APH Contractors Pty Ltd v Earl
[2014] WADC 52
•23 APRIL 2014
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: APH CONTRACTORS PTY LTD -v- EARL [2014] WADC 52
CORAM: REGISTRAR KINGSLEY
HEARD: 13 MARCH 2014
DELIVERED : 23 APRIL 2014
FILE NO/S: BUN CIV 17 of 2013
BETWEEN: APH CONTRACTORS PTY LTD
Plaintiff
AND
ALAN EARL
IAN EARL
NEIL EARL
Defendants
Catchwords:
Practice - Order 16 Rules of the Supreme Court - No new principles
Legislation:
Nil
Result:
Application dismissed
Representation:
Counsel:
Plaintiff: Mr Scurria
Defendants: Mr D Beere
Solicitors:
Plaintiff: Tottle Partners
Defendants: Lane Buck & Higgins
Case(s) referred to in judgment(s):
Agar v Hyde [2000] HCA 41
Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209
Barrick Gold of Australia Ltd v FL Smidth Inc [2007] WASC 186
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Hawkins v Clayton (1988) 164 CLR 539
Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133
Michael v Nicolson (Unreported, WASC, Library No 950660, 1 December 1995)
REGISTRAR KINGSLEY: By a chamber summons dated 17 October 2013, the defendants seek leave to bring an application pursuant to O 16 Rules of the Supreme Court 1971 out of time, and seek orders that the plaintiff's claim be dismissed.
A writ of summons endorsed with the statement of claim was filed on 22 July 2013 and an appearance entered on 29 July 2013. The defendants then filed a defence and counterclaim on 12 August 2013 with the plaintiff's reply and defence to counterclaim filed 2 September 2013.
The defendants' counsel submits that the reply and defence to counterclaim confirmed the view of the defendants that the plaintiff had no case. On 13 September 2013 the defendant's solicitors by letter invited the plaintiff to consent to its claim being dismissed. The plaintiff declined that invitation and the defendants' application was filed on 23 October 2013. The defendants' application is out of time by 50 days.
The plaintiff opposes leave being given submitting that the onus is on the defendant to justify any delay by affidavit evidence. The plaintiff's solicitor submits that the fact there is no evidence to explain the delay is fatal to the application – citing Michael v Nicolson (Unreported, WASC, Library No 950660, 1 December 1995) in support. Kennedy ACJ and Rowland ACJ stated that no explanation for the delay was given by way of affidavit and both agreed that omission would have justified the application being dismissed.
The conduct of proceedings must be considered in light of O 1 r 4B Rules of the Supreme Court which, in essence, provides that the procedures of the court be conducted to promote the just determination of an action, the efficient disposal of the action and at a cost that is proportionate to the value, importance and complexity of the subject matter in dispute.
In this matter there is some explanation as to delay, and unlike Barrick Gold of Australia Ltd v FL Smidth Inc [2007] WASC 186 the delay is relatively minor. Having regard to O 1 r 4B I will give leave to bring the application.
Context
The defendants owned land known as Cowaramup Country Estate and sought to subdivide the land. The conditions of subdivisional approval required the defendants to undertake earth works. The defendants appointed Cardno (WA) Pty Ltd (Cardno) as its engineer and project manager.
By a tender dated 17 November 2008, the plaintiff submitted a tender submission to Cardno. Included in the tender was an amount by provisional sums in respect of items 13.8, 13.9, 13.10 and 13.11 of the tender. These items refer to work to be done in relation to a trench.
The defendants instructed Cardno not to accept the plaintiff's tender unless the provisional items were withdrawn as provisional items and included in the lump sum contract. The plaintiff by email dated 5 December 2008 provided a revised tender where the provisional sum items were shown as 0. The plaintiff's revised tender was accepted by Cardno by letter dated 20 January 2009 (the contract).
The plaintiff commenced work and in May 2009 submits to Cardno a claim for rock excavation. Cardno rejected the claim on the basis that the rock excavation fell within the lump sum items – specifically Item 13.11. In July 2009 the plaintiff issues a Notice of Dispute and the dispute was referred to arbitration on 2 September 2009.
On 15 September 2009, a director of the plaintiff (Farrell) met with the defendant to discuss the Notice of Dispute. On the plaintiff's pleaded case, the meeting resulted in an oral agreement whereby, in consideration of the plaintiff not proceeding with the arbitration, the defendants would pay the plaintiff $320,000 inclusive of GST (the settlement sum). Plaintiff's counsel contends that the following terms of the agreement are to be implied namely, the plaintiff notify the arbitrator that the latent condition claim had settled, the plaintiff would render a tax invoice for the settlement sum and the defendants would pay that invoice within a reasonable time the settlement sum.
The defendants plead that the arbitration had no standing because the plaintiff had accepted the risk of any latent rock in the trenching. Thus there is no consideration passing in relation to the promise to pay $320,000. Further, the oral agreement is void because there is no provision for the payment of money.
The defendant further pleads that if there was an agreement it was superseded by being reduced to writing in a letter dated 23 September 2009. The pleading refers to this agreement being signed by the parties but it is common ground only the defendants signed the agreement. The defendants plead that the letter is not binding on it because of the lack of consideration and uncertainty as to payment.
In support of the defendants' application is the affidavit of Ian Earl sworn 21 October 2013 (Earl's affidavit), and in opposition by the plaintiff, the affidavit of Shane Patrick Farrell sworn 13 February 2014 (Farrell's affidavit).
Order 16 principles
A defendant, as applicant for summary judgment bears a heavy onus. 'An application for summary judgment for a defendant … should be approached with great caution' (Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209, 113). Despite the various formulations of the appropriate test for summary judgment for a defendant, in the end there needs to be a high degree of certainty about the ultimate outcome of the proceedings if it were allowed to go to trial in the ordinary way (Agar v Hyde [2000] HCA 41). A court will only dismiss a claim if the defendant can establish that the case of the plaintiff is so clearly untenable that it cannot possibly succeed (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, 129).
Defendants' submissions and discussions
The principle argument by the defendant is that either the oral agreement of 15 September or the letter dated 23 September is a collateral contract which is inconsistent with the main contract. I will refer to the two purported agreements collectively as the settlement agreement, unless the context dictates otherwise. Defendants' counsel submits that when one compares the terms relied on by the plaintiff with respect to the settlement agreement with the terms of the contract, the terms of the contract are inconsistent because the settlement agreement requires the defendants to pay for rock work which the plaintiff was already responsible for under the contract. This is reference to the fact that the plaintiff was required to remove the provisional sums for rock work and to place those items under the lump sum heading.
Defendants' counsel submits that it is a long standing principle of law that a court will not enforce a collateral agreement which is inconsistent with the main contract, citing Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133. The defendants' counsel submits that the terms relied on by the plaintiff in respect to the oral agreement are inconsistent with the terms of the contract.
I am not persuaded that the settlement agreement is a collateral contract. The settlement agreement arises out of a dispute between the parties that had been referred to arbitration. The parties agreed to compromise the arbitration dispute by purportedly entering into an agreement evidencing that compromise. I am of the opinion that the settlement agreement stands apart from the contract and cannot be categorised as a collateral contract.
The defendants' counsel submits that the oral agreement does not plead when the sum of $320,000 was to be paid, and further submits that terms could not be implied which would make payment within a reasonable time. Defendants' counsel submits that to imply a term on the grounds of business efficacy, a court must first determine whether or not there was an agreement. In any event defendants' counsel submits where there is an oral agreement a term may be implied if it is necessary for the reasonable or effective operation of the agreement of that nature in the circumstances of the case (see Hawkins v Clayton (1988) 164 CLR 539). Defendants' counsel submits that when one reads the 23 September 2009 letter a court would be very reluctant to imply the term proposed by the plaintiff.
The submissions by defendants' counsel would, in my opinion, in themselves be enough to refuse the defendants' application. On the defendants' counsel's submissions there would be required a contextual examination of the circumstances surrounding the making of the oral agreement, and the letter of 23 September 2009. Further, it is common ground that the defendants made a payment of $175,000 to the plaintiff, presumably in accordance with the oral agreement (or alternatively their understanding of the letter of 23 September 2009) and there was subsequently an email exchange between the defendants and the plaintiff seeking an extension of time for the balance of monies owing.
Defendants' counsel submits that there was an obligation to act in good faith in carrying out the contract. As I understand it, this argument is directed to the oral agreement and seeks to avoid the oral agreement on the basis of lack of good faith. Defendants' counsel submits that an attempt by the plaintiff to impose on the defendant an obligation to pay an additional amount for removal of rock, when the plaintiff took that risk on in entering into the contract, is contrary to the contractual objects of the contract and a breach of good faith.
In support defendants' counsel cite Mason AF, in 'Contract, Good Faith and Equitable Standards in Fair Dealings' [2000] 116 LQR 66, 69 where it is stated:
It is probable that the concept embraces no less than three related notions:
(1)an obligation on the parties to cooperate, in achieving the contractual objects (loyalty to the promise itself);
(2)compliance with honest standards of conduct; and
(3)compliance with standards of conduct which are reasonable having regard to the interests of the parties and in substance 'good faith' is no more than an excluder of 'bad faith' behaviour.
Again on the defendants' counsel argument it would be inappropriate to enter judgment in the circumstances. The context in which the Notice of Dispute was made, and the subsequent settlement agreement, would need to be put to the judge to determine whether, in the circumstances any concept of good faith could be imported into the dealings between the parties, and if so whether there has been a breach of the obligation of good faith.
For these reasons I am not persuaded that the plaintiff's action should be summarily determined against it. I will hear counsel on the issue of costs and the future conduct of the action.
As the plaintiff's solicitors are in Perth and the defendants' solicitors are in Bunbury I will list a directions hearing in Perth with liberty to the defendants' solicitor to appear by audio link.
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