Pacific National (ACT) Limited (ACN 48 052 134 362) v Queensland Rail (ABN 47 564 947 264) [2005] FCA 959 (11 July 2005)

Last Updated: 15 July 2005

FEDERAL COURT OF AUSTRALIA

Pacific National (ACT) Limited (ACN 48 052 134 362) v Queensland Rail (ABN 47 564 947 264) [2005] FCA 959

PRACTICE AND PROCEDURE – leave sought to amend defence and cross claim – whether responsive - whether open on the pleadings






























PACIFIC NATIONAL (ACT) LIMITED (ACN 48 052 134 362) V QUEENSLAND RAIL (ABN 47 564 947 264)

N 690 of 2003

JACOBSON J
11 JULY 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 690 of 2003

BETWEEN:	PACIFIC NATIONAL (ACT) LIMITED (ACN 48 052 134 362) APPLICANT/CROSS-RESPONDENT
AND:	QUEENSLAND RAIL (ABN 47 564 947 264) RESPONDENT/CROSS-CLAIMANT
JUDGE:	JACOBSON J
DATE OF ORDER:	11 JULY 2005
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.	Leave is granted to amend the Second Further Amended Defence and Cross Claim as contained in the Third Further Amended Defence and Cross Claim.

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 690 of 2003

BETWEEN:	PACIFIC NATIONAL (ACT) LIMITED (ACN 48 052 134 362) APPLICANT/CROSS-RESPONDENT
AND:	QUEENSLAND RAIL (ABN 47 564 947 264) RESPONDENT/CROSS-CLAIMANT

JUDGE:	JACOBSON J
DATE:	11 JULY 2005
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 Mr Kelly, counsel for the respondent, seeks leave to file a third further amended defence and cross claim. He did not concede that leave was necessary but he took this course because Mr Leopold, counsel for the applicant, submitted that a number of the paragraphs were not responsive to the fourth further amended statement of claim.

2 The third further amended statement of claim pleaded what was called "the capacity issue" in [73A] - [73D] ("the capacity claim"). Paragraph 73C pleaded that the current average utilisation of the Acacia Ridge terminal was 90 per cent, and particulars were given which included the statement that the total intermodal throughput for 2003 comprised approximately 218,000 twenty foot equivalent units ("TEUs") and 244,000 TEUs for 2004. The third further amended statement of claim pleaded in [73D] that the capacity of the Acacia Ridge terminal would be reduced if the terminal was operated as a multi-user facility by anyone other than Pacific National ("PN").

3 In the second further amended defence Queensland Rail ("QR") denied the allegations in [73C] and [73D] of the third further amended statement of claim. It said that the current management of the terminal was inefficient and it particularised in [70C] 11 reasons why this was so. The particulars included the claim that staff were underutilised during some shifts, that there was a lack of discipline exercised over the acceptance of pre-received containers and that storage of containers was limited to stacking one or two high when containers could have been stacked three high.

4 In its fourth further amended statement of claim PN has deleted [73A] – [73D]. It continues to plead the claim of operational detriment. In [62(c)], PN pleads that it will suffer substantial operational detriment to its integrated national systems when compared with the level of business and profits it would have if QR adheres to the assumptions pleaded in the statement of claim. In [68(c)], PN pleads that there will be operational detriment to its integrated national system if QR were itself to take over control and management with substantial loss of business to PN. There was a similar pleading in [70A(c)].

5 In its proposed third further amended defence, QR has of course deleted the paragraphs which responded to the capacity claim pleaded in [73A] - [73D]. However, QR now pleads in answer to the claim of operational detriment the facts and matters pleaded in answer to the capacity claim.

6 Previously, QR had merely denied the operational detriment claims pleaded in [62], [68] and [70A]. QR now proposes to plead in answer to [62] a denial that PN will suffer substantial operational detriment for a number of reasons. In its proposed [61(k)(iv)E], QR seeks to plead that since the middle of 2003 the Acacia Ridge terminal has not been operated at the limit of its capacity, such that there has been at all material times further capacity capable of being exploited at the terminal. In subparagraph F of that paragraph of the proposed defence, QR seeks to plead that during 2004 and 2005 the terminal was not run efficiently by PN so that more efficient management would increase the exploitation of available capacity and lessen the possibility of operational detriment being suffered by PN. The particulars of subparagraph F are identical with the particulars of "inefficiency", which I referred to at [3] above as contained in the second further amended defence.

7 Mr Leopold objects to these two paragraphs of the proposed pleading. He also objects to subparagraphs G to J but I will not set out the detail of those paragraphs.

8 The capacity issue was referred to in argument on 28 April 2005. I will record what Mr Kelly said at transcript page 1579 as follows:-

"MR KELLY: I should say, Your Honour, in terms of Mr Leopold rhetorically raising the question of where does this capacity evidence go to, if you look at paragraph 73A to D of the statement of claim, you will see it is the applicant who raises it squarely as an issue in the case. Then if you look at paragraph 79(c). These were amendments that the applicant introduced into their statement of claim. That is where the capacity issue is raised in the applicant's case.
....
If Mr Leopold's submission is, well, the only detriment they want to point to is that there is a cap in the offer of Mr Wilson and the applicant wishes to drop the capacity issue that it has pleaded, we are more than happy to accommodate that. We are meeting a case, in a sense, about capacity. We are saying it is quite wrong for the applicant to have alleged that the capacity was exhausted when they have incrementally and substantially used more capacity as they wished to over time."

9 There was correspondence between the parties which I should refer to briefly.

10 On 20 May 2005, PN's solicitors wrote to the solicitors for QR stating that as they were aware PN has pleaded that it would suffer substantial detriment to its integrated national systems and services if QR were to resume management and control of the Acacia Ridge terminal. The letter stated that the detriment fell into three broad categories. The third category stated was the detriment following from a lack of control and management of the operation of the Acacia Ridge terminal with the consequential loss of business.

11 The letter continued by stating that the applicant had sought to prove the last mentioned category of detriment by evidence, including the integration of the Acacia Ridge terminal into PN's national operations and the fact that the Acacia Ridge terminal was operating at or close to capacity based on its current configuration. The letter continued by stating that given concessions which were said to have been made by QR's witnesses as to the importance of control of the Acacia Ridge terminal, it seemed to PN's solicitors to be a matter which was no longer genuinely in dispute between the parties. Reference was made to evidence of Mr O'Rourke, Mr Wilson and Mr Scheuber. The evidence included a statement referred to on several occasions that Mr Scheuber said at page 1204 that control of the Acacia Ridge terminal was a huge advantage.

12 The solicitors continued by saying that given the evidence of those witnesses it seemed to them that PN had made out the requisite substantial detriment and that the issues identified in Issues 31 - 33 of the "Real Issues in Dispute" document were no longer in issue. Issues 31 - 33 are as follows:-

"31. To what extent is exclusive control by it of the Terminal significant to the Applicant’s commercial viability (paragraphs 15(ii) and 79(c) of the Third Further Amended Statement of Claim)?
32. What is the nature of the detriment, if any, the Applicant will suffer if it ceases to have exclusive control of the Terminal (Part D below)?
33. Is any such detriment substantial?"

13 The solicitors continued by saying that they were of the view that the only issue in dispute to which evidence as to the capacity of the Acacia Ridge terminal may be relevant was the treatment of the access applications made by QR and a related company as set out in the cross-claim. The solicitors said that they proposed to amend the statement of claim and the real issues document by, inter alia, deleting [73A] – [73D], that is the capacity claim, and also by deleting [31] to [33] of the Issues in Dispute document.

14 On 1 June 2005, QR's solicitors responded by stating that QR did not agree with the contention that PN has established the detriment that it claims would flow from a lack of control and management of the operation of the terminal, or that such a detriment would include a consequential loss of business for PN. The solicitors stated that QR has a different interpretation of the evidence from that which was summarised in the letter from PN's solicitors. They stated that it was a matter for PN if it now wished to abandon the allegations. They also said as to items 31 to 33 of the issues list, that QR did not agree that those matters were no longer genuinely in dispute.

15 PN's solicitors responded on 15 June 2005 stating, amongst other things, that they had thought that the issue of detriment flowing from the lack of control and management of the operation of the Acacia Ridge terminal was one that was no longer in dispute between the parties. They said, that, however, there had been no determination of any issue by the court and they noted that QR regarded the issue as one which would remain a dispute between the parties.

16 On 17 June 2005, the solicitors for QR wrote to PN's solicitors suggesting that the parties agree upon a statement in relation to the capacity evidence. The proposed agreed statement was as follows:-

"The applicant considers that evidence relating to capacity is no longer relevant to its claim. It considers that it has established on the evidence that a substantial operational detriment will flow to it from a lack of control and management of the operation of the terminal. The applicant proposes to amend its statement of claim to delete allegations formerly made in relation to the capacity of the terminal in paragraphs 73A to 73D (and related allegations). The applicant’s position is that that issue of capacity is only relevant to the respondent’s cross-claim. However, the applicant has decided not to call Mr Williams as a witness in relation to the issue of capacity. The applicant’s position is set out fully in the Clayton Utz fax to Allens Arthur Robinson of 20 May 2005.

The respondent’s position, as summarised in the Allens Arthur Robinson fax to Clayton Utz of 1 June 2005, is that capacity is an issue that remains relevant to its defence of the applicant’s claim and that it is also relevant to the respondent’s cross-claim. The respondent’s position is that that Court could not determine whether, as the applicant claims, there was a risk of substantial operational detriment to the applicant in the respondent having management and control of the terminal, without having evidence of the circumstances in which that changeover would take place. The respondent contends that a relevant circumstance must be the question of capacity of the terminal. It is the respondent’s case that there is substantial spare capacity at the terminal which makes it less likely that the applicant will suffer a substantial operational detriment should the respondent manage the terminal but continue to grant the applicant access to it in terms of the open offers made in Mr Wilson’s seventh affidavit. The respondent’s position is that the question of substantial operational detriment cannot be determined in a vacuum, uninformed by consideration of capacity of the terminal. Additionally, the respondent contends that one of the reasons for it giving the notice to quit was so that it could manage the terminal in a way so as to maximise its capacity and efficiency. The respondent also contends that the question of capacity of the terminal, particularly at the time at which the respondent made its requests for access to the terminal, is a relevant issue as reasons given by the applicant at the time for refusing access were ostensibly based upon a contention that there was not spare capacity. The respondent will rely upon the evidence of Mr Merrigan and Professor Ferreira in relation to capacity."

17 Mr Leopold put two substantial reasons for opposing leave to amend to add subparagraphs E - J of [61] of the third further amended defence. The first was that QR had not previously raised the inefficiency defence in answer to the claim for operational detriment. He submitted that the inefficiency defence as now pleaded was therefore a new case which was not previously put by QR. Second, he submitted that the inefficiency defence as now pleaded raised the question of whether QR would be a more efficient operator of the terminal than PN.

18 It is true that Mr Kelly said on 28 April 2005 that that inefficiency defence was merely responsive to the capacity issue raised by PN in its third further amended statement of claim, but it would have been open to QR on the pleadings to have raised this issue in answer to PN's claim of operational detriment. It seems to me that QR cannot be shut out from seeking to maintain that issue, notwithstanding PN's withdrawal of [73A] – [73D] of the pleading.

19 That withdrawal was a unilateral decision taken by PN after all of the lay evidence had closed and has to be considered in light of the correspondence between the parties to which I have referred. The correspondence indicates QR's position and notwithstanding the fact that PN did not accept the proposed agreed statement, I do not see that there is any irreparable prejudice to PN by permitting QR to maintain the inefficiency defence which was previously pleaded and which is now proposed to be included in the third further amended defence.

20 The question of whether QR would be a more efficient operator than PN was, it seems to me, also within the previous pleadings although it does not appear to have been identified expressly as an issue in the agreed issues document between the parties. Nevertheless, the evidence makes plain QR's intention to resume possession of the Acacia Ridge terminal and to run it as a multi-user facility. Its offer to grant access to PN, and in particular the draft terminal services agreement submitted to PN on or about 9 March 2005, were premised upon this.

21 It was implicit in QR's offer that it could provide the capacity stated up to the capped limit set out in the draft document. It would have been open to PN to raise with Mr Wilson in cross-examination, or indeed in its own case, the contention that QR would be unable to provide that capacity because the terminal was already operated at close to maximum capacity and QR could not improve on it. PN did not cross-examine Mr Wilson on [24] of his second affidavit.

22 That is not to say that PN is shut out from contending that QR has failed to establish the necessary ingredients of this part of the claim. However, I do not accept Mr Leopold's submission that PN is prejudiced by the amendment, nor do I accept his submission that the other proposed paragraphs, including subparagraph J of the proposed amendment, raise new grounds. What is pleaded, it seems to me, falls within the terms of the previous pleadings and the case as put to Mr Lawrence in cross-examination.

23 I will therefore permit, to the extent necessary for me to give leave, that leave be given to QR to file its third further amended defence substantially in the form of the draft document submitted to me on 8 July 2005.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Associate:
Date: 13 July 2005

Counsel for the Applicant:	Mr A Leopald
Solicitor for the Respondent:	Clayton Utz
Counsel for the Respondent:	Mr B O’Donnell QC with Mr L Kelly
Solicitor for the Respondent:	Allens Arthur Robinson
Date of Hearing:	11 July 2005
Date of Judgment:	11 July 2005