ALLSTATE Plumbing Pty Ltd v Crouch Developments Pty Ltd [No 4] - [2011] WADC 203

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: ALLSTATE PLUMBING PTY LTD -v- CROUCH DEVELOPMENTS PTY LTD [No 4] [2011] WADC 203

CORAM: STAUDE DCJ

HEARD: 18 OCTOBER & 1 NOVEMBER 2011

DELIVERED : 18 NOVEMBER 2011

FILE NO/S: CIV 3314 of 2008

BETWEEN: ALLSTATE PLUMBING PTY LTD
Plaintiff
AND
CROUCH DEVELOPMENTS PTY LTD
Defendant

Catchwords:

Procedure - Pleadings - Appeal from decision not to strike out reply and defence to counterclaim - Plea of estoppel and abuse of process - Whether pleading embarrassing - Whether particulars required - Turns on own facts

Procedure - Discovery - Appeal from springing order for discovery - Scope of order for specific discovery - Whether order for judgment in default of compliance appropriate

Legislation:

Nil

Result:

Appeal from decision not to strike out substituted reply and defence to counterclaim allowed in part - Two paragraphs struck out - No particulars ordered

Appeal from springing order for discovery allowed in part - Extension of time for compliance ordered

Representation:

Counsel:

Plaintiff: Mr S Blyth
Defendant: Mr B Wheatley

Solicitors:

Plaintiff: Lewis Blyth & Hooper
Defendant: Mossensons

Case(s) referred to in judgment(s):

Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASCA 281
FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268
Noye v Gwilliam [2006] WASC 183
West Boat Builders Pty Ltd v Cull Holdings Pty Ltd [1999] WASCA 72

STAUDE DCJ:

Introduction

In this action the plaintiff claims a liquidated sum of $155,424.34 for plumbing work done for the defendant in relation to a residential development of which the defendant was the builder. The defendant disputes liability for the plaintiff's claim and counterclaims damages.
There are two appeals by the defendant from decisions of the principal registrar. By r 15(6) of the District Court Rules 2005 the appeals are to be conducted as new hearings. Accordingly, it is not incumbent on the defendant to show error. Rule 15(5) provides that an appeal does not operate as a stay unless the court orders otherwise.
The first appeal, by notice dated 28 September 2011, is from the principal registrar's decision on 20 September 2011 not to strike out the plaintiff's substituted reply and defence to counterclaim filed 15 September 2011 pursuant to the orders of his Honour Judge Stavrianou. In that appeal the defendant seeks an order that the substituted reply and defence to counterclaim be struck out on the grounds that it may prejudice, embarrass or delay the fair trial of the action.
The second appeal, by notice dated 11 October 2011, is from a springing order made by the principal registrar on 7 October 2011 in terms that the defendant's defence and counterclaim be struck out and judgment entered for the plaintiff with costs unless by 12 October 2011 the defendant file and serve a further list of documents verified by affidavit relating to an arbitration between the defendant and D & M (Australia) Pty Ltd (D & M), the building owner. As the order was not complied with the plaintiff is entitled to judgment unless the appeal succeeds.
The orders made by his Honour Judge Stavrianou on 12 August 2010 followed an appeal by the defendant from a decision of the principal registrar on 14 April 2011 striking out parts of the amended defence, set‑off and counterclaim dated 25 February 2011 and granting leave to the defendant to amend.
The appeal was dismissed, but a number of programming orders were made, including that the defendant have leave to amend its defence, set‑off and counterclaim in accordance with a minute dated 3 August 2011. It was otherwise ordered that any party may amend any pleading without leave at any time prior to the date seven weeks before the day fixed for the commencement of the trial, namely 22 November 2010, and that the other party may without leave make consequential amendments within seven days.
It is clear from the orders made that his Honour was concerned by the slow progress of the action to trial and questions of proportionality in respect of the interlocutory proceedings. Appropriately, in my respectful view, his Honour took a robust and pragmatic approach intended to bring the parties as economically and expeditiously as possible to an early trial in a manner that is wholly consistent with the principles of case flow management and, as far as the pleadings are concerned, the approach authorised in Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASCA 281.
Regrettably, his Honour's expectations have not been realised. I was informed that the hearing of this matter on 1 November 2011 that on 19 October 2011 the trial dates were vacated by consent.

Appeal from decision not to strike out substituted reply and defence to counterclaim

Pursuant to the orders of 12 August 2011, the defendant filed an amended defence, set‑off and counterclaim dated 26 August 2011. The plaintiff on 14 September 2011 filed a substituted reply and defence to counterclaim. On 19 September 2011, the day before a scheduled directions hearing before the principal registrar, the defendant's solicitors wrote to the plaintiff's solicitors setting out objections to the substituted reply and defence to counterclaim. The letter sought particulars of pars 2, 4(a)(iii), 8 and 23 and observed that pars 23, 24 and 25 were liable to be struck out.
In a minute of proposed directions prepared for the purposes of the hearing on 20 September 2011 the defendant sought an order that the plaintiff's pleading be struck out. The principal registrar declined to make such an order, but observed that the plaintiff would have to give particulars, making a general order to that effect. The lack of specificity in the order for particulars is explained by the principal registrar's comment that the adequacy of the particulars to be given would be determined at a future directions hearing.
The defendant complains that the reply and defence to counterclaim was filed out of time without consent or further order and that it is objectionable for other reasons. As to the first point, absent an order to that effect, the fact that the pleading was filed and served out of time does not render it liable to be struck out: Rules of the Supreme Court 1971 O 20 r 19. The other objections are based on the failure of the plaintiff to comply with the rules of pleading.
The relevant principles were summarised in Noye v Gwilliam [2006] WASC 183 [35] by Master Newnes as follows:
In determining whether a pleading is likely to prejudice, embarrass or delay the fair trial of the action, it is fundamental that a party is entitled to a statement of the opponent's case sufficiently clear to allow the party a fair opportunity to meet it: Gould & Birbeck & Bacon v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 at 517; Dare v Pulham (1982) 148 CLR 658 at 664. A pleading may therefore be struck out where it is vague, ambiguous or pleaded at too great a level of generality so as to leave the other party in doubt as to how to respond to the pleading: Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405 at 413; Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J.
The question of whether a pleading is likely to prejudice, embarrass or delay the fair trial of the action in any particular case invariably involves matters of judgment and degree. The approach to be taken to such an objection to a pleading, or proposed pleading, must be directed to the attainment of the objectives set out in O 1 r 4B. Such an approach requires a degree of flexibility that may not always be consistent with the practices of earlier times. The question of whether a pleading is so defective that it should be struck out is generally to be answered by whether or not the pleading serves the fundamental objective of pleadings and whether any significant deficiencies in it can adequately be overcome by the provision of particulars or by some other means. While it is necessary that a pleading set out with reasonable clarity and detail the case that the other party must meet, the focus must be on whether the pleading is sufficient for the fair and proper disposition of the case, not whether it complies meticulously with the rules of pleading.
Looking, then, at the defendant's substantive objections, I will deal firstly with the main point, as I see it, which is that the pleas of estoppel and abuse of process in pars 24 and 25 of the reply and defence to counterclaim are embarrassing.
Paragraph 24 alleges that by reason of the defendant's conduct of or in respect of an arbitration concerning matters in dispute between the defendant and D & M (Australia) Pty Ltd, the defendant is estopped from pleading or pursuing the causes of action or otherwise seeking the relief referred to in pars 6, 7, 7A, and 10 ‑ 23 of the amended defence, set‑off and counterclaim. Paragraph 25 of the reply and defence to counterclaim alleges that pars 10 to 23 are an 'abuse of law' [sic – process]. I will briefly set out what those parts of the defence and counterclaim allege.
Paragraphs 6, 7 and 7A contend that the plaintiff breached an implied term to do the contracted plumbing work with reasonable care and skill by supplying incorrectly sized firewater pipes, incorrect water meters, and water and drainage pipes without acoustic lagging, all of which required rectification or replacement, impliedly at the defendant's cost, and which otherwise rendered the plaintiff's work worthless in respect of those items.
Paragraph 10 alleges that in breach of an implied term that the work would be carried out with reasonable diligence and due expedition the plaintiff failed to provide sufficient workmen to carry out the work thus causing undue delay.
Paragraph 11 alleges that the plaintiff's breaches of the contract caused a dispute between the defendant and the building owner causing financial loss to the defendant by way of loss of profit.
Paragraphs 13 to 23 contend that by reason of the alleged breaches of contract, a breach by the plaintiff of a common law duty of care and a breach of s 52 of the Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010) the defendant has suffered economic loss and is entitled to damages.
The plaintiff has not purported to plead that any decision of the arbitrator precludes the agitation of the same issue in this action, so it is not the plaintiff's case that an issue estoppel as such arises from the arbitration. Clearly, none can, as the plaintiff was not a party to the arbitration and was not a privy of the defendant. Rather, the plaintiff seeks to show that the defendant's denial of liability for the plaintiff's claim and its counterclaim for damages are inconsistent with its position in the arbitration. The plaintiff contends that the defendant ought not be allowed to take a different position in these proceedings from the position it took in the arbitration and that the counterclaim is an abuse of process. In this context I understand that the use of the word 'estopped' does not connote a legal bar to the counterclaim, but merely describes the factual basis upon which the abuse of process is alleged.
I was taken to an affidavit sworn on 12 March 2009 by the defendant's director Mr Crouch in opposition to an application for summary judgment wherein at par 29 Mr Crouch stated that the defendant held sufficient money on trust to pay all nominated subcontractors pending the outcome of the arbitration.
The defendant was successful in the arbitration and has consequently been paid monies due it under the head contract. The plaintiff contends that the very issues raised in par 7 of the amended defence, set‑off and counterclaim were resolved in favour of the defendant and therefore cannot be maintained against the plaintiff.
Furthermore, it is contended that evidence of Mr Crouch in the arbitration was that the plaintiff completed 82% of the agreed plumbing work which is inconsistent with the allegation in par 4 of the amended defence, set‑off and counterclaim that when the agreement between the plaintiff and the defendant was terminated the plaintiff had completed just over half the work. The plaintiff's position is that about 90% of the work was completed.
These facts, if found, may tend to disprove relevant parts of the defence, set‑off and counterclaim and otherwise discredit the defendant. But essentially they are matters of evidence. If the plaintiff wishes to contend that the counterclaim is an abuse of process it should apply for it to be struck out. I do not suggest that such an application would be merited, but, absent such an application, to plead an abuse of process in a defence to counterclaim is unnecessary and is embarrassing. Of course, it does not mean, as I observed during argument, that the plaintiff may not lead evidence at trial of the defendant's pleadings and evidence in the arbitration, and the outcome of the arbitration, insofar as it is relevant to issues of loss and damage, to show that its defence and counterclaim are untenable or otherwise unmerited.
In the circumstances I uphold the defendant's objection to pars 24 and 25.
Related to the defendant's objection to pars 24 and 25 is the objection to par 23 which is said to be embarrassing in that it asserts that the defendant's loss and damage was caused by the dispute between the defendant and D & M as pleaded in par 8 which, the defendant submits, refers to six disputes without any pleaded facts to establish the same.
Paragraph 23, in answer to the counterclaim, alleges that, if the defendant suffered any loss and damage, it was caused by its dispute with D & M as pleaded in par 8, which, in answer to the defendant's allegation of a failure on the part of the plaintiff to work with reasonable diligence and due expedition causing injurious delay, contends that any delay was due to nine pleaded causes for delay occasioned by the defendant or D & M, or both.
I find no defect in par 23 or par 8. The defendant's claim is for loss of profits from its contract with D & M and loss of profits from other commercial opportunities related to that company: defence and counterclaim pars 12 ‑ 23. The plaintiff is entitled to plead, in the alternative to its denial, that if the defendant has suffered such loss and damage it is by reason of other events for which the plaintiff is not responsible.
The defendant submits that pars 8 and 23, which were not pleaded prior to the substituted reply and defence to counterclaim, are pleaded in aid of a fishing expedition aimed at obtaining discovery of documents in the arbitration between the defendant and D & M. I do not accept that submission. The relationship between the defendant and D & M was put in issue by the defence and counterclaim. Furthermore, I do not consider that either paragraph requires particularisation, having regard to the scope of discovery and the orders that have been made for the exchange of witness statements. I do not accept that the defendant does not know what the case against it is in this respect.
The defendant objects to par 2 on the basis that it lacks particularity. Paragraph 5 of the defence and counterclaim alleges that when the agreement was terminated the plaintiff had completed just over half of the plumbing work. In par 2 of the reply and defence to counterclaim the plaintiff disputes the allegation and says that it had performed most of the work. The defendant's submission is that it cannot tell from the plaintiff's invoices what work was done. The plaintiff refutes the submission, pointing to a letter from the plaintiff to the defendant dated 18 May 2008 annexed to an affidavit of Raymond John Beale sworn 17 March 2009 in the summary judgment application which details what work was left uncompleted when the agreement was terminated.
In my opinion such a letter is no substitute for particulars where the claim is for a quantum meruit. As counsel for the plaintiff conceded at the hearing, the claim is not for the balance of the contract price as the contract was terminated before the plaintiff could complete the work. It is for the plaintiff to prove that the work represented by the invoices was done and that the sums charged are fair and reasonable. This should be pleaded: West Boat Builders Pty Ltd v Cull Holdings Pty Ltd [1999] WASCA 72 [4].
In a case such as this one would expect the work for which the claim is made to be a matter of common knowledge. Indeed, I cannot see from the court file that the defendant has ever requested further and better particulars of the statement of claim on the basis that it needed to know what work was represented by the claimed invoice amounts. In my view if the defendant needs particulars, which I doubt, it should seek them by reference to the statement of claim.
The defendant's objection to par 4 is that it pleads to particulars. No basis for this objection has been shown. In relation to par 4(a)(iii) the defendant contends that the plaintiff does not specify in what respect the letter of Simon Tan & Associates Pty Ltd is incorrect. The defendant refers to the letter in its defence and counterclaim as a basis for alleging that the firewater pipes installed by the plaintiff did not satisfy a relevant standard. The plaintiff disputes that allegation and says that the letter is incorrect in that respect. The objection is baseless.
With respect to the defendant's appeal from the decision of the principal registrar not to strike out the substituted reply and defence to counterclaim, I allow the appeal in part and order that pars 24 and 25 be struck out.

Appeal from springing order for specific discovery

I turn now to the second appeal which is from the springing order for specific discovery. There are two issues. The first is whether specific discovery should be ordered with respect to all documents relating to the arbitration between the defendant and D & M, and the second is whether, in any event, a springing order should be made.
I have indicated in my reasons in relation to the first appeal that, in my view, documents relating to the arbitration are relevant to the extent that they are liable to be discovered by the defendant. Relevant in this context means relating to the matters in question in the action. The action arises with respect to a subcontract for plumbing work between the plaintiff and the defendant in relation to a residential building development by D & M. The defendant's contractual relationship with D & M is relevant to the defence, set‑off and counterclaim pleaded by the defendant. Evidence of the significance of the arbitration between the defendant and D & M is found in an affidavit of Mr Crouch in opposition to summary judgment to which I have referred.
At a directions hearing before the principal registrar on 22 August 2011 a general order was made for the provision of discovery on oath by 5 September 2011. At the next directions hearing on 20 September 2011 the time for compliance with the order for discovery was extended to 23 September 2011. At the hearing on 20 September 2011 it was indicated that the plaintiff would be seeking discovery of documents relating to the arbitration, reference being made to a decision of Blaxell J on 11 June 2010 refusing an application by D & M for leave to appeal from the interim award of Mr Roger Davis, arbitrator, given 7 May 2009. On 22 September 2011 the defendant filed an affidavit of Mr Crouch sworn 21 September 2011 verifying a list of documents which did not include documents relating to the arbitration.
On 23 September 2011 it was ordered that 'the defendant is to discover all documents relating to the dispute between the defendant and D & M arising out of the construction works undertaken at 90 Scarborough Beach Road, Mount Hawthorn, Western Australia'. At the hearing on 23 September the solicitor for the defendant indicated that the list of documents from the arbitration would be used as the basis of a further affidavit of discovery. The principal registrar stated that his understanding at the previous directions hearing was that the D & M documents would be discovered.

A further affidavit sworn by Mr Crouch on 30 September 2011 annexed a list of documents which included documents relating to the arbitration, including the reasons for interim award of Mr Davis in redacted form, but no other arbitration documents.
At a directions hearing on 7 October 2011 the principal registrar ordered that unless by 12 October 2011 the defendant filed and served a further list of discoverable documents in compliance with the order made on 23 September 2011 and an affidavit verifying the list, the defence and counterclaim be struck out and judgment entered for the plaintiff with costs.
It was further ordered that the list of documents include, but be not limited to, witness statements, pleadings, exhibit lists, exhibits tendered, submissions, any other documents provided to the arbitrator by either party and any orders were reasons to decision of the arbitrator. I will refer to these documents as the arbitration documents.
The springing order was made, not because of the imminence of the trial, but rather because of the failure of the defendant to comply with the order made on 23 September 2011 to discover all documents relating to the dispute between the defendant and D & M. On behalf of the defendant it is submitted that the order made on 23 September 2011 was not sufficiently clear so as to require the defendant to discover the arbitration documents. The solicitor to the defendant has maintained a semantic distinction between 'dispute' and 'arbitration'.
The court is unimpressed by this distinction. Having read the transcripts of the various directions hearing that pertain to this issue, I am satisfied that the defendant solicitor knew or ought to have known that the order made on 23 September 2011 required the discovery of the arbitration documents. Moreover, it is clear from the submissions made in respect of the first appeal that the defendant was concerned to strike out the reply and defence to counterclaim in order to prevent the scope of discovery being widened to include those documents. Accordingly, I am of the view that the affidavit of discovery of Mr Crouch sworn 30 September 2011 was disingenuous. If the defendant was aggrieved by the order it should have appealed.
The requirement to discover the arbitration documents is not oppressive. The documents may be numerous, but can be discovered in bundles. In the circumstances of this case the relevance of the documents was obvious and no order for specific discovery of those documents ought to have been necessary.
On the part of the defendant it is submitted that the springing order was made with respect to an order for specific discovery which detailed seven classes of documents pertaining to the arbitration, and was therefore in different terms from the order made on 23 September 2011. It is argued that the previous order lacked clarity and specificity, such that the narrow construction placed on the word 'dispute' the purpose of determining the scope of discovery was not unreasonable.
As a corollary to that argument, it was submitted that no springing order ought to have been made before the defendant had been given an opportunity to comply with the order for specific discovery, that is, the order which set out specifically the classes of document to be included.
The defendant did not appeal the order of 23 September 2011 as it should have done. Rather, the defendant purported to comply with it on the basis of an unreasonably narrow interpretation. It did so, inappropriately, but not contemptuously, in my view, to preserve its position with respect to its application to strike out the substituted reply and defence to counterclaim which, it hoped, misguidedly, would remove the basis for the discovery for specific discovery. There is a thin line between contumacy and obstinance. I am unable to find that the defendant has been contumacious, despite the criticism I have made of it.
In relation to the order of 7 October, I would observe that it set out with considerable specificity the classes of documents to be included in discovery. Implicitly, the form of the order suggests that the previous order was ambiguous. This circumstance tends to support the defendant's contention that the earlier order was not clear, thus justifying the extent of its compliance. Although I do not accept that the previous order was unclear, the making of a further order in different terms acknowledges that it was perceived to be so, at least by the defendant.
It may also be observed that the making of a different order for specific discovery, even though it was intended to be to the same effect, as part of a springing order, would effectively deprive the defendant a right of appeal to a judge in respect of the latter order.
The defendant submits that the pending first appeal militates against a springing order. By virtue of that appeal there existed the potential, if the appeal were successful, for the defendant to argue that on the pleadings the arbitration documents did not relate to any matter in issue. Because the scope of discovery is determined by the issues, discovery is generally not ordered before the close of pleadings. Although I have now found that the scope of discovery is not altered by the challenged pleading, I consider that a springing order for specific discovery is, in the circumstances of this case, contra‑indicated by the unresolved pleading point.
These circumstances are sufficient in my opinion to warrant the setting aside of the springing order. The appeal was lodged the day after the order, within the time for compliance. Although no stay was obtained, the plaintiff has not argued that the defendant is precluded from appealing due to the 'springing' of the order. The decision of the High Court in FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 is authority for the proposition that an extension of time to comply with a springing order may be granted notwithstanding that the time for compliance has passed.
Where contumacy is not shown, the court leans in favour of a determination of disputes on their merits. This matter is close to trial. The defendant has evinced an intention to defend. In the circumstances I would allow the appeal. Despite its questionable conduct, it would be contrary to the interests of justice for the defendant to be deprived of its day in court.
On the question of the scope of discovery, I find for the plaintiff. The terms of par 5 of the order of 7 October should not be changed. I consider that the court should deal with the appeal by setting aside par 4, ordering instead that the time for compliance with the order for specific discovery be extended. As the trial has been vacated, I will hear from counsel as to what would be an appropriate period.

Redaction of arbitrator'reasons

At the first hearing of this appeal the plaintiff applied for and obtained an order requiring the defendant to produce document number 257 in the defendant's most recent list, being the reasons for decision of the arbitrator. The defendant's solicitor indicated that he wished to reserve the right to argue against the production of the document in full, but was prepared to provide to the plaintiff an edited version. I ordered that the defendant provide the plaintiff with the edited version and the court with both versions. I indicated that I would rule on the edits upon the conclusion of the appeals.
Order 26 r 1B of the Rules of the Supreme Court provides that a party must discover a document relating to a matter in question even if it contains information not related to the matter in question or information that the party objects to producing, but that the party may edit the document to hide such information. If the party edits the document the party must, in pt 1B of the list of documents, list the document, identify the document as one that contains hidden information and state why the information is hidden and, if the party objects to producing any of the hidden information, state the grounds for objecting. With respect to document 257, these requirements have not been met.
I will hear the parties further on the question of relevance.