Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority
[2007] VSC 363
•5 October 2007
a
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 7091 of 2000
| AQUATEC-MAXCON PTY LTD (ACN 002 250 482) | Plaintiff |
| v | |
| BARWON REGION WATER AUTHORITY and OTHERS | Defendants |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 August, 24 September 2007 | |
DATE OF JUDGMENT: | 5 October 2007 | |
CASE MAY BE CITED AS: | Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority (No. 8) | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 363 | |
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Practice and Procedure – costs – costs of unsuccessful claims between defendants for apportionment and contribution – Calderbank offer in context of multi-level apportionment claims – whether indemnity costs order should go against the party which was generally resistant to settlement.
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APPEARANCES: | Counsel | Solicitors |
| For Aquatec-Maxcon Pty Ltd (Aquatec) | Mr R J Manly SC and | Gadens Lawyers |
| For Barwon Region Water Authority (Barwon) | Mr Peter H Clarke | Harwood Andrews |
| For Nacap Pty Ltd (Minson Nacap) | Mr T J Margetts | Moray & Agnew |
| For MWH Pty Ltd (Montgomery Watson) | Mr D S Levin QC and Mr I H Percy | Monahan + Rowell |
| For Wynton Stone Australia Pty Ltd (Wynton Stone) and for Mr Sloggett | Mr David J O’Callaghan SC | Deacons |
| For JJP Geotechnical Engineering Pty Ltd (Barrett Fuller) | Mr John R Dixon | Phillips Fox |
| For Taylor Thomson Whitting Pty Ltd (TTW) | Ms L Chan | Minter Ellison |
HIS HONOUR:
The parties now seek final orders as to costs in these proceedings and, generally, to tidy up any loose ends. Procedurally, the structure of the counterclaim has five levels as appears from this table:
| Barwon | |||||||||||||||||
| Level 1 | |||||||||||||||||
| Minson Nacap | Montgomery Watson | Wynton Stone | Barrett Fuller | TTW | ||||||||||||
| Level 2 | |||||||||||||||||
| Montgomery Watson | Wynton Stone | Barrett Fuller | TTW | |||||||||||||
| Level 3 | |||||||||||||||||
| Aquatec | Wynton Stone | Barrett Fuller | TTW | |||||||||||||
| Level 4 | Wynton Stone | Minson Nacap | Montgomery Watson | Barrett Fuller | |||||||||||||
| Aquatec | Minson Nacap | Barrett Fuller | ||||||||||||||
| Level 5 | |||||||||||||||||
| Wynton Stone | Barrett Fuller | Aquatec | Minson Nacap | Montgomery Watson | Wynton Stone | ||||||||||||
| Sloggett | |||||||||||||||||
The parties in the left hand column of the table represent at each level the principal claimants and the principal defendants. The horizontal lines show the parties who were joined by the principal defendant or otherwise as parties against who contribution and apportionment was sought by the principal defendant at each level in order to minimise its exposure to the claim of the principal claimant at that level. The picture became a little complicated because some of the claimants did not resist the temptation themselves to sue some of these added defendants.
I have now given judgment in respect of each of the claims, reserving in many cases questions of costs. As a matter of convenience, I shall deal with each of the outstanding claims as they appear at each level.
Strictly speaking, at each level after the first, the principal party is a third party to the claim at the proceeding level. In this way Minson Nacap is a third party to the Barwon counterclaim, Montgomery Watson a fourth party to that counterclaim, Wynton Stone and TTW fifth parties to that counterclaim and Wynton Stone and Mr Sloggett sixth parties. But, as a consequence of the decision of Aquatec to join them as co-defendants to the Barwon counterclaim against it, each of those parties, other then Mr Sloggett, was also a defendant to Barwon’s counterclaim. At each level, as appears in the table, the principal party as defendant joined the four other parties, other than Barwon and the claimant against the principal party, as co-defendants for apportionment and contribution purposes. This meant that each of the parties, other than Barwon, had a multitude of procedural statuses. For example, Minson Nacap was second defendant to Barwon’s counterclaim, a firstnamed third party to Aquatec’s claims, a thirdnamed fifth party to Montgomery Watson’s claims against Wynton Stone and to Montgomery Watson’s claims against TTW and a thirdnamed sixth party to TTW’s claims against Barrett Fuller. The parties in these pleadings did not always respect these multiple characteristics and no point was taken about this. Nevertheless, at this, the final round of the judgments which this litigation has produced, the distinctions may assume some importance.
Before I turn to the particular applications at each level I make some general observations.
For the most part, the present claims concern applications for costs made by parties against which unsuccessful claims for apportionment or contribution were brought. The apportionment claims were brought under s. 131 of the Building Act 1993. It is important to note that the statutory entitlement to apportionment was available only where the primary claim was one for damages and, further, apportionment was available only against a co-defendant.
In this case the essential contractual structure of the project was linear as appears from the table in paragraph [14] of the principal judgment.[1] The claims for apportionment were commenced by Aquatec when it was a defendant to the counterclaim of Barwon. It joined as co-defendants for apportionment purposes Minson Nacap, Montgomery Watson, Wynton Stone, Fisher Stewart, Barrett Fuller and, later, TTW. Fisher Stewart, Barwon’s consulting engineer, took no part in the proceeding and may be ignored for present purposes.[2] Two aspects of this joinder are significant. It was made possible because Barwon sought relief in damages against Aquatec for breach of its head contract with Barwon. Second, it required Aquatec to allege that each of the joined defendants owed a duty of care to Barwon and was liable to Barwon in damages. As the case proceeded, Barwon evinced uncertainty as to whether its claim against Aquatec was in truth one for damages rather than one for a liquidated sum due under its head contract. In fact, when it finally settled with Aquatec and sought a consent judgment against that party it was, even then, unclear whether this sum represented damages or not. I was simply told it was an agreed sum. Aquatec, too, had an ambivalent attitude towards its apportionment claims. After some vacillation it finally abandoned them.
[1][2006] VSC 117.
[2]It is in liquidation and may represent yet another of the corporate casualties of this project or, perhaps, of this litigation.
But following the original joinder by Aquatec the rush to apportionment appeared irresistible. As each layer was added to the litigation, each of the parties which had been added as defendant by Aquatec at level 1, just moved position at each level; at one level it may be a principal defendant against which monetary relief was sought, and others it was a party against which apportionment was sought. At times, it appeared that little thought had been given to the requirement that the party against which apportionment was sought had to be shown to be liable in damages to the principal claimant at that level.
All of these apportionment claims very much complicated the pleadings in the proceeding and, as will be seen, created difficulties for the parties seeking to achieve settlement. But my perception is that, these matters apart, the apportionment claims added little if any extra time to the trial. For this reason, and for the assistance of the Taxing Master, I will direct that the costs of these apportionment and contribution claims be the costs only of the pleadings passing between the parties with respect to those claims.
This, together with the fact that most of the respondents to these apportionment and contribution claims themselves advanced similar claims against other parties, doubtless provides an explanation for the position adopted by Aquatec, Minson Nacap and TTW that these costs should lie where they fall. The remaining parties, Montgomery Watson, Wynton Stone and Barrett Fuller, however, seek costs orders in respect of these unsuccessful claims brought against them. And, by an understandable volte-face, having received these claims, Aquatec, Minson Nacap and TTW argued that, if they should be obliged to pay these costs to Montgomery Watson, Wynton Stone or Barrett Fuller, so too should those parties pay costs of their unsuccessful claims against Aquatec, Minson Nacap and TTW.
The approach I have adopted with respect to these applications for the costs of abandoned or unsuccessful apportionment and contribution claims is that costs should ordinarily follow the event. This was generally accepted as a starting point, so that argument against the claims for costs was focussed upon the facts which should lead me to depart from this basic approach.
Level 1 – Barwon and Aquatec
On 25 July 2006, I gave judgment on the claim by Aquatec against Barwon and on the counterclaim by Barwon against Aquatec in terms of the agreement reached between these parties.[3] The judgment in favour of Barwon was for $2,924,557 plus $2,041,522.77 interest and costs.
[3]See [2006] VSC 270.
Aquatec had brought contribution proceedings and sought apportionment of its liability to Barwon against Minson Nacap, Montgomery Watson Wynton Stone, Barrett Fuller and TTW. These claims were not pursued and I reserved their costs.
The Aquatec claims for contribution and apportionment against Minson Nacap, Montgomery Watson, Wynton Stone, Fisher Stewart, Barrett Fuller and TTW were abandoned in the course of the trial on 1 December 2005. Now, Wynton Stone and Barrett Fuller seek costs of these abandoned claims.
Aquatec resists Wynton Stone’s application on the basis that Wynton Stone itself unsuccessfully sought apportionment. This is factually correct. Wynton Stone sought apportionment at level 1 against Minson Nacap, Montgomery Watson, Barrett Fuller, Fisher Stewart and TTW. It did not seek apportionment against Aquatec. In any event, upon the approach I have adopted, this might be a reason for making a costs order against Wynton Stone; it is not a reason for refusing the order sought by Wynton Stone.
Aquatec resists the Barrett Fuller application on the basis that Barrett Fuller was found to have been in breach of its contract with Wynton Stone and this was a significant contributing factor to the failure of the tanks which provoked this litigation. I am not persuaded that this is a reason to disturb the usual order for costs as between Aquatec and Barrett Fuller. The fact remains that Aquatec’s claim failed. If it had no claim it must bear the costs consequence of having brought it.
Barrett Fuller then seeks a special order for costs by reason of an offer of compromise dated 11 November 2005. On its face, the offer is expressed to have been made pursuant to R. 26.10 and as a Calderbank offer. It does not satisfy the requirements of O. 26. It is expressed as two alternative offers to operate in the event that the liability of the defendants to counterclaim is found to be proportionate or joint and several, respectively. The first alternative is in fact an offer to pay a lump sum inclusive of costs. Each offer required acceptance by all of the other defendants to counterclaim if it is to be effective against any of them. It is incapable of a simple acceptance by any one offeree.[4]
[4]Barwon Regional Water Authority v Aquatec-Maxcon Pty Ltd [2007] VSCA 186.
It may then be considered as a possible Calderbank offer which I may have regard to in determining the basis for taxation in accordance with the principles laid down in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2).[5]
[5](2005) 13 VR 435.
In considering the effect of the offer and the reasonableness of its non-acceptance, I am mindful that it is said to operate in a relatively unfamiliar environment, that of proportionate liability under s. 131 of the Building Act. A feature of this regime is that the Court is obliged to give a separate judgment to each defendant found to be liable. These means that, if one of a number of defendants makes an offer to the plaintiff in conventional terms, that is, an offer to pay a sum plus costs, there are grave risks for the offeree if the offer were accepted. In the present case where the apportionment claims are brought at multiple levels, there are also serious risks for the offeror.
The difficulty with the Barrett Fuller offer is that it appears to have been drawn and made, not in an effort to settle, but rather as an insurance against an adverse judgment. This is demonstrated by the fact that none of the offerees could sensibly respond to it by saying simply that the offer was accepted. The applicability of the alternatives depends upon a determination as to the nature of the liability of the defendants to the Barwon claim. This is an issue which Barwon could agree upon but Barwon is not an offeree.
I will therefore not make a special order for Barrett Fuller’s costs.
This leaves the application by Wynton Stone for an order against Barwon. I have been informed on 30 August that Wynton Stone does not pursue this application and I shall say nothing further about it.
Level 2 – Aquatec - Minson Nacap
On 9 August 2006 I gave judgment in favour of Aquatec against Minson Nacap in the sum of $3,223,392 and interest of $2,367,688.80 and costs.[6] Minson Nacap had at this level sought apportionment or contribution against Montgomery Watson, Wynton Stone, Barrett Fuller, Fisher Stewart and TTW on the basis that they were in part responsible for the loss of Aquatec. These claims were rejected at trial on the basis that none of these parties, other than TTW, owed to Aquatec a duty of care and that TTW was itself not in breach of duty.[7] Wynton Stone and Barrett Fuller now seeks costs of Minson Nacap’s unsuccessful claims against them.
[6]See [2006] VSC 285.
[7][2006] VSC 117 at [359].
With respect to the Wynton Stone application, for the reasons already set out, I will order that Minson Nacap pay Wynton Stone’s costs of the failed claims against it.
Wynton Stone also seeks an order for the costs of the Minson Nacap damages claim in negligence which was abandoned in the course of the trial. On 29 November 2005, I gave leave to Minson Nacap to deliver an amended pleading against Montgomery Watson, Wynton Stone, Barrett Fuller, Fisher Stewart and TTW. In the ordinary course, Wynton Stone would be entitled to its costs of and occasioned by the amendment.[8] My perception of the trial was that the abandonment of this claim did not otherwise adversely affect Wynton Stone. In any event, I would be reluctant in a trial such as this to make an order dealing with costs of a particular issue. I will not make the order sought.
[8]Rule 63.17.
Minson Nacap responds to this application by itself seeking a costs order against Wynton Stone in respect of the unsuccessful Wynton Stone claim for apportionment and contribution. Wynton Stone says that this claim stands in a different light: it was conditional upon a finding against it that Wynton Stone is liable to Barwon, Aquatec, Minson Nacap or Montgomery Watson, as the case may be. This liability was never established other than that to Montgomery Watson under its warranty. And so, it was said, no order should be made on the third party claim which had not determined.
In the case of a third party claim for contribution, the failure of a plaintiff’s claim will not inevitably relieve the defendant of its liability for the costs of the third party. By analogy, the same result will obtain in the circumstances of this case. Having received a claim, it was open to Wynton Stone to make a decision whether it would seek to pass the risk to other parties. It decided to do so and I do not criticise it for this. The fact remains that it must bear the consequences. I will therefore make an order that it pay the costs of its unsuccessful claim against Minson Nacap.
Barrett Fuller also seeks costs of the Minson Nacap failed apportionment and contribution application. For reasons already discussed, I will make the order sought and, further, reject the Barrett Fuller application that the costs be taxed otherwise than on a party and party basis.
Minson Nacap again responds by seeking a like order against Barrett Fuller. For reasons given I will make the order sought.
Level 3 - Minson Nacap - Montgomery Watson
On 1 December 2006 I gave judgment[9] between these parties as follows:
·On the Minson Nacap claim against Montgomery Watson, judgment for Minson Nacap in the sum of $4,138,696.00 plus $2,640,951.60 by way of interest plus costs to be taxed.
·On the Montgomery Watson cross-claim against Minson Nacap, judgment for Montgomery Watson to the sum of $175,296.70 with no order as to interest or costs.
[9]See [2006] VSC 459.
At this, the third level Barrett Fuller also seeks that Montgomery Watson pay its costs of the failed apportionment and contribution claims. I will make an order in the terms already mentioned and for the reasons given.
Montgomery Watson then seeks to pass this burden to Wynton Stone by a Sanderson order. The basis for this is that Wynton Stone ought to have itself sued Barrett Fuller,[10] who was its subcontractor, and, in such event it would have succeeded given the findings made at trial. This would have meant that Barrett Fuller would have been found liable for Wynton Stone’s costs of the trial. The decision of Wynton Stone not to bring a damages claim against Barrett Fuller was maintained until after the trial was concluded. Counsel for Montgomery Watson offer, by way of explanation for this surprising decision, the fact that each of Wynton Stone and Barrett Fuller shared a common insurer. This may be so. My task, however, is to fashion a costs order in terms of the proceeding as the parties chose to conduct it. As is the case with the other parties, at different levels, Montgomery Watson chose to bring a claim against Barrett Fuller and the claim failed. I will not make the order sought by Montgomery Watson.
[10]It did not do so, contenting itself with seeking to apportion with Barrett Fuller responsibility for the damages sought against it, Wynton Stone,
Level 4 - Montgomery Watson - Wynton Stone and TTW
At this level Montgomery Watson sued Wynton Stone and TTW. On the claim against Wynton Stone on 1 May 2007 I gave judgment[11] against Wynton Stone in the sum of $4,138.696 and interest in the sum of $2,946,601.08. I reserved the costs of this claim. On the Montgomery Watson claim against TTW on 23 March 2007, I gave judgment against TTW in the sum of $4,138,696 and interest in the sum of $1,985,340.74 and costs to be taxed.
[11]See [2007] VSC 213.
Montgomery Watson seeks an order for the costs of its successful claim against Wynton Stone and, further, that part of these costs be taxed on an indemnity basis.
I will make the first order. The claim for a special costs order is based upon what was described as the unreasonable attitude of Wynton Stone to a number of reasonable settlement offers made by Montgomery Watson. These offers were made on 15 May 2003, 9 October 2003, 5 November 2003, 19 December 2003, 24 December 2003 (two offers), 14 January 2004, 23 August 2005, 30 August 2005, 18 October 2005, 22 November 2005, 6 December 2005 and 7 December 2005. It was not put that I should act upon the basis that the non-acceptance of any one of these offers was unreasonable in the sense that is required under the Hazeldene’s Chicken Farm decision; it was put that the Wynton Stone response to them and the terms of its own counter-offers were such that it showed itself to be not committed to the cause of compromise. Further, it was said that the result achieved by Montgomery Watson against Wynton Stone was better than any of its offers and a good deal better for Montgomery Watson that any of the Wynton Stone counter-offers.
I accept as a general proposition that the policy of the Court is to encourage a just settlement of litigation before it. To that end the Court promotes mediation and protects the confidentiality of settlement discussions. In order to encourage litigants to face up to serious offers of settlement the Court, when making orders as to costs, may have regard to offers made under Order 26 and Calderbank offers. Moreover, in undertaking this task, the Court will approach offers made and responses to them in a flexible and practical way[12] having regard to the nature and complexity of the litigation and to the costs savings which might have followed had the offer been accepted by the suggested unreasonable party.[13] In the appropriate case, the Court might undertake the task of evaluating the reasonableness of the response of an offeree to an offer, even one which is not expected to be accepted.[14] Such a task, however, is directed to a particular offer or offers.
[12]See Lend L
lease Retail Projects Pty Ltd v Construction Engineering (Aust) Pty Ltd [2000] VSCA 114.[13]Henderson v Simon Engineering (Australia) Pty Ltd [1998] VR 867.
[14]Toomey v Scolaro’s Concrete Constructions Pty Ltd [2002] VSC 28 at [28], per Eames J.
I think it undesirable to engage in a general assessment of the negotiating conduct of the parties as counsel for Montgomery Watson would have me do. There are a number of reasons for this. First, such an enquiry might have the consequence of unnecessarily prolonging litigation and increasing costs to the parties. Second, the material available, that is the unprivileged material, may represent only part of the picture. Third, it is not appropriate at the end of a trial to require the Court to undertake an examination of what the negotiating parties might or might not have done, especially when the result of the trial is known. Fourth, as is this case demonstrates, there may be good commercial reasons for a party adopting a particular position. It is undesirable that the Court be required to weigh up these considerations and to apply a general test of reasonableness. Next, as became apparent in the course of argument, the contentions put on behalf of Montgomery Watson as to the costs savings which might have been achieved, depended at various points upon speculation. If Wynton Stone had accepted an offer or adopted a more reasonable approach, other parties which also did not accept the offers might have taken an different position or positions. No evidence was offered as to the states of mind of those parties. Sixth, in a case such as the present with numerous parties and issues, it may be difficult to single out the position of one party for such an examination. I do not say that, in an extreme case an obdurate litigant might not be visited with a punitive costs order. But this is not such a case. I will not make the special order sought.
Wynton Stone says, too, that I should include in the costs order, in favour of Montgomery Watson, some adjustment for issues upon which Montgomery Watson was unsuccessful. These are set out in its submission of 21 August 2007. I decline to do so. The issues which it would seek to excise from the costs order are not so clear-cut that it is appropriate to depart from the general rule. In any event, this is not a case where it is desirable, if it be possible, to make costs orders with respect to separate issues.
Level 5 - TTW - Wynton Stone, Sloggett, Barrett Fuller
At trial I found that each of Wynton Stone and Mr Sloggett was liable to indemnify TTW in respect of the judgment against TTW in favour of Montgomery Watson. On 4 May 2007[15] I made what was called a “leapfrog” order against them with the effect that each of them suffered judgment in favour of Montgomery Watson in the sum of $4,138,699 and interest which was then not quantified. As to costs, I made a Bullock order against Wynton Stone and Mr Sloggett in respect of these costs.
[15]See [2007] VSC 127.
The TTW claim against Barrett Fuller was for its defective geotechnical work. The claim failed and I will order that Barrett Fuller have its costs. I understand that Barrett Fuller seeks that part of these costs be taxed on an indemnity basis relying, again on its offer of compromise of 18 November 2005. For reasons already given, I decline to make such an order.
TTW now seeks to pass the costs payable to Barrett Fuller to Montgomery Watson on the basis that the nature of Montgomery Watson’s claims against TTW made it reasonable for TTW to seek to pass them to Barrett Fuller. It is relevant to observe that Montgomery Watson succeeded in its claim against TTW. TTW’s claim over against Barrett Fuller, seen in retrospect, was unwise. In these circumstances, I see no reason to relieve TTW of the consequences of that decision.
.
At this level, too, Barrett Fuller and TTW, as well as Wynton Stone and Barrett Fuller, exchanged unsuccessful claims for contribution and apportionment. I will make the usual orders for costs against each of them.
On 6 July 2007 I refused an application by Wynton Stone at this level to amend its claim against Barrett Fuller to introduce a claim for damages for breach of duty which had previously been alleged in the context of its apportionment claim. I reserved the costs of that application. There being no resistance I will order that the costs of that application be paid by Wynton Stone.
Conclusions
In the course of the numerous applications which followed the giving of the principal judgment in this proceeding, the parties were agreed that it would be sensible that any appeals run together. To this end they proposed, and to the extent that I have power to do so, I agreed, that time for appeal or to seek leave to appeal from any of the orders and judgments not run until all of the applications were concluded. This has now occurred. I have included such an order in the paragraphs which follow.
I, therefore, propose the following orders:
(1)The costs of Montgomery Watson of its claim for damages against Wynton Stone including reserved costs be paid by Wynton Stone.
(2)The costs of Barrett Fuller of the claim brought by TTW against it for damages including reserved costs be paid by TTW.
(3)The costs of Aquatec, of any claim for contribution or apportionment brought against it by Minson Nacap, Montgomery Watson, Wynton Stone, Barrett Fuller or TTW be paid by the claimant concerned.
(4)The costs of Minson Nacap of any claim for contribution or apportionment brought against it by Aquatec, Montgomery Watson, Wynton Stone, Barrett Fuller or TTW be paid by the claimant concerned.
(5)The costs of Montgomery Watson of any claim for contribution or apportionment brought by Aquatec, Minson Nacap, Wynton Stone, Barrett Fuller or TTW be paid by the claimant concerned.
(6)The costs of Wynton Stone of any claim for contribution or apportionment brought against it by Aquatec, Minson Nacap, Montgomery Watson, Barrett Fuller or TTW be paid by the claimant concerned.
(7)The costs of Barrett Fuller of any claim for contribution or apportionment brought against it by Aquatec, Montgomery Watson, Minson Nacap or TTW be paid by the claimant concerned.
(8)The costs of TTW of any claim for contribution or apportionment brought by Aquatec, Minson Nacap, Wynton Stone, Barrett Fuller or Montgomery Watson be paid by the claimant concerned.
(9)The amount of costs ordered in paragraphs (3) to (8) be limited to the costs of pleadings between the applicant for contribution or apportionment and the respondent respectively.
(10)The sums payable under orders contained in paragraphs (3) to (8) be set off against other sums payable between the same parties under other orders made under those paragraphs.
(11)That the costs of Barrett Fuller of the application by Wynton Stone brought in May 2007 to amend its statement of claim be paid by Wynton Stone.
(12)The time for appeal from any orders in this proceeding made consequent upon the trial of this proceeding run from the date of the authentication of this order.
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CERTIFICATE
I certify that this and the14preceding pages are a true copy of the reasons for judgment of Byrne J of the Supreme Court of Victoria delivered on 5 October 2007.
DATED this 5th day of October 2007.
Associate
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