Coal Management Operations & Processing Pty Limited v Resource Pacific Limited

[2009] NSWSC 796

CITATION:	Coal Management Operations & Processing Pty Limited v Resource Pacific Limited [2009] NSWSC 796
HEARING DATE(S):	31 July 2009
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	31 July 2009
CATCHWORDS:	EVIDENCE – Expert evidence – Single experts
CATEGORY:	Procedural and other rulings
CASES CITED:	Daniels v Walker [2000] 1 WLR 1382 Wu v Statewide Developments Pty Ltd [2009] NSWSC 587
PARTIES:	Coal Management Operations & Processing Pty Ltd (plaintiff) Resource Pacific Ltd (defendant) First Cross-Claim: Resource Pacific Ltd (cross-claimant) Paul John Jury (XD1) David Hughes (XD2) Carol Esther Holley (XD3) Geoffrey Toby Rose (XD4) Coal Management Operations & Processing Pty Ltd (XD5) Second Cross-Claim: Paul John Jury (cross-claimant) Resource Pacific Ltd (XD1)
FILE NUMBER(S):	SC 50051/08
COUNSEL:	Mr BJ Burke (plaintiff/XD5) Mr MR Elliot (defendant/XC1) Ms KH Barrett (XD1-4)
SOLICITORS:	O'Hearn & Bilinsky Lawyers (plaintiff/XD5) Mallesons Stephen Jaques (defendant/XC1) Clayton Utz (XD1-4)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BRERETON J

Friday 31 July 2009

50051/08 Coal Management Operations and Processing Pty Limited v Resource Pacific Limited

JUDGMENT (ex tempore)

1 HIS HONOUR: On 22 May 2009, I made directions in the following terms:

Direct that by 17 July 2009 the cross-claimant may serve:

(a) a report of an expert with expertise in coal preparation processes, being a report as to what that expert would have advised had he or she been requested to provide an independent expert report to the Board of Resource Pacific Limited in or about December 2007 in connection with the “process improvement” proposed by the plaintiff at the Newpac Colliery;

(b) the report of an expert with expertise in management in the coal mining industry as to whether there was any and if so what standard practice or practices in that industry as to the due diligence inquiries, procedures, and processes undertaken by reasonably prudent directors of coal mining companies:
(i) in or about December 2006, in connection with transactions such as the Operating Contract the subject of these proceedings; and
(ii) in or about December 2007, in connection with transactions such as the Process Improvement Agreement and the Termination Agreement the subject of these proceedings.

2 Pursuant to those directions, the defendant has served two expert reports – one of David Porteus, a person with expertise in the processing of coal at a coalmine, and the other of Gordon Galt, a person with experience in the management of coal mining enterprises. No particular difficulty arises so far as concerns the report of Mr Porteus.

3 Mr Galt’s report addresses itself to questions which he states in paragraph 1.3 of that report, as follows:

My instructions are to provide an expert report in relation to:

(a) what, if any, due diligence, inquiries, procedures and processes would reasonably prudent directors (both executive and non-executive) of coal mining companies follow in deciding whether or not to enter into an operating agreement with CMOP in each of February 2004 (“2004 Operating Contract”) and December 2006 (“2006 Operating Contract”), and, if so, on what terms?

(b) what, if any, due diligence, inquiries, procedures and processes would reasonably prudent directors (both executive and non-executive) of coal mining companies in late 2007 and early 2007 in deciding whether or not to enter into the agreements described as the Termination Agreement (“Termination Agreement”) and the Process Improvement Agreement (“Process Improvement Agreement”), and, if so, on what terms?

4 Those questions were, as he says, taken from the letter of instructions which he received from the defendant’s solicitors. Regrettably, those questions do not precisely reflect the form of the questions, which was settled with some care, following submissions from both parties, after the previous hearing.

5 In his report, Mr Galt, after setting out some general matters, expresses opinions as to the processes or procedures which reasonably prudent directors of coal mining companies followed, in the ordinary course, in 2004 and at other relevant dates: see, for example, paragraphs 6.5, 6.9, 6.13, 6.17, 6.18, 7.4, 8.3, 8.4, 8.5, 8.6 and, in particular, 8.7 – which, in terms, refers to, “the standard practice of directors of coal mining companies in 2007”. These instances are not exclusive.

6 Elsewhere, it is true, Mr Galt lapses into expressions of opinion as to what, “a reasonably prudent ... director would have done”: see, for example, paragraphs 6.12, 6.14, 6.16, 7.6, 7.7. Again, these examples are not intended to be exclusive. It is, however, unlikely that Mr Galt intended something different when he wrote of what reasonably prudent directors would have done, as distinct from what reasonably prudent directors did, save that he appears to use the conditional sense, “would have”, largely in the context of applying the more general statements of practice to the particular assumptions pertaining to the case in question.

7 Although it is, to say the least, unfortunate that the questions directed to Mr Galt were not in the terms which were settled by the Court, I think his report sufficiently identifies practices of reasonably prudent directors of coal mining companies to show that such evidence may be of assistance, and even importance, in resolving issues likely to arise in this case, and that the exercise of exploring expert opinion ought not be terminated, at least at this stage. As I have indicated in Wu v Statewide Developments Pty Ltd [2009] NSWSC 587, [11], [17] – largely, by reference to what was said by Lord Woolf in Daniels v Walker [2000] 1 WLR 1382 – consideration and determination of what expert evidence will, ultimately, be permitted at the hearing, particularly in the context of a large and complex case (and having regard to the many millions of dollars in issue here, this is plainly such a case), is an ongoing process. Sometimes, it will involve obtaining a single expert’s report merely as a first step, and then permitting parties to obtain reports from their own separate experts.

8 In this case, the course adopted was, first, to permit the defendants/cross-claimants to obtain reports, having endeavoured to refine the issues to which those reports should be directed. In my view, the appropriate course now is to permit the other parties, if they so wish, to obtain and serve the relevant reports. It is likely that it will then be appropriate to require the experts to confer, to the extent of any difference between them, with a view to producing a joint report as to matters agreed and matters disagreed between them. Once that is done, it will be able to be seen just what expert evidence ought to be permitted to be adduced at the hearing.

9 I adjourn the proceedings generally for further directions on 1 September 2009 at 9.30 am, before me. On that occasion, as well as the application for leave to amend the defence and cross-claim, it will be necessary to consider what directions should be made in respect of the service of the plaintiff’s lay evidence in reply and the plaintiff’s expert evidence, and also, the lay and expert evidence of the cross-defendants.

10 As the matter is to be adjourned to that time in any event, I do not think any prejudice could be occasioned to any party by extending time for service of the defendant’s lay evidence – it having been indicated that it is proposed to serve two further affidavits – to 14 August 2009.

11 I extend time for service of the defendant’s lay evidence to 14 August 2009.

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