ACT v SMEC Australia Pty Ltd and CM Jewell and Associates Pty Ltd
[2015] ACTSC 142
•2 June 2015
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | ACT v SMEC Australia Pty Ltd & CM Jewell & Associates Pty Ltd |
Citation: | [2015] ACTSC 142 |
Hearing Date: | 29 May 2015 |
DecisionDate: | 2 June 2015 |
Before: | Mossop AsJ |
Decision: | See [35] |
Category: | Interlocutory Application |
Catchwords: | PROCEDURE – Time for filing of defence – case involving substantial volumes of documentary material – potential for proportionate liability defence or claims for contribution – potential for limitation period to expire in relation to claims by plaintiff against possible concurrent wrongdoer – notice of statement of claim given six months prior to formal service – not appropriate to delay filing of defence until after consideration of plaintiff’s discovered documents – defence ordered to be filed two and half months after formal service of claim |
Legislation Cited: | Civil Law (Wrongs) Act 2002 (ACT) Limitation Act 1985 (ACT) Court Procedures Rules 2006 (ACT) |
Cases Cited: | Ucak v Avante Developments [2007] NSWSC 367 |
Parties: | Australian Capital Territory (Plaintiff) SMEC Australia Pty Ltd (First Defendant) CM Jewell & Associates Pty Ltd (Second Defendant) |
Representation: | Counsel Mr J Hutton (Plaintiff) Mr P Walker SC (First and Second Defendants) |
| Solicitors ACT Government Solicitor (Plaintiff) Lee and Lyons Lawyers (First Defendant) Meyer Vandenberg (Second Defendant) | |
File Number: | SC342/14 |
Application
This matter was docketed to me in order to deal with an application for directions under r 1401 of the Court Procedures Rules 2006 (ACT) (‘the Rules’). The direction that was sought was that the defendants file a defence by 15 June 2015. Having regard to the fact that proceedings were served by post on the defendants on 31 March 2015 and r 102 of the Rules requires that a defence be filed within 28 days, the application would, on its face, raise only very limited issues.
However the application involved quite a deal of evidence and oral submissions of some length. The issue in contention is whether or not the defendants should be required to file a defence before having been able to fully consider the documentary material available to them by way of informal discovery provided or offered by the plaintiff. The defendants contended that they should not be required to file a defence until September or October of this year. The plaintiff resists such a course principally because if the defendants then raise defences of proportionate liability pursuant to Chapter 7A of the Civil Law (Wrongs) Act 2002 (ACT) (‘CLW Act’) then in relation to one identified potential concurrent wrongdoer any claim that the Territory might bring at that time may be statute barred or at least run into significant problems under the Limitation Act 1985 (ACT).
In order to understand the parties’ contentions it is necessary to outline some of the background to the present application.
Nature of the claim
The proceedings arise out of the site investigation, design and construction of a pond in an area bounded by Cotter Road and the suburb of Weston to the south, the Molonglo River to the north, the Tuggeranong Parkway to the east and the suburbs of Coombs and Wright to the west. (This area is an area now known as the North Weston Ponds although not referred to as such in the claim.) The allegations against the first and second defendants are pleaded in the statement of claim of 226 paragraphs which extends over 70 pages.
The plaintiff (‘the Territory’) alleges breaches of contract and negligence against the first and second defendants. The activities in relation to which the defendants were engaged related to sampling, analysis and management of contaminated soil in the area proposed to be excavated for the pond. The first defendant (‘SMEC’) is alleged to have been responsible for preparing an environmental and site assessment and remedial action plan (see Statement of Claim at [26]). The second defendant (‘Jewell’) is alleged to have been responsible for audits and oversight of the methodology adopted (see Statement of Claim at [16]-[17]). It is alleged that as a consequence of the defendants breaching their duty to the Territory there was inadequate sampling and analysis of the soil prior to the design of the pond and as a result the quantity of contaminated landfill that needed to be removed from the site was significantly underestimated. As a consequence the Territory is alleged to have incurred losses involved by reason of the cost of additional excavation and delay costs relating to the excavation contract. It is also alleged to have incurred the cost of redesigning the pond once the extent of contamination was known and to have incurred additional remediation, construction and other costs that it would not have incurred otherwise. The amounts claimed against each defendant are in excess of $5 million.
Procedural history of the claim
The proceedings were commenced on 30 July 2014 when an originating claim and statement of claim were filed. A copy of the statement of claim together with some nine volumes of documents referred to in the statement of claim were provided to each of the defendants on 23 September 2014. At that stage the Territory made it clear that the documents were not being formally served on the defendants but were instead served in order that the defendants may consider, without the necessity for litigation, admitting liability for damages to be assessed. The Territory formally demanded that each defendant admit liability for the matters pleaded in the statement of claim with damages to be assessed and it sought a response to its correspondence by 18 November 2014.
The solicitors for SMEC responded on 18 November 2014 seeking various categories of documentation and requesting that SMEC could be given until the end of February 2015 to provide its response to the demand for an admission of liability. The letter also enquired what steps the Territory had taken to enforce its rights against Cardno Young Pty Ltd (‘Cardno’) and Coffey Geosciences Pty Ltd (referred to in the letter as ‘Coffey Geotechnics’) (‘Coffey’). The letter said ‘SMEC understands and appreciates the method in which the ACT wishes to traverse the claim in a non-litigated sense’.
The solicitors for the Territory responded to that letter offering to provide informal discovery on certain conditions and extending the period in which it agreed not to serve the originating claim until 28 February 2015. In relation to the reference to Cardno and Coffey the solicitor for the Territory stated that if it was alleged that Cardno or Coffey caused or contributed to the loss or damage claimed in the proceedings in such a way that might reduce the liability of SMEC then the solicitors should identify the legal and factual bases for those allegations. He drew particular attention to the time that had passed since the pleaded facts occurred and the desirability of providing that information as soon as possible so as to avoid prejudice to the Territory. The letter concluded:
As our client will have allowed your client some 5 months to consider the claim, it is our client’s expectation that the parties will be in a position to quickly progress the proceeding after 28 February 2015. Please let us know if your client does not share that expectation.
In the period between November 2014 and March 2015 there was correspondence between the solicitors for the Territory and the solicitors for SMEC relating to access to the documents provided by way of informal discovery by the Territory and in relation to the potential liability of Cardno and Coffey. Notwithstanding a number of pieces of follow-up communication SMEC did not respond to the letter of demand by 28 February 2015 or at any time prior to the service of the originating claim. However by 31 March 2015 when the originating claim was served by post, the confidentiality deed had been signed and informal discovery was provided by the Territory on that day.
The position in relation to Jewell was somewhat different. Jewell did not respond to the letter of demand by 18 November 2014. Instead it requested additional documents. The Territory offered informal discovery and requested a response to its letter of demand by 12 December 2014. Jewell did not respond on that date and on 16 December 2014 it declined the Territory’s offer of informal discovery. The Territory agreed to extend the time for a response to its letter of demand to 23 January 2015. Jewell did not respond at that time or at the later date of 12 February 2015 which the Territory had suggested. It communicated on 17 February 2015 that its response was taking longer than expected and it would send a ‘holding letter’. On 5 March 2015 the Territory asked to be told by 19 March when the Territory could expect to receive Jewell’s response. No response to that communication was received prior to 31 March 2015 when the originating claim was served by post.
At the point of service of the originating claim, the Territory’s solicitor, in correspondence to both defendants, identified 6 May 2015 as the date by which the Territory contended a defence was required under the Rules to be filed and continued: ‘Given that your client has had more than 6 months to investigate our client’s claim, our client requires that this time limit be strictly complied with.’
Following formal service of the claim there was correspondence between the parties both in relation to potential concurrent wrongdoers and in relation to when a defence could be expected.
SMEC has made arrangements to examine the documents and has devoted considerable resources to that process. The position taken by Jewell was that it would be in a position to file its defence after it had obtained discovery from the Territory and ‘non-party discovery’. Although there was some communication between the parties about the terms of a confidentiality deed Jewell has not accepted the offer by the Territory to have access on an informal basis to its documents. It is not clear how, in the absence of a defence, formal discovery could proceed given that the facts in issue could not be identified.
Having regard to the fact that the originating claim was served by post, the contention of the Territory was that a defence was required to be filed by 6 May 2015. At the hearing before me no party contended that the Rules required any different date.
The Territory filed its application seeking directions on 20 April 2015. The application also sought that pursuant to r 6254 of the Rules the jurisdiction of the Court be exercised by a judicial officer. As a consequence, on the return date of 1 May 2015 the proceedings were listed for mention before me on 8 May 2015. On that date I made some directions in relation to evidence and listed the application for hearing on a date convenient to counsel for the parties. I indicated to the parties that the delay in having the application determined by reason of accommodating counsels’ convenience would not place them in a different position than if the application was able to be heard more promptly.
At the hearing of the application on 29 May 2015 the following affidavits were read and, where relevant, the exhibits referred to in them admitted into evidence:
(a)Nigel Oram dated 22 May 2015;
(b)Matthew Smith dated 15 and 28 May 2015;
(c)Leigh Parker dated 21 and 28 May 2015.
A schedule of correspondence also became Exhibit 1.
Submissions of the parties
The submission of the plaintiff was to the effect that the Rules required a defence to be filed within 28 days. In the present case the defendants had had substantially longer than would ordinarily have been the case in order to investigate and consider the claim as a result of the approach taken by the Territory in serving the statement of claim on 23 September 2014. As a consequence the defendants would have had almost nine months to investigate the claim and be in a position to file a defence if they were directed to file a defence by mid-June. Further, the plaintiff submitted that if a defence was not filed at that stage and the defendants subsequently contended that their liability was limited by the proportionate liability provisions of the CLW Act then the plaintiff would be prejudiced because of the expiry of the limitation period in relation to at least one of those potential concurrent wrongdoers.
The oral submissions made by the first and second defendants, who were jointly represented by senior counsel for the purposes of this application, contained two themes which were developed at some length. Those two themes were as follows. First, in a complex claim such as this one the interests of justice would be advanced by the defendants putting on a detailed and meaningful defence which could only be done after they had had the opportunity to examine the documents provided by the Territory and undertake further investigations, potentially including obtaining independent expert advice. While it was perfectly possible for the defendants to put on a holding or interim defence that would not assist the proper disposition of the case. Second, in so far as there were potential limitation problems for the Territory arising if the defendants were not required to file a defence and disclose any proportionate liability defences in the time proposed by the plaintiff then those problems were problems of the Territory’s own making having regard to its slowness in investigating and commencing the proceedings.
Consideration
The starting point
The starting point is the position identified in the Rules, namely, that a defence should be put on within 28 days of service of the claim. Plainly enough, in many cases that period is too short and more time needs to be given. However it is obvious that the Rules contemplate that a defence will be required to be filed prior to complete investigation of the claim by way of discovery and the obtaining of documents from third parties. The reasonably early filing of a defence allows the crystallisation, to the extent that it is practicable at that stage, of the issues in dispute. It then permits progress of the case through the various interlocutory steps. The proposal by the defendants, that a defence not be required to be filed until September or October 2015 would tend to delay the further progress of the case. So far as the plaintiff is concerned it would preclude the plaintiff from obtaining discovery from the defendants until after that time. So far as Jewell is concerned the absence of any defence would make it logically difficult for it to insist on discovery in circumstances where the facts in issue were not defined by any pleadings.
Complexity of the case
I accept that the case is one of substantial complexity involving a construction process that took place over a number of years and involved a significant number of consultants to the Territory. Although the statement of claim is a lengthy one, the issues of liability as between plaintiff and defendants are not inherently so complex. The more complex issues appear to arise in relation to damages and the potential for defences of proportionate liability or claims for contribution against third parties.
The evidence discloses that the informal discovery provided by the Territory to SMEC involved some 60,232 documents that are in the process of being examined by the lawyers for SMEC. I accept the evidence that the inspection process will only be completed by mid to late June 2015. Further, I accept that this is a case which involves significant complexity so far as the defendants are concerned if they wish to make claims for contribution under Part 2.5 of the CLW Act or rely upon the proportionate liability regime established under Chapter 7A of that Act. That is because the conduct of the other potential wrongdoers is conduct which they themselves may have had little or nothing to do with as part of the construction project and hence are matters which can only be learned of and assessed by investigation, particularly by reference to documents.
Delay by the Territory
As will be apparent from the summary of the themes of the submissions made by senior counsel for the defendants, considerable emphasis was placed upon the proposition that the Territory, as an institutional player with knowledge of the problems relating to removal of additional quantities of contaminated soil from the site from at least April 2010, was in a position to have commenced the proceedings earlier and should have been particularly conscious of the fact that commencing proceedings close to the point at which limitation periods expired would prejudice its own position. In particular, it is clear from the allegations in the statement of claim that by April 2010 asbestos removal from the site had been suspended and the earthworks contractor had commenced making claims for increased costs as a result. Further, significantly prior to the commencement of proceedings, the Territory had been considering potential claims to recover damages. In order to resolve an objection to some of the evidence sought to be relied upon by the defendants, counsel for the Territory made the concession for the purposes of this application that the Territory had, in November 2013, given consideration to claims it may have against Cardno, SMEC and Coffey, identified possible grounds for those claims and discussed damages figures.
I do not accept that the position is as stark as senior counsel for the defendants made out. The facts alleged in the statement of claim make it clear that development approval for further redesign of the pond arising out of the discovery of greater areas of contamination was granted in August 2012 and that earthworks continued after that date. Although the pleading does not make it precisely clear when additional costs ceased to be incurred or when the project was actually completed, it cannot in my view be said that the whole of the period from April 2010 until July 2014 constituted a delay on the part of the Territory in enforcing its rights. In my view it would be reasonable to wait until the damages alleged to arise were reasonably able to be quantified. While the evidence is not adequate to make clear findings of fact as to the point at which the Territory was in a position to properly assess its claims against the defendants the evidence does not support the submission that the whole of the period involves an unreasonable delay on the Territory’s part. Therefore it cannot be said that the commencement of the proceedings was unreasonably delayed so that any prejudice to the Territory arising from a delay in the filing of defences is prejudice of its own making.
Further, some of the submissions made by the defendants were to the effect that the course adopted by the Territory in commencing the proceedings, but not formally serving those proceedings, was not an appropriate course. I do not accept that submission. First, the submission is inconsistent with the approach actually taken by the defendants who appear to have, at the very least, acquiesced in the course adopted by the Territory. Both appeared content to attempt to address the potential dispute without immediately resorting to the formalities and costs of litigation. Second, while the course adopted is not a usual one, in so far as it allows institutional or insured parties to attempt to avoid complex and costly litigation by coming to some agreement outside the court process then that is a course which is commercially sensible and one which should not be discouraged by the Court.
Consequences for proportionate liability defences
Requiring the defendants to file a defence will mean that those aspects of the proceedings dependent upon there being pleadings, most obviously discovery, can proceed. The defendants will be obliged to make a decision whether or not they are in a position to allege a proportionate liability defence under Chapter 7A of the CLW Act or wish to join third parties in order to seek contribution from them under Part 2.5 of the CLW Act.
It is clear that the Territory has given consideration to whether or not to bring proceedings against additional defendants. It has obviously made the decision not to, bringing these proceedings against only SMEC and Jewell. However, that is not to say that the pleading of an entitlement by the defendants to limit their liability having regard to what they say is the conduct of Cardno may not be significant so far as the Territory is concerned to a reconsideration of that position. The Territory must reasonably have regard not only to how it perceives the case but also to how the defendants will attempt to persuade the Court to see the case against a third party.
It was uncontroversial that the approach to be taken to the pleading of a defence of proportionate liability was that identified by Justice Hammerschlag in Ucak v Avante Developments [2007] NSWSC 367 at [41] namely that ‘a defendant should plead with the same degree of precision and particularity as it would have done before the Act if it were bringing a cross-claim against an alleged concurrent wrongdoer’. As a consequence the defendants would, if they choose to raise a defence of proportionate liability, be subject to the full rigours of pleading in identifying the basis upon which the third party would be a concurrent wrongdoer.
If the defendants do not plead any proportionate liability defence when they file a defence or file a claim for contribution at that time then, if they wish to do so in the future, they will be compelled to seek leave of the Court. At that point there may be costs consequences arising out of the amendment to the pleadings or the joinder of additional parties. Further, in relation to any proportionate liability claim, if, by the time the defendants make such a claim the limitation period has expired for a claim by the plaintiff against the third party, then that is a factor which it will be open to the Court to consider when dealing with the application to amend. As I have pointed out above, the particular third party identified by the defendants as a possible candidate for a proportionate liability pleading in relation to which there is the potential for a limitation defence to shortly arise is Cardno. That is because Cardno prepared the proposed designs for the pond in or around early August 2009 and hence there is the potential for limitation periods to expire from August 2015.
It is important to note at this point that the provisions of the Limitation Act 1985 (ACT) provide different regimes in relation to claims for contribution against the tortfeasors under s 21 of the CLW Act and claims necessitated by a proportionate liability defence. In relation to contribution between tortfeasors s 21 of the Limitation Act 1985 (ACT) provides that a cause of action for contribution is not maintainable if brought after the first to end of a period of two years from the date when the cause of action for contribution first accrues to the person claiming contribution or a limitation period of four years running from the date of the end of the limitation period for the principal cause of action. Section 21(2) defines when a cause of action for contribution first accrues effectively by reference to the date of the judgment or settlement of the principal cause of action. As a consequence a defendant who wishes to make a claim for contribution is not constrained by the expiry of the limitation period relevant to the cause of action relied upon by the plaintiff in the principal proceedings. On the other hand, there is no adjustment to the limitation period for a plaintiff where a defendant raises a defence of proportionate liability. As a consequence, where a limitation period expires prior to a defence raising a defence of proportionate liability is put on, the plaintiff is not in a position to adjust to the defence by bringing a claim against the concurrent wrongdoers.
The position is therefore likely to be that if the defendants are not in a position to plead a defence based on proportionate liability identifying other entities as concurrent wrongdoers at the point at which they file their defences but later form the view that such a defence ought to be pleaded they will be required to seek leave to make that amendment. If, by reason of the expiry of the limitation period as between the plaintiff and the third party, the Court considered that it would be not appropriate to permit that defence to be raised then, having regard to the different limitation regime applicable to claims for contribution, it is likely that the relevant defendant would have available to it the capacity to join the third party itself and make a claim for contribution against it. That course would involve greater risks so far as the defendant was concerned because it would be responsible for the joinder of the party. However as a means of deflecting liability it would only lack utility if the third party was not a good defendant in the sense of not being an entity of sufficient substance to meet the claim either by reason of its asset position or by reason of insurance.
Balancing exercise
SMEC understandably emphasised the significant task that was being undertaken examining each of the Territory’s documents. Notwithstanding that that process was not complete it has had available to it the nine volumes of documents referred to in the pleadings themselves. Further the evidence of Mr Smith discloses that, for reasons which are not explained, the solicitors have not yet begun the process of reviewing the documents provided by their own client. Similarly there is little other evidence about its investigations or preparation undertaken either in the period from September 2014 or from March 2015.
So far as Jewell is concerned, notwithstanding the contention that no defence should be required until after discovery and third party discovery, there is no evidence that it has taken steps, for example, to obtain documents from third parties by way of notices for non-party production. Similarly, as with SMEC, there is little evidence of what investigations or preparation it has done in relation to the claim in the period from September 2014 or from March 2015.
The question is ultimately one which is resolved by a discretionary judgment based on case management considerations, balancing the interests of the parties in the light of the purpose of the Rules identified in r 21. There appear to me to be insufficient reasons to justify a further significant delay until September or October 2015 prior to the defendants being required to file a defence. While that would be the ideal situation so far as the defendants are concerned, the effect of such a course will be to delay the further progress of other aspects of the proceedings and will have the potential to give rise to prejudice to the plaintiff if proportionate liability defences are to be relied upon. I accept that informal or formal discovery and the obtaining of documents from third parties using compulsory court processes may well give rise to circumstances in which the defendants consider it necessary to amend their defences. That is a not unusual situation that parties in litigation must face. Whether and to what extent that is the case will depend upon the nature of the defences that are filed and the material which subsequently becomes available to the defendants. In so far as the defendants would be required to seek leave to amend their defences if they choose not to raise a proportionate liability defence in the first instance, then the appropriateness of that course and the costs consequences, if any, can be considered when that leave is sought. Even if leave were to be refused by reason of the prejudice to the plaintiff arising out of the expiry of a limitation period as between it and a third party, the defendants are likely to have available to them the capacity to bring a claim for contribution against a concurrent wrongdoer.
In my view it is appropriate to require the defendants to file their defences within a relatively short period. It is not appropriate to defer the filing of defences until September or October 2015. Counsel for the plaintiff sought an order that the defences be filed by 15 June 2015 although he did indicate that a difference of a week would not be of concern so far as the plaintiff was concerned. In my view it is appropriate to permit the defendants until 22 June 2015 to file their defences. This is two and a half months after formal service of the claim and nine months after notice was given of the existence, and basis for, the claim.
Orders
The orders of the Court are:
1. Each defendant is to file a defence no later than 22 June 2015.
2. The costs of the application are reserved.
3. The parties are directed to exchange proposed directions no later than 25 June 2015, to consult and attempt to agree on directions to be made by the Court and provide either agreed or competing directions by email to my associate no later than 4:00 pm on 1 July 2015.
4. The proceedings are listed for further directions at 9:30 am on 2 July 2015.
| I certify that the preceding thirty-five [35] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Associate Justice Mossop. Associate: Date: 2 June 2015 |
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