Australian Kimberley Diamonds Nl v Cambridge Consolidated Nl
[2002] WASC 19
AUSTRALIAN KIMBERLEY DIAMONDS NL & ANOR -v- CAMBRIDGE CONSOLIDATED NL [2002] WASC 19
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 19 | |
| Case No: | CIV:2042/1998 | 6 FEBRUARY 2002 | |
| Coram: | MASTER SANDERSON | 13/02/02 | |
| 8 | Judgment Part: | 1 of 1 | |
| Result: | Trial of preliminary issue ordered | ||
| B | |||
| PDF Version |
| Parties: | AUSTRALIAN KIMBERLEY DIAMONDS NL (ACN 009 245 210) ZEPHYR MINERALS NL (ACN 008 894 442) CAMBRIDGE CONSOLIDATED NL (ACN 059 458 374) BENNETT & CO (A FIRM) |
Catchwords: | Practice and procedure Application for trial of preliminary issue Turns on own facts |
Legislation: | Nil |
Case References: | Australian Kimberley Diamonds NL v Cambridge Consolidated NL [2001] WASC 218 Ansons Pty Ltd v Merlex Corp Pty Ltd (2001) 162 FLR 443 Immer (No 154) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 Lewis v Daily Telegraph (No 2) [1964] 2 QB 601 Stirling Marine Services Pty Ltd v Austral Piling and Constructions Pty Ltd, unreported; SCt of WA; Library No 970620; 21 November 1997 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- ZEPHYR MINERALS NL (ACN 008 894 442)
Plaintiffs
AND
CAMBRIDGE CONSOLIDATED NL (ACN 059 458 374)
Defendant
BENNETT & CO (A FIRM)
Third Party
Catchwords:
Practice and procedure - Application for trial of preliminary issue - Turns on own facts
Legislation:
Nil
(Page 2)
Result:
Trial of preliminary issue ordered
Category: B
Representation:
Counsel:
Plaintiffs : Mr C L Zelestis QC & Mr A F Mizen
Defendant : Mr M J McCusker QC & Mr N P Gentilli
Third Party : No appearance
Solicitors:
Plaintiffs : Alan Mizen
Defendant : Jackson McDonald
Third Party : No appearance
Case(s) referred to in judgment(s):
Australian Kimberley Diamonds NL v Cambridge Consolidated NL [2001] WASC 218
Case(s) also cited:
Ansons Pty Ltd v Merlex Corp Pty Ltd (2001) 162 FLR 443
Immer (No 154) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26
Lewis v Daily Telegraph (No 2) [1964] 2 QB 601
Stirling Marine Services Pty Ltd v Austral Piling and Constructions Pty Ltd, unreported; SCt of WA; Library No 970620; 21 November 1997
(Page 3)
1 MASTER SANDERSON: This is the plaintiffs' application for the trial of a preliminary issue. On 24 August 2001 I ordered that this action be heard together with action CIV 1732 of 2001 and that the two actions be case managed together. I further ordered that the evidence in this action, to the extent that it is relevant and the evidence in action CIV 1732 of 2001 to the extent that it is relevant, each be deemed to be evidence in the other. I published reasons for making those orders: see Australian Kimberley Diamonds NL v Cambridge Consolidated NL [2001] WASC 218.
2 As I explained in these reasons, the proceedings which are now CIV 1732 of 2001 were originally commenced in the Federal Court, they were cross-vested to this Court pursuant to orders of Lee J made 21 May 2001. In the course of the reasons I summarised the dispute between the parties in each action and I referred to CIV 1732 of 2001 as the Federal Court proceedings and CIV 2042 of 1998 as the Supreme Court proceedings. I will adopt that terminology throughout these reasons. I also incorporate without repeating the summary of the disputes found in par 2 to par 8 in the reasons.
3 It is important to define at the outset precisely what matters the plaintiffs want determined by way of trial of a preliminary issue. Paragraph 1 of the application seeks an order that: "The issues of liability in this action be tried separately from and before any other question or issue in this action". That rather cryptic statement does not fully express the issues the plaintiffs want determined. What is required is a rather detailed analysis of the pleadings.
4 By their statement of claim the plaintiffs plead that by deed dated 26 October 1996 the plaintiffs of one part and the defendant on the other part entered into a Contract pursuant to which the defendant covenanted to drill at its cost for the plaintiffs by 31 March 1997, 30 drill holes on test sites nominated by the plaintiffs in the Cambridge Gulf (the "Contract"). The plaintiffs plead certain terms of the Contract, including an implied term that time was of the essence. It is pleaded by 31 March 1997 only seven of the test holes nominated by the plaintiffs had been drilled. This, it is said, was a breach of the Contract by the defendant as a consequence of which the plaintiffs have suffered loss and damage. What is claimed by way of damage is the cost of drilling the remaining 23 test holes.
5 There then follows an alternative plea. The plaintiffs say that if it is found that time was not of the essence of the Contract then pursuant to the provisions of the Contract, the plaintiffs had the right to terminate after
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- giving notice to the defendant of the defendant's inadequate performance and where the defendant failed within 10 days to remedy that inadequate performance. It is pleaded that the defendant wrote to the plaintiffs on 3 April 1997, saying it was terminating the drilling programme which the plaintiffs say was a repudiation of the agreement which was subsequently accepted by the plaintiffs. At the same time as the acceptance of the alleged repudiation, the plaintiffs say they gave the defendant notice of inadequate performance and required that inadequate performance to be rectified. That was not done and the plaintiffs say that accordingly the Contract was terminated.
6 Of particular importance in the context of this application is par 10 of the statement of claim. It is in the following terms:
"By clause 13.2 of the Contract the parties agreed that termination of the Contract should be without prejudice to the rights which the Plaintiffs had with respect to any antecedent breach of the provisions of the Contract."
7 By its defence the defendant denies the terms of the Contract as pleaded by the plaintiffs. What it says is that it was obliged to drill no more than 10 drill holes at each of 3 test sites nominated by the plaintiffs in the Cambridge Gulf. The defendant denies time was of the essence of the Contract either on a proper interpretation of the Contract itself or as an implied term. The defendant says that by 31 March 1997 it had drilled eight test holes nominated by the plaintiffs and had been instructed by the plaintiffs to cease drilling at the second test site and move to a third test site. The defendant denies that its correspondence evinced an intention not to be bound by the terms of the Contract and says, consequently, that the plaintiffs were not in a position to purportedly accept the defendant's repudiation. Further, the defendant says that the plaintiffs were not entitled to terminate the Contract consequent upon the terms of the Contract itself and the defendant's alleged failure to perform.
8 The defendant then pleads the fact of the Federal Court action. It pleads that the Federal Court action was the subject of a deed of settlement and release and the terms of the deed of settlement are pleaded. It is said that the deed of settlement appears as an annexure to the Contract and the parties intended both the deed of settlement and the Contract "to take effect as one document". The defendant then pleads at para 16 that:
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- "… upon a proper construction of the deed of settlement and the Contract, the plaintiffs' only remedy if the defendant failed to perform the obligations under the Contract is the prosecution of their counterclaim in the action (Federal Court action)."
9 There are then three alternative pleas. The first is that if the deed of settlement and the Contract are not properly construed as one document, then there is an implied term in the Contract that it should incorporate the deed of settlement. The second alternative is a plea of estoppel. In effect it is said that as a consequence of certain pleaded conduct, the plaintiffs are estopped from asserting that they are entitled to claim damages for breach of Contract, but rather that they are limited to pursuing the Federal Court action. The third alternative is a plea of election. The defendant says that since the alleged breach of the Contract by the defendant, the plaintiffs have pursued the Federal Court action. It is said that this is inconsistent with the claim for damages for breach of Contract and there has been an election such that the remedy of damages is now not available to the plaintiffs if there has been a breach of the Contract by the defendant.
10 Out of all of this there can be distilled a number of issues which will fall to be determined at trial. Firstly and foremost the Court will need to determine the terms of the Contract. The question then is whether the defendant has breached the terms of the Contract so as to give rise to a claim in damages, or whether the Contract has been breached and properly terminated by the plaintiffs. If the plaintiffs succeed in one or other of these two issues, there is then the question as to whether they are entitled to damages or whether as the defendant says, they are left solely with the right to pursue the Federal Court action. If the plaintiffs are found to have a right to claim damages, then the question is whether they are entitled to the cost of drilling the remaining 23 test holes or whether the measure of their damages is the difference between the value of the tenements with the test holes drilled, as against their value when the holes have not been drilled.
11 Although these are rather complex questions which will no doubt involve considerable evidence, they are issues which, in my view, stand apart from the question of whether or not there were any diamonds found on the exploration licences. In the Supreme Court proceedings this question only becomes relevant when and if it is determined that the plaintiffs are entitled to claim damages and the proper measure of damages is the value of the tenements with the test holes drilled as against their value with the test holes not drilled. Put that way there is, in my
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- view, a sound basis for determining certain questions as preliminary issues.
12 The defendant for its part vigorously opposed the plaintiffs' application. It did so on a number of grounds. First, it was submitted that as I have already determined that the two actions should be case managed together and when heard, evidence in one should be evidence in the other, there was an issue estoppel on the question of whether there should be determination of any preliminary question. With respect, the question I determined on the earlier application was entirely different from the question raised by this application. It must be said that it would have been highly preferable if, when the defendant made the earlier application, the plaintiffs had raised the possibility of trial of preliminary issue. Be that as it may, it seems to me that the two applications involve entirely separate and distinct considerations and that no issue estoppel has arisen.
13 As a second objection, the defendant submitted that the issues of liability and quantum were so inexorably linked as to make a trial of preliminary issue impractical. In written submissions counsel for the defendant went to some length to demonstrate this point. I have dealt with this issue above. While there may be some intermeshing between questions which would be raised on trial of a preliminary issue and the question of damages, I am satisfied that the two questions are sufficiently distinct and separate to justify trial of a preliminary issue being ordered.
14 Following on from this point, counsel pointed to difficulties which arise in practice on trial of a preliminary issue. It must be acknowledged that difficulties can and do arise. There is always the prospect that after trial on the question of liability there will be an appeal which necessitates a retrial, whereas if liability and quantum had been considered together, judgment could have been given after any successful appeal. I acknowledge that in this case such a possibility exists. It is a question of judgment as to how to proceed. In this case the plaintiffs' estimate that the time taken at trial on the question of liability would be between four and five days, with a similar time required on the question of damages. While counsel for the defendant did not necessarily agree with this time estimate, it does not strike me as unrealistic. On balance I am satisfied that the potential saving in time and cost to the parties in the circumstances of this case warrants ordering trial of a preliminary issue.
15 There is one further complicating factor. That is the third party proceedings. The defendant has issued third party proceedings against the firm of solicitors who drew the terms and settlement and deed of release
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- in relation to the Federal Court action. It is alleged that the defendant instructed the third party that the deed should reflect an agreement that if the defendant breached the Contract, the plaintiffs' only right lay in pursuing the Federal Court proceedings. The defendant says that if that is not the effect of the Contract, then the third party is liable to the defendant in damages. The defendant makes two points with respect to the third party proceedings. First, it is said that to order a trial of a preliminary issue will introduce complications with respect to the third party proceedings which will confuse the situation and add to the expense of all parties. With respect I fail to see how that could be so. Any liability attaching to the third party is dependant upon the plaintiffs establishing, first, that the defendant is liable for damages for breach of Contract and secondly, that the proper measure of the damages is the cost of the 23 undrilled holes. If the plaintiffs do not succeed on both of these issues, then no liability can attach to the third party. While the third party may wish to appear and take some part in the determination of the questions of liability, they are not, in my view, in any way prejudiced by having these issues tried separately.
16 The second point made by counsel had to do with the availability of witnesses. It seems that the solicitor at the third party firm who drew the deed of settlement, a Mr Shaw, is no longer employed by the firm and works in London. It was submitted that if a preliminary issue was tried, Mr Shaw might be required to give evidence on two separate occasions. While I do not necessarily accept that Mr Shaw would be required to give evidence twice, if that were so it is entirely possible he could give his evidence by video link. If that could not be arranged, or was not in the circumstances a practical option, it is likely that there would be some time between trial of the preliminary issue and any subsequent trial relating to damages. That being so, even if Mr Shaw were required to return to Australia on two separate occasions, the inconvenience would not be so substantial as to provide a reason for refusing this application. While no doubt further costs would be incurred if Mr Shaw was required to travel on two occasions, in the context of the costs of this case overall, the amount involved is relatively insignificant.
17 In all the circumstances then I am prepared to order that there should be a trial of preliminary issue. However, I am not satisfied that the orders sought in the application properly reflect orders that would be appropriate in the circumstances of this case. I direct that the parties confer in an attempt to agree a minute. If no agreement is possible then each party should provide to the Court a minute of proposed orders and I will make orders after consideration of the minutes. In a case such as this I think
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- that the proper order is the costs of the application be costs in the cause. I will hear from the parties if there is any dissent to that proposed costs order.
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