FEDERAL COURT OF AUSTRALIA Alstom Limited v Liberty Mutual Insurance Company [2010] FCA 588 Citation: Alstom Limited v Liberty Mutual Insurance Company [2010] FCA 588 Parties: ALSTOM LIMITED (ACN 000 038 237) v LIBERTY MUTUAL INSURANCE COMPANY (ARBN 086 083 605), ALLIANZ AUSTRALIA INSURANCE LIMITED (ACN 000 122 850), ACE INSURANCE LIMITED (ACN 001 642 020), CATLIN SYNDICATE LIMITED (ACN 108 319 786) and TOKIO MARINE EUROPE File number: WAD 300 of 2008 Judge: SIOPIS J Date of judgment: 11 June 2010 Catchwords: PRACTICE AND PROCEDURE – discovery – O 15 r 11 of the Federal Court Rules – whether document within the power of a party – third party claimed document was confidential. Legislation: Federal Court of Australia Act 1976 (Cth) s 37P Federal Court Rules O 15 r 11 Cases cited: Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627 Taylor v Santos Ltd (1998) 71 SASR 434 Sabre Corporation Pty Ltd v Russ Kalvin's Hair Care Company (1993) 46 FCR 428 Date of hearing: 22 April 2010 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 37 Counsel for the Plaintiff: Mr CG Colvin SC Solicitor for the Plaintiff: Cocks Macnish Counsel for the Defendants: Mr GR Hancy and Mr EM Davies Solicitor for the Defendants: Blackstone Waterhouse Lawyers IN THE FEDERAL COURT OF AUSTRALIA in admiralty WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 300 of 2008 BETWEEN: ALSTOM LIMITED (ACN 000 038 237) Plaintiff AND: LIBERTY MUTUAL INSURANCE COMPANY (ARBN 086 083 605) First Defendant ALLIANZ AUSTRALIA INSURANCE LIMITED (ACN 000 122 850) Second Defendant ACE INSURANCE LIMITED (ACN 001 642 020) Third Defendant CATLIN SYNDICATE LIMITED (ACN 108 319 786) Fourth Defendant TOKIO MARINE EUROPE Fifth Defendant JUDGE: SIOPIS J DATE OF ORDER: 11 June 2010 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The plaintiff: (a) request and do all such things that may reasonably be necessary to obtain from Crompton Greaves Limited a copy of the drawing No T63B3781Q referred to in the witness statement of Mr Manish; (b) inquire of Crompton Greaves Limited whether the reference to a "quality control check list", in the witness statement of Mr Manish, is a reference to a document, and if so, to request that Crompton Greaves Limited produce a copy of that document to the plaintiff. 2. Should the plaintiff obtain possession of the drawing, referred to in 1(a) and the quality control check list (if it is a document) in 1(b), the plaintiff is to give discovery of each of those documents within 7 days of obtaining such possession. 3. The plaintiff is to give further and better discovery of the following documents: (a) Documents which record the decision to install and the installation of 25 mm steel plates to the top locating posts of the repaired transformers; (b) Documents which record the decision to ship the repaired transformers without lignostone insulating material around the top locating posts to install that insulation material on site; and (c) Documents which record discussions between the plaintiff, CGL and Newgen Kwinana Partnership concerning the matters in para 3(a) and para 3(b) above. 4. The defendants' motion is otherwise dismissed. 5. There be no order as to costs. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA in admiralty WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 300 of 2008 BETWEEN: ALSTOM LIMITED (ACN 000 038 237) Plaintiff AND: LIBERTY MUTUAL INSURANCE COMPANY (ARBN 086 083 605) First Defendant ALLIANZ AUSTRALIA INSURANCE LIMITED (ACN 000 122 850) Second Defendant ACE INSURANCE LIMITED (ACN 001 642 020) Third Defendant CATLIN SYNDICATE LIMITED (ACN 108 319 786) Fourth Defendant TOKIO MARINE EUROPE Fifth Defendant JUDGE: SIOPIS J DATE: 11 june 2010 PLACE: PERTH REASONS FOR JUDGMENT 1 Alstom Limited, the plaintiff, purchased two gas turbine transformers from Crompton Greaves Limited (CGL) for use in the Kwinana Power Plant at the Kwinana Industrial Estate. CGL is a company which carries on business in Mumbai, India. The transformers were manufactured in Mumbai and were packed by CGL in sealed steel tanks for shipment to Western Australia. The transformers were shipped on 17 June 2007 on board the vessel "MV Fairload". The vessel arrived at Henderson, Western Australia on 8 July 2007 and the transformers were delivered to the Kwinana site on 15 July 2007. 2 During the commissioning the sealed steel cases housing the transformers were removed. It was then discovered that the transformers were damaged. 3 Thereafter, Alstom made a claim on its marine cargo insurance policy which it had entered into with the defendants, in respect of the damage to the transformers. Pursuant to that policy, the defendants agreed to indemnify Alstom in respect of any damage to the transformers during the voyage from India to Australia. However, the defendants refused to indemnify Alstom in respect of the damage to the transformers because the defendants contended that the damage to the transformers arose by reason of an inherent vice – an excluded risk under the policy. The defendants contended that the transformers had been packed in a defective manner which rendered the transformers liable to be damaged by the usual conditions encountered in sea transportation. 4 On 17 December 2008, Alstom commenced an application against the defendants in this Court seeking an order that the defendants indemnify it under the policy in respect of the damage to the transformers. 5 On 14 August 2009, the Court made orders that Alstom file written statements of evidence from witnesses on which it intended to rely. On 26 August 2009, Alstom filed a statement from Mr Manish, Mr S Mitra and Mr Nitin Naik, each of whom is an employee of CGL. The evidence shows that CGL was prepared to give only limited cooperation to Alstom, and required that Alstom's solicitors forward to CGL in writing the questions which Alstom wished their relevant employees to answer. The witness statements, therefore, comprised a question and answer format. 6 On the same day, Alstom also filed a witness statement from Mr KR Krishnan, who is an employee of Tata Projects Ltd, a company engaged by Alstom to carry out pre‑delivery inspections of the transformers on behalf of Alstom. 7 All four of these persons are resident in India. The witness statements referred to one or more documents and expressed conclusions founded on those documents. However, the witnesses did not attach to their statements all the documents to which they referred. It is this circumstance which has given rise to the defendants' application currently before the Court. 8 On 19 January 2010, the defendants filed a notice of motion which is supported by two affidavits sworn by Mr Malcolm Davies on 23 December 2009 and 8 April 2010 respectively. That notice of motion was subsequently amended. 9 At the hearing, the defendants did not, in light of subsequent dealings between the parties, pursue all the orders sought in the amended notice of motion. As a consequence, there were three kinds of orders sought at the hearing. 10 First, the defendants sought orders that Alstom produce certain documents which were referred to in the statements of Mr Manish and Mr Naik, two of the persons referred to above. 11 Secondly, the defendants sought further and better discovery of other identified documents. 12 Thirdly, the defendants sought orders that Alstom not be permitted to lead evidence from either or both of Mr Manish and Mr Naik in the absence of the production of the documents sought in the first category of orders. CLAIM FOR PRODUCTION OF DOCUMENTS 13 The defendants sought orders that Alstom produce for inspection the following categories of documents: 1(b) The following documents identified in the statement of Mr Manish dated 23 July 2009: (i) Documents for the design, manufacture and preparation for transport of the transformers manufactured by Crompton Greaves Ltd (CGL); (ii) Standard design drawing T63B3781Q; (iii) Quality Control check list. … 1(d) The following documents identified in the statement of Nitik Naik dated 23 July 2009 – CGL documents for the design, manufacture and preparation for transport of the transformers manufactured by CGL. 14 The defendants say that they are entitled to an order under O 15 r 11(1) of the Federal Court Rules (the Rules). Order 15 r 11(1) reads as follows: Where – (a) it appears from a list of documents filed by a party under this Order that any document is in his possession, custody or power; (b) a pleading or affidavit filed by a party refers to any document; or (c) it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that any document relating to any matter in question in the proceeding is in the possession, custody or power of a party, the Court may, subject to any question of privilege which may arise, order the party - (d) to produce the document for inspection by any other party at a time and place specified in the order; or (e) to file and serve on any other party a copy of the whole or any part of the document, with or without an affidavit verifying the copy made by a person who has examined the document and the copy. 15 The defendants contended that by reason of cl 12.3 of the general terms and conditions of the contract between it and CGL, Alstom has a contractual right to have the documents produced to it. The defendants contended, therefore, that the documents are within the power of Alstom and it is on that basis that Alstom should be ordered to produce the documents. 16 Clause 12.3 provides as follows: The purchaser or the Owner, as the case may be, will take out a project specific Marine Cargo Insurance (MC) for the benefit of the Supplier (and its Subcontractors) covering the risk of damage and loss of the Work during transportation of the Work from the Supplier's and/or Subcontractor's facility to the named destination and/or the Site. … The Supplier shall strictly adhere and cause its Subcontractors to strictly adhere to the terms of the MC…and shall promptly make all information available required by the Insurer. 17 The "Supplier" referred to in cl 12.3 is CGL. It is contended by the defendants that cl 12.3 applies because they require inspection of the documents in this proceeding. 18 In the case of Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627 (Lonrho), Lord Diplock observed at 635: [T]he expression "power" must, in my view, mean a presently enforceable legal right to obtain from whoever actually holds the document inspection of it without the need to obtain the consent of anyone else. Provided that the right is presently enforceable, the fact that for physical reasons it may not be possible for the person entitled to it to obtain immediate inspection would not prevent the document from being within his power; but in the absence of a presently enforceable right there is, in my view, nothing in O 24 to compel a party to a cause or matter to take steps that will enable him to acquire one in the future. 19 In the case of Taylor v Santos Ltd (1998) 71 SASR 434 at 438 (Taylor), Doyle CJ observed: But, in my opinion, the obligation to discover hinges upon having a right or actual and immediate ability to examine the document. A person does not have that right or actual immediate ability if the person is able to inspect the document only if a third person, who has control of the document, agrees to permit inspection, or agrees to refrain from so exercising that person's control as to prevent inspection. 20 The evidence shows that each of Mr Manish and Mr Naik have in the course of answering the questions posed, refused to disclose the documents falling within para 1(b)(i) and para 1(d) of the amended notice of motion (the design documents) (see [13] above), on the basis that the documents were confidential business documents. 21 It is unnecessary to rule on whether, on its proper construction, cl 12.3 of the terms and conditions applies to documents sought by the insurers in defence of a claim made by Alstom as opposed to a claim made by CGL on an insurance policy taken out for the benefit of CGL. This is because, in my view, even if the clause did apply to that class of documents, it is far from clear that cl 12.3 requires CGL to disclose its confidential documents to the insurer. 22 Further, by reason of the claim to confidentiality made by CGL, Alstom is not being prevented from inspecting documents, which it would otherwise unquestionably be entitled to inspect, solely because the documents are not in Alstom's physical possession. Rather it is because CGL is claiming a legal entitlement not to disclose the documents. In those circumstances, Alstom does not have, in terms of Lord Diplock's definition in Lonrho, a "presently enforceable legal right" to inspect the documents in question. Nor would Alstom have power over the documents under the definition of power adopted by Doyle CJ in Taylor. This is because CGL has not agreed to release its claims to the confidentiality in the documents and to permit Alstom to inspect the documents. 23 In my view, the defendants have not established that the documents sought are within the power of Alstom such as would permit Alstom to produce the documents if an order was made to that effect. 24 In those circumstances, the Court will not make an order for the production by Alstom of the documents in question. 25 However, the Court will make an order for the discovery of the drawing referred to in para 1(b)(ii) of the notice of motion on the basis that there is a real likelihood that the drawing would be produced by CGL to Alstom on Alstom's request (Sabre Corporation Pty Ltd v Russ Kalvin's Hair Care Company (1993) 46 FCR 428). This is because Mr Manish, who referred to this drawing in his witness statement, stated that the drawing may be disclosed in Court. 26 The position in relation to the "quality control check list", which is referred to in para 1(b)(iii) of the notice of motion, is not as clear. Mr Manish refers in his witness statement to a process occurring as "part of the quality check list". Whilst, it may well be that there is a physical document comprising a "quality control check list", it may be that Mr Manish is speaking metaphorically. I will order that Alstom clarify the position and request that CGL produce the "quality control check list", referred to by Mr Manish, if it, in fact, is a document. FURTHER AND BETTER DISCOVERY 27 The defendants also sought the orders that the plaintiff give discovery of the following documents: (a) Any records of inspections compiled by CGL or Moody International Ltd or their officers or employees which were provided to the Plaintiff in respect to their inspection of the transformers at Bangalore on 6 June 2007; (b) Any documents prepared by KR Krishnan in relation to his inspection of the transformers at Bangalore on 6 June 2007; (c) Documents which record the decision to install and the installation of 25mm steel plates to the top locating posts of the repaired transformers; (d) Documents which record the decision to ship the repaired transformers without lignostone insulating material around the top locating posts to install that insulation material on site; and (e) Documents which record discussions between [Alstom], CGL and Newgen Kwinana Partnership concerning the matters in paragraphs (c) and (d) above. 28 At the hearing, the defendants advised the Court that they were not pressing for orders for discovery of the documents referred to in para (b) above. Further, during the hearing the plaintiff advised the Court that it would give discovery of the documents, referred to in paras (c), (d) and (e) above. 29 As to the order sought in relation to the documents in para (a) above, the defendants relied upon a document annexed to the affidavit of Mr Davies sworn on 8 April 2010 for the contention that Alstom had failed to discover documents falling within that description. The document annexed to Mr Davies' affidavit is a pre-shipment inspection report prepared by a representative of Alstom who attended the inspection. The document records the name of the person from each of CGL and Moody International who also attended the pre-shipment inspection of the transformers. The defendants contended that Alstom has not discovered reports prepared by the employees of each of CGL and Moody International who attended the pre-shipment inspection. Mr Davies says in his affidavit that it is likely that those employees would have prepared such reports and provided them to Alstom. Mr Davies does not provide any foundation for this assertion. Mr Davies' evidence does not provide a sufficient basis to make the order sought. ORDERS PREVENTING MR MANISH AND MR NAIK FROM GIVING EVIDENCE 30 The next issue is whether the Court should make orders that Alstom not be permitted "to adduce oral or written evidence of any matter" in the witness statements of each of Mr Manish and Mr Naik, in the absence of compliance with the orders sought in para 1(b) and para 1(d) of the notice of motion, respectively. 31 In support of the application for these orders, the defendants contended that the impugned witness statements were replete with conclusory and highly generalised assertions. Further, it is said that it is unfair and oppressive for the witnesses to refer to documents and found conclusions on the documents when those documents have not been produced by the witnesses in their witness statements nor have they been produced or discovered by the defendants. It followed, contended the defendants, that in the absence of Alstom producing the documents sought by the defendants, Alstom should not be permitted to lead any evidence at the trial from Mr Manish and Mr Naik of the matters referred to in their respective witness statements. It was said that orders to that effect should be made now. 32 Further, it is contended that the Court has a wide power under s 37P of the Federal Court of Australia Act 1976 (Cth) to give directions about the practice and procedure to be followed in a proceeding and the power should be exercised in a way that best promotes the over-arching purpose of a just determination of the proceeding before the Court. 33 As previously mentioned, it is obvious that the witness statements contain statements which are objectionable as to form. This is because, as counsel for the defendants correctly observed, the documents are in the form of assertions and conclusions. Further, the witnesses purport to state conclusions by reference to the content of documents which are not produced. 34 Accordingly, the witness statements could not in their current form and without substantial modification, stand as evidence-in-chief of the witnesses at trial. Nor, could the witnesses give oral evidence in the form in which the witness statements are currently drawn because that oral evidence would be open to the same kind of objections. 35 Further, unless the defendants were able to inspect the records of CGL on which the evidence of these witnesses is founded in sufficient time for the defendants fairly to be able to prepare for the trial, the defendants may well be prejudiced at the trial. 36 In my view, it is not appropriate to make orders now precluding Mr Manish and Mr Naik from giving evidence in respect of the matters in their respective witness statements in the proceeding. The question of the objection to, and admissibility of, the proposed evidence of these two witnesses should be dealt with closer to trial. By then the position in relation to the availability of the documents for inspection by the defendants will be clearer. In this regard, I note that, whilst it is the case that there are special issues which attend an application for leave to issue a subpoena addressed to a party outside the jurisdiction, to date no attempt has been made by the defendants to subpoena the design documents from CGL. 37 I will hear the parties on costs. I certify that the preceding thirty‑seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate: Dated: 11 June 2010