHILLIPS PETROLEUM TIMOR SEA PTY LIMITED FIFTH RESPONDENT JUDGE: BEAUMONT J DATE: 21 JANUARY 2002 PLACE: SYDNEY REASONS FOR JUDGMENT (ON PETROTIMOR'S APPLICATION TO SET ASIDE PHILLIPS' NOTICE TO PRODUCE) BEAUMONT J: INTRODUCTION 1 This is an application by the first and second applicants (collectively, unless otherwise indicated, "Petrotimor") to set aside a notice to produce served upon them by the third, fourth and fifth respondents (collectively, unless otherwise indicated, "Phillips") requiring the production of a number of documents, not only pre-trial, but also in aid of an application by Phillips to strike out the whole of Petrotimor's principal proceedings upon the ground that it is an abuse of process. In order to understand the issues which arise in the application, it will be necessary first to explain the essential nature of the claims relevantly made by Petrotimor against Phillips in the principal proceedings, as follows. (Insofar as they are made as free-standing claims, the claims made against the Commonwealth and the Joint Authority need not be considered now.) THE CLAIMS MADE BY PETROTIMOR AGAINST PHILLIPS IN THE PRINCIPAL PROCEEDING 2 Relevantly, the claims made by Petrotimor in its Statement of Claim may be summarised essentially as follows: (i) Background 3 The Government of Portugal entered into a Concession Agreement with the first Petrotimor applicant dated 11 December 1974 ("the Concession Agreement"), which entitled that applicant exclusively to prospect for, investigate, develop and exploit, deposits of natural hydrocarbons, and associated substances, on part of the continental shelf between the Portugese province (as it then was) of East Timor and Australia. Oceanic, the second Petrotimor applicant, owned and controlled the first Petrotimor applicant (pars 5 – 11). 4 Petrotimor expended money and resources in exploring, investigating and prospecting activities pursuant to the Concession Agreement (pars 12 – 13). 5 In the course of, and as a result of, these activities, certain Confidential Business Information ("CBI") was discovered, developed and recorded by Petrotimor (par 14). In response to Phillips' solicitors' subsequent request to Petrotimor's solicitors to "specify the precise information and data alleged to constitute the alleged [CBI]", Petrotimor's solicitors replied: "AS TO PARAGRAPH 14 OF THE STATEMENT OF CLAIM 3. The Confidential Business Information comprises: (a) the seismic data relating to the Concession Area that was obtained for value by the First and Second Applicants from private sources, the worksheets and notes that record the process of interpretation and analysis of that privately obtained data in the context of the data obtained from publicly available sources, work programs and reports made to the representatives of the Government of Portugal (in Dili and Lisbon) (which information was confidential pursuant to the Concession Agreement); (b) various maps and charts which record the results of the analysis and interpretation of the data referred to above and which record the areas of the Concession Area that were considered to be highly prospective for hydrocarbon resources. 4. When appropriate Orders for Discovery or Notices to Produce are made, specific particulars and copies of the documents which comprise the Confidential Business Information will be provided." 6 Performance of the obligations imposed by the Concession Agreement was prevented or obstructed as a result of civil unrest in Portugese Timor from August 1975, and from the subsequent invasion by Indonesia in December 1975 (pars 15 – 17). 7 By a law made in 1976, the Government of Indonesia purported to integrate East Timor into the Republic of Indonesia (par 18). 8 By mutual agreement made in 1976, performance of the Concession Agreement was suspended for force majeure, and remained suspended until at least November 1999 (par 19). (ii) Claim of misuse of confidential information 9 Petrotimor conducted geological analysis and interpretation, and made various discoveries and predictions (the CBI), in respect of the area covered by the Concession Agreement ("Concession Area") between January 1974 and December 1975 (pars 79 – 80). 10 Petrotimor's officers were forced to vacate its premises in extraordinary circumstances (of unrest) in August 1975 and the documents recording the CBI were, by necessity, left (pars 82 – 83). 11 Under the provisions of the Concession Agreement, the CBI was confidential to Petrotimor and the Government of Portugal (par 84). 12 The Commonwealth and the Joint Authority came into possession of the CBI by means unknown to Petrotimor at some time between December 1974 and 11 December 1989 (par 85). 13 On 11 December 1989, the Commonwealth and the Republic of Indonesia entered into the Timor Gap Treaty which established a Zone of Cooperation ("Area A"), comprised of territory almost wholly within the Concession Area (pars 48, 53 – 54 and 58). 14 The terms of the Timor Gap Treaty required the Joint Authority to enter into production contracts (the "Production Sharing Contracts") with limited liability corporations in order to explore for, and exploit, petroleum resources in Area A, and permitted entry into such Contracts in respect of the Concession Area to the exclusion of Petrotimor and without payment of compensation to Petrotimor (pars 55 and 57). 15 Production Sharing Contracts issued by the Joint Authority to Phillips, presumably at the Commonwealth's direction, are in respect of the areas identified by Petrotimor and described in the CBI as holding significant potential to be rich in hydrocarbon resources (par 87). 16 It should be inferred that the selection of the area to form Area A and the location of the areas in respect of which Petrotimor was granted Production Sharing Contracts were a result of the misuse of the CBI by the Commonwealth, the Joint Authority and Phillips (par 88). 17 Phillips has benefited, unjustly, from the use of the CBI made by it, or by the Commonwealth and the Joint Authority, with Phillips' knowledge (par 126). (iii) Claim of Interference with contractual relations 18 The effect of the Production Sharing Contracts is to prevent Petrotimor from exercising their rights and fulfilling their obligations under the Concession Agreement (par 119). 19 Phillips had actual or constructive knowledge of the existence of the Concession Agreement, then in the public domain, at the time the Production Sharing Contracts were entered into (par 120). 20 At the time of entry into the Production Sharing Contracts, the third Phillips respondent had actual or constructive knowledge of the fact that Petrotimor and the Government of Portugal considered that the Concession Agreement was suspended by force majeure as a result of Indonesia's invasion of Portugese Timor (par 121). 21 The entry into the Production Sharing Contracts by Phillips amounted to a wrongful interference with the contractual relations of Petrotimor and the Government of Portugal (par 122); or, alternatively, a dealing and interference with Petrotimor's property rights, constituting a conversion of those rights (par 123), causing loss (par 124). (iv) Equitable claim 22 Phillips entered into the Production Sharing Contracts with actual or constructive notice of Petrotimor's interests, giving rise to an equity in favour of Petrotimor (par 127). RELIEF SOUGHT IN PETROTIMOR'S APPLICATION 23 In its application, Petrotimor seeks, relevantly, the following relief: · Declarations that the Petroleum (Australia-Indonesia Zone of Cooperation) Act 1990 (Cth) and the Maritime Legislation Amendment Act 1994 (Cth) are invalid to the extent that they effected acquisitions of Petrotimor's property other than on just terms. · Equitable compensation from the Commonwealth, the Joint Authority and Phillips. · A declaration that entry into the Timor Gap Treaty was beyond the Commonwealth's powers and void. · An order that the Joint Authority and Phillips hold on trust for Petrotimor any interests in respect of exploration rights etc in Area A in respect of which Petrotimor held rights under the Concession Agreement. PHILLIPS' MOTION FOR SUMMARY DISMISSAL OF PETROTIMOR'S PRINCIPAL PROCEEDING 24 By its notice of motion, Phillips gives notice that it will later this year (the motion is fixed for hearing on 3, 4 and 5 April 2002), move the Court for the following declarations and orders: · A declaration that the claims made by Petrotimor in its Application require adjudication of acts of state, including the validity, meaning and effect of the transactions of foreign sovereign states, which are not justiciable, or do not give rise to a matter within the Court's jurisdiction; and an order that Petrotimor's application be set aside, dismissed or permanently stayed. · Alternatively, an order under O 20 r 2 that Petrotimor's Application be dismissed or permanently stayed on grounds (a) that no reasonable cause of action is disclosed; or (b) that the proceeding is frivolous or vexatious or an abuse of process. · Alternatively, an order under O 11 r 16 that Petrotimor's Statement of Claim be struck out on the grounds that it discloses no reasonable cause of action, or is embarrassing, or is otherwise an abuse of process. PHILLIPS' NOTICE TO PRODUCE 25 By its notice to produce dated 21 November 2001 Phillips requires Petrotimor to produce to a Registrar the following documents for the purpose of evidence: The Third, Fourth and Fifth Respondents require each of you to produce at thehearing before the Deputy Registrar on l2 December 2001 the following documents for the purpose of evidence: 1. All documents relating to the constitution and registration as a company or legal entity of the first applicant including, without limitation, all documents relating to or recording the shareholding or ownership of the first applicant from its establishment to the present time. 2. All documents constituting or relating or referring to or reporting any application or proposed application by any person or entity for, and/or the award to any person or entity of, Production Sharing Contracts by the Joint Authority from and including 1989 and including all such documents which in any way relate or refer to the application for, and/or the award of, the contracts referred to in the Statement of Claim to any of the Third to Fifth Respondents, or of any such contracts now held by any of the Third to Fifth Respondents. 3. All documents constituting or relating or referring to or reporting any application or proposed application by any person or entity for, and/or the award to any person or entity of, rights to explore in the Timor Sea by the Australian Government from and including 1970. 4. All documents in any way relating or referring to or otherwise recording or reporting any drilling or testing or other exploration or development activity carried out by either of the First or Second Applicants in the Timor Sea in the period 1973 to 1975 inclusive and including, without limitation, all documents identifying or recording or relating or referring to or reporting where such activity occurred, how it was conducted, and the results of such activity. 5. All documents comprising or in any way noting or referring to or concerning the Confidential Information of the Applicants referred to in the Statement of Claim. 6. All documents in any way referring or relating to or reporting any exploration or testing or drilling or development activity carried on by any of the Third, Fourth or Fifth Respondents in the Timor Sea at any time since the entry into any of the Production Sharing Contracts referred to in the Statement of Claim. 7. All documents constituting or relating or referring to any communications between either of the Applicants (or any agent of the Applicants) and the Government of Portugal or any of its agencies or departments (or any official or employee or agent of the Government of Portugal or any of its agencies or departments) relating to or concerning the Concession Agreement referred to in the Statement of Claim or its performance or anything done or proposed or reported to be done or proposedin relation to it at any timesince its initial grant to the Applicants or either of them. 8. All documents relating to or concerning any legal rights which the Applicants may have in relation to any of the claims or their subject-matter raised in the Statement of Claim, brought into existence at any time since January 1989 to the present time." CONCLUSION ON MOTION TO SET ASIDE THE NOTICE TO PRODUCE 26 As I followed the arguments of the parties, it is accepted by both sides, correctly, that in the resolution of the motion, the test to be applied is whether the particular requirements of the notice to produce serve a legitimate forensic purpose. In applying this test, it will be convenient to consider each of its paragraphs in turn, as follows: "1. All documents relating to the constitution and registration as a company or legal entity of the first applicant including, without limitation, all documents relating to or recording the shareholding or ownership of the first applicant from its establishment to the present time." 27 In my view, no need for immediate production of these documents has been demonstrated. On the contrary, it is reasonable to expect that Petrotimor will, upon receipt of an appropriate request from Phillips, formal or informal, admit the material facts. If appropriate admissions are not forthcoming (and the Court expects generally, that facts not seriously in dispute need not be proved), any truly contentious aspect of the issue may be reviewed at a directions hearing. In my view, par 1 is an inappropriate mechanism to invoke, at least at this initial stage. "2. All documents constituting or relating or referring to or reporting any application or proposed application by any person or entity for, and/or the award to any person or entity of, Production Sharing Contracts by the Joint Authority from and including 1989 and including all such documents which in any way relate or refer to the application for, and/or the award of, the contracts referred to in the Statement of Claim to any of the Third to Fifth Respondents, or of any such contracts now held by any of the Third to Fifth Respondents." 28 One can only assume that Phillips already holds, or is aware of, these documents. Obviously, the Commonwealth and the Joint Authority are in the same position. As a model litigant, the Commonwealth may be expected to produce the relevant documents upon request, formal or informal. Presumably, the requirement to produce these documents is aimed at establishing Petrotimor's knowledge of these matters at a particular point of time. The comments made in respect of the inappropriateness of par 1, above, at this early stage, are equally applicable here. "3. All documents constituting or relating or referring to or reporting any application or proposed application by any person or entity for, and/or the award to any person or entity of, rights to explore in the Timor Sea by the Australian Government from and including 1970. 29 In my opinion, the position here cannot, in principle, be distinguished from par 2, above. "4. All documents in any way relating or referring to or otherwise recording or reporting any drilling or testing or other exploration or development activity carried out by either of the First or Second Applicants in the Timor Sea in the period 1973 to 1975 inclusive and including, without limitation, all documents identifying or recording or relating or referring to or reporting where such activity occurred, how it was conducted, and the results of such activity." 30 This paragraph is generally expressed. Presumably, it seeks to identify further the CBI, previously the subject of the request for further particulars of par 14 of the Statement of Claim, mentioned above. Presumably, the documents described in this part of the notice to produce would be liable, subject to any special order otherwise, to be discovered under a general order for discovery. However, as Practice Note No. 14 explains, the modern practice of the Court is not to order general discovery, but rather to mould discovery to suit the instant circumstances, and to inquire whether the purposes sought to be achieved by discovery may be accomplished by another, less expensive means. The Practice Note is, of course, primarily directed to the forensic context of a final hearing. Where, as here, the context is a collateral, interlocutory issue (viz, a strike out application), the need to consider less expensive alternatives hardly requires emphasis. Clearly, as potentially complex litigation, the principal proceedings will call for intensive Court supervision, particularly in the discovery process. Yet par 4 seeks to proceed unfettered by any such supervision. In my view, it would be premature to allow that requirement to be made at this stage. It should only be made when all other reasonably available avenues have been exhausted. If necessary, I would give appropriate directions in this connection (at a specially convened directions hearing) in lieu of par 4, which, in my view, is not needed at this stage. "5. All documents comprising or in any way noting or referring to or concerning the Confidential Information of the Applicants referred to in the Statement of Claim." 31 In my view, the position here cannot be distinguished from par 4, above. Liberty to apply will be reserved, and this would include a specially convened directions hearing, as mentioned. If sought, I could list such a hearing in the last week of January or the first week of February. "6. All documents in any way referring or relating to or reporting any exploration or testing or drilling or development activity carried on by any of the Third, Fourth or Fifth Respondents in the Timor Sea at any time since the entry into any of the Production Sharing Contracts referred to in the Statement of Claim." 32 In my opinion, the above comments on the requirements of par 2 are equally apposite here. "7. All documents constituting or relating or referring to any communications between either of the Applicants (or any agent of the Applicants) and the Government of Portugal or any of its agencies or departments (or any official or employee or agent of the Government of Portugal or any of its agencies or departments) relating to or concerning the Concession Agreement referred to in the Statement of Claim or its performance or anything done or proposed or reported to be done or proposedin relation to it at any timesince its initial grant to the Applicants or either of them." 33 Again, this paragraph seeks to obtain the benefit of a general order for discovery, something not appropriate at any stage, let alone at this stage. If it is in aid of the act of state argument, it is reasonable to expect that the relevant facts will be agreed. Even specific discovery should be invoked as a last resort. Here also, if necessary, I will hold a special directions hearing. So far as the justiciability issue raises a question of law, it requires separate management (see below). "8. All documents relating to or concerning any legal rights which the Applicants may have in relation to any of the claims or their subject-matter raised in the Statement of Claim, brought into existence at any time since January 1989 to the present time." 34 In my view, although questions of legal professional privilege may also arise, the comments made above in respect of the notice in the context of par 2 are equally applicable. In short, the paragraph is premature and may indeed ultimately be unnecessary. However, as in the other areas of the requirements of the notice to produce, the Court expects the parties, and the representatives, to focus upon what relevant facts are seriously in dispute . Given the high level of professional representation in this matter, the Court expects that its own involvement in that exercise should be minimalist. ORDERS ON MOTION 35 In these circumstances, it is, I think, not appropriate to set aside the notice to produce at this stage, but rather, pursuant to the power conferred by O 33 r 12(1), to defer the call on the notice at this point. I will therefore order that, until further order, the applicants are not required to produce the documents called for in the notice to produce. The notice of motion is stood over generally, with liberty to restore on three days' notice. Liberty to any party to apply is reserved. Because the Court expects that the parties' representative will confer immediately upon the scope of any seriously disputed factual matters, no formal direction to confer will be given now, but I will give such a direction if sought. COSTS 36 In the event, neither side being wholly successful, there should be no order for the costs of the motion to date. DIRECTION ON MANAGEMENT OF THE JUSTICIABILITY ISSUE 37 Further, consideration ought to be given by the parties now with respect to the management of the issue of justiciability raised by Phillips. As mentioned in the course of argument, insofar as this appears to raise a pure and important question of public law, it may be appropriate that a direction be given under s 20(1A) of the Federal Court Act. I direct that the parties file and serve written submissions on or before 4 February 2002 on the question whether such a direction should be given. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont. Associate: Dated: 21 January 2002 Counsel for the Applicants: Mr G C Lindsay SC with Mr C Ward and Mr J Kennett Solicitor for the Applicants: Deakins Counsel for the First Respondent: Ms J Pownall Solicitors for First Respondent: Australian Government Solicitor Counsel for the Third, Fourth & Fifth Respondents: Dr A S Bell Solicitors for the Third, Fourth & Fifth Respondents: Freehills Date of Hearing: 16 January 2002 Date of Judgment: 21 January 2002