Allco Newsteel Pty Ltd v Remm Construction (SA) Pty Ltd

[1990] HCATrans 134

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No Al3 of 1990

B e t w e e n -

ALLCO NEWSTEEL PTY LTD

Applicant

and

REMM CONSTRUCTION (SA)

PTY LTD

Respondent

Application for special

leave to appeal

DEANE J

Allco

GAUDRON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 8 JUNE 1990, AT 9.41 AM

Copyright in the High Court of Australia

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MR S.P. CHARLES, QC:  May it please the Court, I appear with

MR B. DEBELLE, QC, and MR I. NOSWORTHY for the

applicant. (instructed by Finlaysons)

MR R. ROBSON, QC: If the Court pleases, I appear with

MR W. HOUGHTON for the respondent. (instructed

byThomson Simmons & Co)

DEANE J: Yes, Mr Charles.

MR CHARLES:  If the Court pleases, in this matter we have reduced

our submissions to writing. They are quite short, six

pages in fairly large typing. It might shorten matters

if we ask the Court to read those submissions.

DEANE J: Thank you, Mr Charles. Yes, Mr Charles?

MR CHARLES:  If I could invite members of the Court to turn to

page 45 of the application book, members of the Court

will see on that page the order that was made by

Mr Justice Mullighan of the Supreme Court of South

Australia on 27 April and which the Full Court upheld in its decision given on 4 May. It is our primary

submission that that order is unprecedented in its

nature and has the consequences that we have set out

in our short submissions.

Now, Your Honours, our case really is based in these circumstances, that Allco claims that it was

the owner of the raw steel which now amounts to

something slightly less than 6000 tonnes. That steel

was to be fabricated for the purposes of the Remm/Myer

project, a project which had a value of something in

the order of in excess of $550 million and was, as
the courts in South Australia repeatedly told the

applicant, the largest project of its kind in South

Australia.

Now, Your Honours, the contention made by the

applicant is that its ownership of that steel could

only be taken from it either under the terms of the

contract, and that would be by virtue of clause 45,

or, alternatively, by payment.

DEANE J:	Mr Charles, to help you focus on what seemed to me to
be the matters of concern  , first of all, it is
an application to appeal from an interlocutory order involving mixed questions of fact and law. Well QOW,
that is perhaps of all cases the type of case that is
inappropriate for this Court to get involved in. The
next thing, just to focus you on the problems as I see them, is that if there be such an obvious mistake
of fact as is suggested, it would lie within the power of the judge at first instance and would be subject to correction on an appeal to interfere with the interlocutory
order. Thirdly, it appears that the right of appeal from

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has not been exercised. Well now, they are the	the last exercise of jurisdiction by the trial judge
matters which, I think, pose a problem for you.

MR CHARLES:  Your Honours, so far as the first matter is

concerned, we are very conscious that the matter

is interlocutory and it was for that reason that we

included the submissions made on the last page of our

submissions.

DEANE J: Yes, we have read those, yes.

MR CHARLES:  And those submissions are framed in the light of the

observations of this Court in cases such as PARINGA

MINING AND EXPLORATION V NORTH FLINDERS which is one

of the four cases on our list of cases and which

members of the Court have and, in particular, Your Honours,

we have borne in mind what members of the Court in that

case said, particularly at page 458 of 165 CLR. It is

our submission, Your Honours, that this is a particularly

good example of a case where the rights of the parties

and, in particular, the applicant, Allco, have been

affected by the making of the orders and also,

Your Honours, a situation where this Court might wish to

grant leave in order to exercise its supervisory

jurisdiction over the manner in which inferior courts

grant interlocutory injunctions and, in particular,

mandatory interlocutory injunctions. Our submission is

that the order made in this case is quite unprecedented.

So far as the question of fact is concerned,

Your Honours, the second matter, that has already been

raised before Mr Justice Nullighan, at first instance, after

the matter went to the Full Court. The applicant was

granted leave by the Full Court to take back to

Mr Justice Mullighan the question of whether there should be any further support in terms of the undertaking as to

damages and on that occasion the applicant raised with

His Honour the question of the mistake of fact which

it was said had been discovered for the first time in

the Full Court's reasons for judgment.

Now, His Honour, the matter having been raised,

indicated that he remained of the same view as before

so that at this stage, Your Honours, the applicant is

left, we would submit, without the possibility of

further relief other than by this matter coming before

this Court.

As to the third matter, Your Honours, on that

it relates only to the question of the adequacy of the

undertaking as to damages. The major points which are

the subject of this application for special leave depend

upon the judgment of the Full Court and the way in which

it has dealt with both clause 45 and the question of the

nature of the interlocutory relief granted by

Mr Justice Mullighan at first instance.

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DEANE J: Except if the mistake of fact were raised with

Mr Justice Mullighan on the subsequent occasion

an appeal would lie from his failure to do anything

about it, one would have thought.

MR CHARLES:  The difficulty, Your Honour, with that is, we

would submit, the Full Court's reasons make it

plain that while the error of fact infected their

reasons, their conclusion would have been the same in anv

event, notwithstanding that error of fact. I refer ,

Your Honour to what the court said -

DEANE J: Well, that seems to put the error of fact to one

side in terms of this application then?

MR CHARLES:  Not, we would submit, Your Honour, entirely,

because it is a major reason whv, as to part of

Their Honours' conclusions, they took the view that the steel had passed into the ownership of

Remm but the reasoning, Your Honour, set out at

pages 62 to 63 demonstrate that the court's conclusions

were based on a wider set of propositions, for

example, looking at paragraph 2 on page 63, that:

Remm's right to take over the contract -

it was said -

would be rendered illusory ..... if it were

denied access to the 'off-site' fabricated

steel.

The Court will appreciate that the passage from

clause 45 of the contract which is set out in the

application book at pages 21 and 22 -

McHUGH J: Just before you go to the affidavit, Mr Charles,

does not the alternative ground of reasoning also depend upon the question of fact because they say

that the purpose:

would be rendered illusory ..... if it is denied access to the 'off-site1

fabricated steel (or the off-site

raw steel for which it has paid in full).

MR CHARLES:  Yes. Your Honour, I accept that the reasoning

infects much of the judgment but our submission

none the less is that notwithstanding that mistake of

fact, that the Full Court has given its imprimatur
to a form of order which, we submit, is one that this

Court simply should not countenance.

McHUGH J: Well, I am sorry, you seem to be shifting your ground

backwards all the time.

MR CHARLES:	I am trying to dodge the questions, Your Honour.
McHUGH J:	Is your real challenge now to the form of the order?

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MR CHARLES:  Our first challenge, Your Honour, is to the form

of the order, indeed, and we are contending that

this is an order of an unprecedented nature which,

in effect, introduces chaos into the contractual

situation as between the head contractor and Allco

and between Allco and its subcontractors. For

obvious reasons, Your Honours, what it does is, in

situations where the subcontractors are fabricating

steel to supply to Allco, that steel has, in effect,

been taken away from Allco by the direct intervention

of Remm interfering in that way in the contract between

Allco and its subcontractors and in circumstances where

Allco is prevented by the court injunction from taking

any step even to counsel or advise its subcontractors

that they may be giving away its, Allco's, steel to

a third party, Remm, and that they may be damaging

their own entitlement to payment by Allco by taking

that course. It is an extraordinary order, in our

submissions, Your Honours.

McHUGH J: Well, SMITHIES V NATIONAL ASSOCIATION OF OPERATIVE

PLASTERERS would seem to approve that being done in

certain circumstances.

MR CHARLES: 

I accept that, Your Honour, but none the less the

very form of the order, we would submit, is unprecedented
and one which ought to attract the attention of this

Court for that reason.

Now, Your Honour, it also raises the question

which, we submit, this Court left undecided in

STEFANETTO, that is to say, whether the provisions of

clause 45 amount to a penalty. Our submission would

be that the Court, in effect, divided equally in that
case notwithstanding that there was a verdict that

the clause in those circumstances did not amount to

a penalty. Our submission would be that the

Chief Justice decided it was not a penalty, that

Mr Justice Mason decided it was, and Mr Justice Jacobs

had a bet each way.

Now, there is a recent decision in the Court of

Appeal in England in JOBSON V JOHNSON, (1979) 1 All ER

621 which accepts that a clause of this kind may involve

a penalty notwithstanding it worked a transfer of

goods rather than money. Now, Your Honours, we submit

that in the circumstances what has happened is that

in circumstances where Allco was vigorously·
maintaining and repeatedly maintaining
to the court both at first instance and inthe Full

Court that there was a dispute, a hot dispute, as to

whether payment had been made by Rernm under the

contract and therefore as to the ownership of the

5000 approximately tonnes of steel off site that the

court has overridden that dispute of fact and both

by its conclusion as to the ownership of raw steel

and by the use of clause 45 has concluded that Rerrrrn

should be entitled to possession of that steel. We

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say that the judgment of the court is infected with
repeated error and I have drawn the Court's attention

already to the passages in the judgment at pages 62

and 63.

McHUGH J:  How did it come about that the Full Court said it was an

undisputed fact, disclosed by your own affidavits,

that all the raw steel had been the subject of progress

payments?

MR CHARLES:	Your Honours, if the Court would be good enough to look at page 30 of the application book the Court will
see that there is a '?rogress Claim Summary'referred to.
Now, it is our understanding that what happened,
Your Honours, was that the court looked at a document
of this kind, a progress claim summary, and concluded
from it both that the material off site, that
12,871,000, because it formed a claim by Allco Newsteel,
also acknowledged payment for the amount claimed and,
secondly, a different document, Your Honours, also showed an amount of 4000 tonnes and referred to that
as being 100 per cent of the steel, the subject of the
contract, as being part of the claim.

Now, the two concurrent errors which were made by

the court was assuming that 4000 tonnes was the full

amount of raw steel involved in the contract whereas,
in fact, variations had increased the amount of steel

subject to the contract to nearly 6000 tonnes and,

secondly, that the making of a claim of this kind by

Allco to Remm in some way acknowledged payment for it whereas the fact was that the sum of $7 million or a sum of approximately that order had been deducted by

Remm from progress payments in relation to its claims

against Allco for its alleged defaults, the consequence,

therefore, being, Your Honours, that it would be

vigorously maintained that there had certainly not been

payment made for all amounts claimed as progress payments

and, secondly, that in any event clause 45 did not

permit the head contractor to insist upon the delivery

of off-site steel to it.

There is a related question, Your Honours, of the

effects of the order made upon contractual rights as

between Allco and its subcontractors and Your Honours

will have seen the related question of the undertaking

as to damages offered, the point being that Allco wished

to submit to the court that because all the assets of

Remm and its holding company had been charged to the

two financiers of the project, without some form of

security, that undertaking might well be a pointless one.

DEANE J:	Mr Charles, is there anything in the evidence to suggest
that Remm is potentially insolvent?
MR CHARLES:	No, Your Honour. This, if I may say so, is one of the points that Allco wished to raise and wished to
direct cross-examination of Rernm's witnesses. The
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material that was before the court, as I understand

it, indicated that all of the assets of Rerrrrn and its

holding company had been charged. As I am

instructed, the only matter in which Rernm is involved
is the construction of this project. It involves a

sum of over $500 million and in the event that anything

happened, some form of financial disaster, then that

undertaking might very well be worthless because of the existence of the charge, but that was a matter which was not able to be investigated in detail in

the way the matter proceeded in the court below.

DEANE J: Well, the answer to my question seems to be no.

MR CHARLES:  Not entirely, Your Honour. Unless I can take the

matter further, those are our submissions, Your Honours.

DEANE J:	Thank you, Mr Charles.	The Court need not trouble
you, Mr Robson.

MR ROBSON: If the Court pleases.

DEANE J: Ordinarily it is inappropriate for this Court to grant

special leave to appeal from an interlocutory order.

This is particularly so in a case when an appeal

would, if leave were granted, involve mixed questions

of fact and law.

We are not persuaded that the circumstances of the present application justify departure from that

prima facie approach. Accordingly, special leave

to appeal is refused.

MR ROBSON:	We would seek an order for costs, if the Court pleases.
DEANE J:	Mr Charles?
MR CHARLES:	I cannot respond to that, Your Honour.

DEANE J: Special leave is refused with costs.

AT 10.04 AM THE MATTER WAS ADJOURNED SINE DIE

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