FEDERAL COURT OF AUSTRALIA Oswal v Apache Corporation (No 3) [2014] FCA 835 Citation: Oswal v Apache Corporation (No 3) [2014] FCA 835 Parties: PANKAJ OSWAL v APACHE CORPORATION File number: WAD 389 of 2013 Judge: GILMOUR J Date of judgment: 8 August 2014 Catchwords: PRACTICE AND PROCEDURE – application for leave to amend defence – r 16.53 of the Federal Court Rules 2011 (Cth) – principles relevant to grant of leave – leave to amend granted Legislation: Trade Practices Act 1974 (Cth) ss 51A, 52, 82 Federal Court Rules 2011 (Cth) r 16.53 Federal Court of Australia Act 1976 (Cth) s 37M Cases cited: Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82 I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109 Pascoe v Boensch [2009] FCA 1240 S.P.I. Spirits (Cyprus) Ltd v Diageo Australia Ltd (No 4) [2007] FCA 1035 Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15 University of Sydney v ResMed Limited (No 5) [2012] FCA 232 Date of hearing: 4 August 2014 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 28 Counsel for the Applicant: Mr DA McLure Solicitor for the Applicant: Kennedys Counsel for the Respondent: Mr SK Dharmananda SC with Mr J Garas Solicitor for the Respondent: Clyde & Co IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 389 of 2013 BETWEEN: PANKAJ OSWAL Applicant AND: APACHE CORPORATION Respondent JUDGE: GILMOUR J DATE OF ORDER: 8 AUGust 2014 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The respondent is granted leave to amend its defence in terms of the respondent's minute of proposed amended defence dated 4 March 2014. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 389 of 2013 BETWEEN: PANKAJ OSWAL Applicant AND: APACHE CORPORATION Respondent JUDGE: GILMOUR J DATE: 8 AUGust 2014 PLACE: PERTH REASONS FOR JUDGMENT 1 The respondent, Apache Corporation (Apache), applies for leave to amend its defence. 2 Apache relies on the affidavit of Ms Jennifer Anne Thornton sworn 22 July 2014. Relevant rules and principles 3 As pleadings have closed, the respondent requires leave to amend its defence: r 16.53 of the Federal Court Rules 2011 (Cth). 4 The Court has a broad discretion to grant leave to amend. However, the discretion is to be exercised with regard to the overarching purpose set out in s 37M of the Federal Court of Australia Act 1976 (Cth) (FCA), namely that proceedings are resolved justly, according to law and as quickly, inexpensively and efficiently as possible: University of Sydney v ResMed Limited (No 5) [2012] FCA 232 at [14]. 5 The principles generally applicable concerning applications for leave to amend are well established and include as the starting point that all amendments should be made and allowed that are necessary to ensure the real questions in controversy between the parties are decided: see, eg S.P.I. Spirits (Cyprus) Ltd v Diageo Australia Ltd (No 4) [2007] FCA 1035 at [14]-[18]. 6 If a proposed amendment is directed at tidying up a pleading to ensure that the issues are clearly defined and well understood, a stronger case for allowing amendment will exist than one which seeks to raise a new case or a new defence: Pascoe v Boensch [2009] FCA 1240 at [79]. 7 The Court does not, in the current era, take an unduly technical or restrictive approach to pleadings. In Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15, the Full Court (Greenwood, McKerracher and Reeves JJ) said (at [13]): It is well-established that the main purposes of pleadings are to give notice to the other party of the case it has to meet, to avoid surprise to that party, to define the issues at trial, to thereby allow only relevant evidence to be admitted at trial and for the trial to be conducted efficiently within permissible bounds… However, it is also well-established that pleadings are not an end in themselves, instead they are a means to the ultimate attainment of justice between the parties to litigation... For these reasons, the courts do not, at least in the current era, take an unduly technical or restrictive approach to pleadings such that, among other things, a party is strictly bound to the literal meaning of the case it has pleaded. The introduction of case management has, in part, been responsible for this change in approach: see the observations of Martin CJ in Barclay Mowlem Construction Limited v Dampier Port Authority (2006) 33 WAR 82 (at [4]-[8]). Even before the widespread use of case management, the High Court reflected this approach in decisions such as Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 (at 668-669) per Stephen, Mason and Jacobs JJ and Water Board v Maustakas (1988) 180 CLR 491 (at 497) per Mason CJ and Wilson, Brennan and Dawson JJ. 8 The observations of Martin CJ in Barclay Mowlem Construction Ltd v Dampier Port Authority (2006) 33 WAR 82 at [4]-[8] endorsed by the Full Court in the above passage are apposite to the present application. The Chief Justice said (at [4]-[8]): [4] …The purposes of pleadings are, I think, well known and include the definition of the issues to be determined in the case and enabling assessment of whether they give rise to an arguable cause of action or defence as the case may be, and apprising the other parties to the proceedings of the case that they have to meet. [5] In my view, the contemporary role of pleadings has to be viewed in the context of contemporary case management techniques and pre-trial directions. In this Court, those pre-trial directions will almost invariably include; first, a direction for the preparation of a trial bundle identifying the documents that are to be adduced in evidence in the course of the trial; second, the exchange well prior to trial of non-expert witness statements so that non-expert witnesses will customarily give their evidence-in-chief only by the adoption of that written statement; third, the exchange of expert reports well in advance of trial and a direction that those experts confer prior to trial; fourth, the exchange of chronologies; and fifth, the exchange of written submissions. [6] Those processes leave very little opportunity for surprise or ambush at trial and, it is my view, that pleadings today can be approached in that context and therefore in a rather more robust manner, than was historically the case; confident in the knowledge that other systems of pre-trial case management will exist and be implemented to aid in defining the issues and apprising the parties to the proceedings of the case that has to be met. [7] In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met, the court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment. [8] Most pleadings in complex cases, and this is a complex case, can be criticised from the perspective of technical pleading rules that evolved in a very different case management environment. In my view, the advent of contemporary case management techniques and the pre-trial directions, to which I have referred, should result in the court adopting an approach to pleading disputes to the effect that only where the criticisms of a pleading significantly impact upon the proper preparation of the case and its presentation at trial should those criticisms be seriously entertained. Proposed amendments 9 The only proposed amendments now in issue concern those in paras [14(b)(iii)] and [35]-[37] of the defence. Paragraph 14(b)(iii) 10 Paragraph [14] of the defence is responsive to the allegation that the applicant, Oswal, suffered loss and damage by Apache's alleged contravening conduct. 11 The applicant submits that the proposed amendment to para [14(b)(iii)] does not have reasonable prospects of success, or at least is ambiguous and embarrassing. 12 The pleading context is that the applicant alleges that: (a) On or about 21 February 2001, Apache made certain representations: statement of claim (SOC) [7]; (b) The representations were with respect to future matters within the meaning of s 51A of the Trade Practices Act 1974 (Cth) (TPA) and Apache did not have reasonable grounds for making them: SOC [9]; (c) Alternatively, the representations were misleading or deceptive in contravention of s 52 of the TPA: SOC [10]-[13]; (d) The applicant relied on the representations and, inter alia, entered into the "Cost Overruns Agreement", pursuant to which money was paid: SOC [8.2]; (e) The applicant suffered loss, including the amounts paid under the Cost Overruns Agreement: SOC [14]. 13 Apache wishes to defend the allegation of loss in para [14] of the statement of claim by alleging at para [14(b)(iii)] of the proposed amended defence that: if Oswal made cost overrun payments as alleged (which is denied), he made those payments under his mistaken belief that he had an oral agreement with BFPL in terms of the alleged Cost Overruns Agreement and if Oswal suffered any losses in relation to construction cost overruns for the plant (which is denied), those losses were caused solely by Oswal's mistaken belief as to the existence of the alleged Cost Overruns Agreement and Oswal's subsequent actions in making those cost overrun payments. 14 As the applicant has identified the issue sought to be raised by para [14(b)(iii)] of the proposed amended defence will be capable of affecting the applicant's entitlement to relief only if the Court finds that Apache engaged in misleading or deceptive conduct by making representations about its ability to perform under the gas supply agreement (SOC [7]). Paragraph [14(b)(iii)] is concerned only with the causal link required for an award of damages under s 82 of the TPA. 15 The applicant submits that if he succeeds in establishing his allegations of misleading or deceptive conduct and in due course relevant reliance, qualified by a finding in the terms alleged at para [14(b)(iii)] of the proposed amended defence, that this will not be capable of depriving the representations of their causative effect. The applicant submits that, at best, a finding in terms of para [14(b)(iii)] would mean that in reliance upon the representations the applicant made payments to Burrup Fertilisers Pty Ltd (BFPL) in the mistaken belief that BFPL would have a liability to repay them. BFPL is now known as Yara Pilbara Fertilisers Pty Ltd. However, I will continue to use its former name as that is how it is identified in the pleadings to which I have been referred. 16 This submission proceeds from the legal proposition that in order to recover damages under s 82 of the TPA for contravention of s 52, the offending conduct need not be the only cause of the applicant's loss: see I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109 at [25], [31], [56]-[57]. 17 However, this is not to the point. The proposed amendment relevantly pleads that if the applicant suffered any losses then they were "solely" caused by the applicant in making payments pursuant to his mistaken belief as to the existence of the alleged Cost Overruns Agreement. 18 The pleading of this positive defence by Apache seems curious at first blush, until it is appreciated that it has its foundation in what was ultimately pleaded by the applicant in his defence to the claim against him by BFPL (WAD 66 of 2011). There he alleges at [69(b)(iii) and (bb)(iii)], under the rubric of "set-off", that, relevantly, he has a set-off, against any entitlement to relief against him by BFPL, in the amount of US$491 million, alternatively US$343 million respectively, provided by him under a mistake of fact or law as to the existence of a valid and binding contract, namely the Cost Overruns Agreement. This defensive plea is repeated as part of his cross-claim in that proceeding: [71(b)(iii) and (bb)(iii)]. 19 Thus the proposed amendment raises an issue of fact: did the misrepresentations, assuming they were made and were misleading, have any causative effect in relation to the applicant's alleged losses. 20 As to this the applicant submits that it would be fanciful to conclude that such misrepresentations would not have had some causative effect. I do not accept this submission, particularly at the very general level it is posited. It is certainly arguable that it was the applicant's mistake of fact or law (if that be established) as to the existence of a valid and binding Cost Overruns Agreement which was the sole cause of his alleged losses. It is a question of disputed fact. 21 I would grant leave to amend para [14(b)(iii)] in terms of the respondent's minute. Paragraphs 35 to 37 22 The applicant submits that the proposed amendments to paras [35]-[37] do not have reasonable prospects of success, do not disclose proper defences, or at least are ambiguous and embarrassing. 23 The proposed paras [35]-[37] to the defence are as follows: 35 Oswal has not suffered any losses attributable to Apache because, if the Court finds that Oswal's Assumed Cost Overruns Agreement in fact subsists and is enforceable (which is denied), he should seek to recover any and all payments he made in respect of cost overruns from BFPL (which continues to trade) under the cost overruns agreement as found by the Court. 36 In the alternative to paragraph 35, Oswal has not suffered any losses attributable to Apache because Oswal's Assumed Cost Overruns Agreement was not validly made with BFPL, or alternatively is unenforceable, such that Oswal cannot recoup any cost overrun payments that he made: (a) solely because of the improper circumstances surrounding the making of that agreement, in furtherance of the Project Finance Deception; and (b) as such, Oswal's conduct relating to the Project Finance Deception is the true cause of any such losses, or is otherwise a supervening event breaking any causal connection between Apache's alleged conduct and Oswal's alleged losses. 37 In the alternative to paragraphs 35 and 36, Oswal has not suffered any losses attributable to Apache because, irrespective of whether or not Oswal's Assumed Cost Overruns Agreement was validly made or is enforceable, Oswal cannot prove Oswal's Assumed Cost Overruns Agreement and cannot recoup any cost overrun payments that he made: (a) solely because of the improper circumstances surrounding the making of that agreement, in furtherance of the Project Finance Deception, particularly the active concealment of the making and existence of Oswal's Assumed Cost Overruns Agreement; and (b) as such, Oswal's conduct relating to the Project Finance Deception is the true cause of any such losses, or is otherwise a supervening event breaking any causal connection between Apache's alleged conduct and Oswal's alleged losses. Paragraph 35 24 Paragraph [35] of the proposed defence alleges that if the Cost Overruns Agreement is enforceable, the applicant has not suffered any loss attributable to Apache because "he should seek to recover any and all payments he made in respect of cost overruns from BFPL". The applicant submits that Apache's preference that the applicant sue someone else for his loss is not a defence to a claim for damages under s 82 of the TPA. As Apache submits this is to misunderstand its proposed pleading. It requires to be read and understood with proposed para [14(b)(iii)] which amendment I have permitted. That is to say that it is a pleading, in effect, directed at causation stating that the applicant "has not suffered any losses attributable to Apache…". Apache pleads, in effect, a break in the chain of causation. Paragraph 36 25 The applicant submits that the misconceived legal premise of the proposed amendment to para [36] is that Apache's liability to the applicant for damages for misleading or deceptive conduct depends on the applicant being able to recoup cost overrun payments from BFPL. 26 The allegation in [36(a)] that the element of causation required by s 82 of the TPA does not exist because of the "improper circumstances surrounding the making of [the Cost Overruns Agreement]" requires to be read together with the allegations earlier made in the defence under the rubric of "The Project Finance Deception". The applicant's submission reveals a misunderstanding as to the effect of the proposed pleading. It concerns causation and that, in effect, there is no causal link whatsoever between the alleged misrepresentations, assuming them to have been made, and the losses allegedly suffered by the applicant. The expressions in [36(a) and (b)] "solely" and "the true cause" respectively are to be understood in this way. This raises a question of fact which Apache is entitled to advance. I will permit the amendment to para [36]. Paragraph 37 27 The applicant submits that proposed paras [37(a) and (b)] suffer from the same defects as paras [36(a) and (b)]. I reject that submission for the same reason as I did in respect to the proposed amendments to para [36]. I will permit the proposed amendments to para [37]. Conclusion 28 Apache will be granted leave to amend its defence in the terms of its minute of proposed amended defence. I will hear the parties on the question of costs. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. Associate: Dated: 8 August 2014