Abigroup Contractors Pty Ltd v Hardesty and Hanover International LLC (No 2) - [2008] SASC 272

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ABIGROUP CONTRACTORS PTY LTD v HARDESTY AND HANOVER INTERNATIONAL LLC (No 2)
[2008] SASC 272
Judgment of The Honourable Justice Gray
14 October 2008
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - PERFORMANCE OF WORK - REMEDIES FOR BREACH OF CONTRACT
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - RIGHT OF APPEAL - WHEN APPEAL LIES - FROM INTERLOCUTORY DECISIONS - LEAVE TO APPEAL
Application for permission to appeal to the Full Court, from a refusal of the Court to grant interlocutory relief - whether a point of principle arises - whether the interests of justice favour a grant of permission.
Held: permission to appeal not granted - application for permission referred to the Full Court pursuant to Rule 282(2) of the Supreme Court Civil Rules 2006 (SA).
Supreme Court Civil Rules 2006 (SA) r 282, referred to.
Abigroup Contractors Pty Ltd v Hardesty & Hanover International LLC [2008] SASC 244; Glenauchen Pty Ltd v Circuit Finance Pty Ltd [2001] SASC 61; State Bank (SA) v Hellaby (1992) 52 SASR 304; Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc. (1981) 148 CLR 170, considered.

ABIGROUP CONTRACTORS PTY LTD v HARDESTY AND HANOVER INTERNATIONAL LLC (No 2)
[2008] SASC 272
Civil
GRAY J

This is an application by the first defendant, Hardesty and Hanover International LLC (“HHI”), pursuant to Rule 282 of the Supreme Court Civil Rules 2006 (SA),[1] for permission to appeal to the Full Court, from a refusal of the Court to grant interlocutory relief.
[1]    Rule 282 provides:
(1) An application for permission to appeal is to be made to:
(a)the single Judge or Master against whose judgment the appellant seeks permission to appeal; or
(b)     the appellate Court.
(2)If an application is made under subrule (1)(a), the Court may only –
(a)     grant permission to appeal; or
(b)     refer the application for determination by the appellate Court.
(3)“Appellate Court” means the Court as it would be constituted to hear the appeal in the event that the permission to appeal is granted.
The history of the proceedings is set out in my reasons for judgment refusing interlocutory relief, delivered on 8 September 2008.[2] In those reasons I set out the background to the applications. It is convenient to repeat that background:
[2] Abigroup Contractors Pty Ltd v Hardesty & Hanover International LLC [2008] SASC 244.
The within proceedings arise out of the construction of a bridge, designed to allow for both ship and motor vehicle traffic. The bridge is to span the Port River at Port Adelaide in South Australia.
The construction of the bridge is a State Government project. The plaintiff, Abigroup Contractors Pty Ltd, is the head contractor. Abigroup engaged the first defendant, Hardesty & Hanover International LLC (“HHI”), an American engineering and consulting firm based in New York, to undertake the engineering design aspects of the bridge construction. It should be pointed out that the contract is ongoing, and that professional services are still being rendered by HHI. Apparently the bridge is nearing completion.
Abigroup is dissatisfied with the work of HHI, and instituted the within proceedings with respect to alleged deficiencies in the bridge design, and in particular an alleged failure of HHI to adequately allow for the need for ship impact protection. Abigroup contended, inter alia, that this failure of HHI led Abigroup to significantly under price its tender. Abigroup also complained that HHI, in the submission of claims under the design contract, have claimed for substantial amounts not properly due under the contract, and that these amounts should be repaid to Abigroup, or otherwise a proper account taken of them.
HHI have filed a defence to the claim, in which they deny any breach of contract or breach of duty. HHI have counterclaimed in respect of contractual rights to which they say they are entitled. The counterclaim seeks relief in respect to what are said to be monies due and owing pursuant to an expert determination. It is this latter aspect of the matter that gives rise to the immediate dispute between the parties, requiring, it is said, the urgent attention of this Court.
Alternative Dispute Resolution
In the course of the contract, HHI sought to mediate a claim for the ongoing payment of fees for work said to have been performed under the contract. The mediation was unsuccessful. HHI then referred claims for expert determination. The expert made a determination in favour of HHI, ordering that Abigroup pay $499,839.88 to HHI. Abigroup have asserted that that there was not a proper submission of any dispute to the expert, and that the expert lacked jurisdiction. Abigroup allege that HHI manipulated the contractual processes to such a point that the so-called claim was a “sham”, such that the expert determination was of no legal effect. HHI deny these assertions.
Initially Abigroup sought an injunction to restrain the expert determination process. This application was refused by a master of this Court. The Master indicated that he considered that a prima facie case had been made out for an injunction, but that the balance of convenience favoured HHI. The expert determination process then proceeded with both parties making submissions before the expert. Abigroup maintained its protest that the expert had no jurisdiction, and against that background made its submissions. The expert proceeded to make his determination on the basis of the documents submitted, together with the written submissions of the parties. Abigroup claim that there was no opportunity to seek the making of full discovery or to test relevant witnesses.
Interlocutory Relief
Following the expert’s determination, HHI sought urgent relief from the Court with respect to the determination. Relief was sought pursuant to three alternative interlocutory applications:
An application for summary judgment of HHI’s Cross Action (Counterclaim);
If summary judgment was not granted, an application for a separate trial on the issue of enforceability of the expert determination (“preliminary issue”); and
If summary judgment was not granted but a separate trial of the preliminary issue was ordered, an application for the urgent determination of the preliminary issue.
In the event, the application for summary judgment has not been pursued.
In the event I refused the applications for separate trial of a preliminary issue and expedition of that trial. I summarised my reasons for refusing the applications as follows:
In reaching my conclusions with respect to the application of HHI, I have had regard to all of the submissions advanced and in particular the following:
–An apparently reasonable and sensible offer has been made by Abigroup to pay disputed claims as assessed by the expert. The only difficulty with the arrangement appears to be with the problems in giving security, and that appears to be within the control of HHI.
–The initiating proceedings related to Abigroup’s claim concerning defective design work. HHI elected to not only defend those proceedings, but to counterclaim in the same proceedings with respect to their money claim the subject of the expert determination. It would have been open to HHI to issue separate proceedings with respect to their claim. They did not do so.
–The legal issues concerning the expert determination are not simple. The contractual documents, part only of which have been provided to the Court, are complex and to the uninitiated, suggest there may be considerable ambiguity and lack of clarity in relevant terms. For example, two sets of competing clauses deal with expert determination and involve material levels of conflict and, with a clause in the contract, suggesting precedence to one set over another. This technique of simply lumping together apparently conflicting procedures in the contract, and then suggesting precedence to one over another, provides a circumstance that may give rise to potential confusion.
–The claim, as finally submitted to the expert, as earlier observed, is said to be manipulated in a way that distorts the true dispute, so as to bring the amount claimed under the $500,000 cap. These are potentially complex and difficult issues to resolve.
–Attempts by Courts to separate out discrete issues for determination often lead to complication and confusion, and have the consequence of delaying ultimate judicial determination of a dispute. The splintering of the case, consequent appeals, cost and delay are unattractive. The Court has a responsibility to provide an expedient and cost effective procedure for the resolution of disputes. The Court must be mindful that the procedure of the Court may be used to attempt to gain a commercial advantage, and its processes should not be unfairly used in this way.
I do not suggest that the above considerations are the only considerations, but they are issues of particular concern.
It is important to record the approach to be taken to applications for permission to appeal with respect to interlocutory matters. This Court has held that permission will only be granted in circumstances where a point of principle arises, or where the interests of justice favour a grant of permission. In Glenauchen Pty Ltd v Circuit Finance Pty Ltd,[3] the Full Court observed:
The court's practice has been to grant leave to appeal only if a question of general principle arises. The court will usually consider whether there is reason to doubt the correctness of the decision under consideration. However, in the end the court must act as the interests of justice require.
[3] Glenauchen Pty Ltd v Circuit Finance Pty Ltd [2001] SASC 61 at [3] (Doyle CJ, Nyland and Gray JJ).
In State Bank SA v Hellaby,[4] King CJ discussed the approach to be taken to appeal with respect to matters of practice and procedure:
The order is the result of an exercise of discretion by the judge appealed from on a matter of practice and procedure. Appellate courts exercise particular caution in reviewing exercises of discretion in matters of practice and procedure: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 176-177. They are constrained not only by the usual considerations attaching to the review of an exercise of judicial discretion (House v The King (1936) 55 CLR 499), but also the special indications for restraint where the discretion relates to practice and procedure: Re Will of Gilbert (1946) 46 SR (NSW) 318, per Jordan CJ at 323; Consolidated Gold Mining Areas NL v Enterprise Gold Mines NL (1992) 57 SASR 584.
[4] State Bank (SA) v Hellaby (1992) 52 SASR 304 at 312.
This authority drew on the following observations of Gibbs CJ, Aickin, Wilson and Brennan JJ in Adam P Brown Male Fashions Pty Ltd v Phillips Morris Inc:[5]
[5] Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc. (1981) 148 CLR 170 at 176-177.
There is no reason to doubt that the disputed decision of Smithers J. concerned a matter of practice and procedure. The essence of such a matter is described in terms which are sufficient for present purposes in Salmond on Jurisprudence 10th ed. (1947), p. 476:
“Substantive law is concerned with the ends which the administration of justice seeks; procedural law deals with the means and instruments by which those ends are to be attained. The latter regulates the conduct and relations of courts and litigants in respect of the litigation itself; the former determines their conduct and relations in respect of the matters litigated”.
An interlocutory order for an injunction is a matter of practice and procedure. See McHarg v. Universal Stock Exchange Ltd. … at p. 82; Minister for the Army v. Parbury Henty and Co. Pty. Ltd. … at p. 489; White v. White … at p. 438. Nor is there any serious dispute between the parties that appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure. Counsel for Brown urged that specific cumulative bars operate to guide appellate courts in the discharge of that task. Not only must there be error of principle, but the decision appealed from must work a substantial injustice to one of the parties. The opposing view is that such criteria are to be expressed disjunctively. Cases can be cited in support of both views: for example, on the one hand, Niemann v. Electronic Industries Ltd. … at p. 440; on the other hand, De Mestre v. A. D. Hunter Pty. Ltd. … at p. 146. For ourselves, we believe it to be unnecessary and indeed unwise to lay down rigid and exhaustive criteria. The circumstances of different cases are infinitely various. We would merely repeat, with approval, the oft-cited statement of Sir Frederick Jordan in In re the Will of F. B. Gilbert (dec.) … at p. 323:
“ ... I am of opinion that, ... there is a material difference between and exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal.”
See also, Brambles Holdings Ltd. v. Trade Practices Commission … at p. 193; Dougherty v. Chandler … at p. 374. It is safe to say that the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration.
In support of the application for permission, HHI submitted that it would suffer a substantial injustice if the enforceability of the expert determination was not clarified. It claimed to have a contractual right to immediate payment, and that its rights were being rendered nugatory through delay. The plaintiff, Abigroup Contractors Pty Ltd, for its part, submitted that HHI was engaged in tactical manoeuvring to seek advantage of aspects of its contractual arrangements, and to defer and delay the substantive claims being advanced by Abigroup.
In my view, permission to appeal should not be granted. As indicated in my earlier reasons, I considered that there was a proper basis for an order of expedition of the entire proceedings. Notwithstanding that indication HHI has not sought to fast track the matter. The conduct of HHI would not suggest that expedition of the entire proceedings has a high priority. As I observed in my earlier reasons:
From time to time in the course of these proceedings, HHI have expressed impatience at what is said to be the Court’s unwillingness, or lack of expedition, in “grasping the nettle” in the way HHI would wish. HHI claims that unless the Court acts swiftly to give relief, HHI’s contractual rights will effectively be rendered nugatory. This is an emotional, and in a sense unattractive, submission. HHI is a firm of professional engineers, operate internationally, and are said to be of considerable substance. They have entered into what they claim to be a multi-million dollar professional engagement. They accepted the terms of engagement. The fact that they have entered into an arrangement that is complicated, and presents difficulties to a Court, is a problem arising from the particular commercial arrangements entered into by the parties.
This Court is prepared to offer an expedited hearing, and, subject to judicial availability, a trial date late in the calendar year 2008. Abigroup is prepared to proceed to trial in that time. Already weeks, if not months, have been lost through the deferring of third party proceedings. HHI have steadfastly resisted a trial this year.
I remain of the view that the legal issues concerning the expert determination are complex and will be difficult to separate from many other issues arising in the proceedings.
There is no relevant commercial urgency concerning the first of the expert’s determinations. An agreement has been reached for the payment of the monies to HHI, subject to a secure obligation to repay in the event that HHI were not entitled to the monies.
There is one further matter to address. HHI have now obtained a second expert determination. An agreement has not been reached as to payment, although the Court has been informed that it is possible that the parties may be able to reach a similar agreement to that arrived at with respect to the first expert determination. In the event that no agreement is reached, HHI propose to pursue an application for summary judgment. Such an application presently awaits a time for hearing. During the course of the argument concerning permission to appeal I indicated to the parties that I had formed the view that the proceedings were complex commercial proceedings that should be referred to the panel of judges who case manage such proceedings. It may be expected that under a case management regime, innovative processes may be invoked to assist the parties to speedily resolve their disputes.
For these reasons, as earlier indicated I would not grant permission to appeal. In this event, Rule 282(2) requires that the application for permission be referred for determination by the Appellate Court. Having regard to the terms of the Rule, I refer the determination of the application to the Full Court.