Barwon Region Water Authority v Aquatec-Maxcon Pty Ltd
[2007] VSCA 186
•10 September 2007
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 7091 of 2000
| BARWON REGION WATER AUTHORITY | |
| Appellant | |
| v | |
| AQUATEC-MAXCON PTY LTD | Respondent |
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JUDGES: | WARREN CJ, KAYE and WHELAN AJJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 28 August 2007 | |
DATE OF JUDGMENT: | 10 September 2007 | |
MEDIUM NEUTRAL CITATION: | [2007] VSCA 186 | |
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Procedure – costs – offer of compromise – multiple defendants – Order 26 – r 26.08 – r 26.09 – Building Act 1993 s 131 – whether one party capable of accepting offer – appeal dismissed.
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| APPEARANCES: | Counsel | Solicitors |
| For the appellant | Mr E N Magee QC with Mr P H Clarke | Harwood Andrews |
| For the respondent | Mr R J Manly SC with Mr B B Carr | Gadens |
WARREN CJ:
The plaintiff, Aquatec-Maxcon Pty Ltd (“Aquatec”), sued the defendant, Barwon Region Water Authority (“Barwon”), for damages arising from a contract to construct septic treatment plants. Barwon counterclaimed. Aquatec then joined the six defendants to the proceeding with Barwon. Later, Barwon made an offer of compromise on its counterclaim to all the defendants to that counterclaim. Following the delivery of reasons for judgment by the trial judge and before all issues of quantum and costs were determined, Aquatec and Barwon settled their disputes and orders by consent were made. Barwon then sought an order for indemnity costs against Aquatec. The trial judge declined and ordered that Aquatec pay costs on a party and party basis. It is the order as to the type of costs that is now appealed.
The main proceeding
Barwon retained a firm of consulting engineers, Fisher Stewart, with respect to the construction of two sewerage treatment plants. The successful tenderer for the design and construction of the plants was Aquatec. On 24 March 1997 Aquatec entered into a contract with Barwon to carry out the design, construction and commissioning of the plants for the amount of $6,426,847. A number of other parties came to be involved as follows:
·An engineering construction contractor, Nacap Australia Pty Ltd (“Minson Nacap”).
·A civil design engineer, Montgomery Watson Australia Pty Ltd (Montgomery Watson”).
·A sub-consultant design engineer, Wynton Stone Australia Pty Ltd (Wynton Stone”).
·Geotechnical Engineers, JJP Geotechnical Engineering Pty Ltd (“Barrett Fuller”). CAN 007 015 965 Pty Ltd (In Liquidation) (“Fisher Stewart”).
·A further engineering company, Taylor Thompson Whitting Pty Ltd (TTW”).
The project was planned to be performed in three stages: the design phase, the construction phase and the commissioning phase.[1] Subsequently, in late 1997 cracking appeared in the aerator tanks. As a consequence, on 8 July 1998, pursuant to the contract, Barwon engaged another contractor, Concrete Construction Group Ltd to perform remedial and other necessary work.[2] Some of the sub-contracts were terminated. Later, when works were completed, Aquatec returned to the project to complete electrical and mechanical work and to undertake the commissioning stage of the project. Eventually, on 23 January 2001, the superintendent under the contract issued to Aquatec the final certificate under the contract.[3]
[1]See Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority (No 2) [2006] VSC 117, [5].
[2]Ibid [7].
[3]Ibid [8].
Proceedings were commenced by Minson Nacap against Aquatec for monies owing. Aquatec filed a counterclaim against that claim alleging defective work. The proceeding was stayed on the basis that the issues would be dealt with in this proceeding.[4] In this proceeding, Aquatec sued Barwon for approximately $1.5 million.
[4]Ibid [9].
Barwon counterclaimed against Aqutaec for the sum of $3,686,584. Barwon claimed damages based in contract and negligence and also claimed in the alternative for monies owed.[5] It is apparent that there was general agreement among the parties that the cause of the failure of the project was a design error and all of Aquatac, Minson Nacap and Montgomery Watson accepted the finding and its consequences.[6]
[5]In the amended defence and counterclaim Barwon claimed against Aquatec in the prayer for relief damages, including liquidated damages and liquidated amounts under various payment certificates arising under the contract.
[6]See Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority (No 2) [2006] VSC 117, [12].
In his reasons for judgment, the trial judge observed that a contractual hierarchy existed between Aquatec and Barwon and the various sub contractors.[7]
[7]Ibid [15]-[16].
A key aspect of the proceedings was the reliance by Aquatec upon s 131 of the Building Act 1993 with respect to its defence to the counterclaim by Barwon. Hence, Aquatec, as defendant to the counterclaim, joined the various other defendants to the counterclaim. Barwon maintained a position that it did not wish to sue the defendants to the counterclaim other than Aquatec and sought no relief against them, notwithstanding its pleading of paragraph 29E which is set out and discussed below.
At trial, Aquatec contended that each of the other defendants of the counterclaim was in breach of a duty of care owed to Barwon and that, as a result, Barwon suffered loss and damage and was entitled to an award of damages against each of the defendants to the counterclaim jointly or severally.[8] The trial judge observed with respect to the contention:
“The consequence of this and of the application of s 131 was, they contended [ie Aquatec], that Barwon should not have judgment against Aquatec for the full amount of its loss, as it contends, but rather, that loss should be apportioned in the judgment of the Court between all or some of the defendants in accordance with their responsibility for that loss. By way of response, each of the added defendants filed a defence to this Aquatec pleading and itself filed a pleading each other defendant asserting an entitlement to apportionment against those others.”
[8]Ibid [22].
In addition to the relief sought with respect to s 131 of the Building Act, each of the defendants to the counterclaim sought contribution against each other defendant pursuant to s 23B of the Wrongs Act 1958.
Barwon sued Aquatec as the sole defendant to its counterclaim. Aquatec applied, and was granted leave, to join as further defendants Minson Nacap, Montgomery Watson, Wynton Stone, Barrett Fuller, Fisher Stewart and, later, TTW. There were claims brought by the parties based in contract. Liability was not challenged save as to quantum.[9] The dispute between Aquatec and Barwon was resolved and in due course orders were consented to. The trial judge recorded:
“The claims between Barwon and Aquatec have been subsequently compromised…When pressed as to the nature of this settlement and the consent judgment to be given, whether it represented an award of damages or an award of a liquidated sum, I was told only that the parties had agreed that this sum should be paid. I was told that, when I deliver my reasons for judgment in this matter, Barwon would seek judgment in the agreed sum plus statutory interest which is presently $1,636,466 to 14 December 2005. I was not told whether an order for costs would be sought by consent or otherwise.”[10] (my emphasis)
[9]Ibid [86].
[10]Ibid [87]-[88].
Relevantly, his Honour observed[11] that Barwon’s claims against Aquatec were not pressed any further and no relief was sought from any other party, in particular, no apportionment was sought pursuant to s. 131 of the Building Act. So much with respect to the contract claim between Aquatec and Barwon. The remaining contractual claims between the parties were the subject of determination by the trial judge and are not generally relevant for the appeal save for two factors.
[11]Ibid [90].
First, we were informed that Wynton Stone made a claim against Aquatec under the Trade Practices Act but that the claim was not actively pursued at the trial. Nevertheless, the claim was acknowledged by Barwon to have been alive at the time the offer of compromise was made and, indeed, when the proceeding settled between Barwon and Aquatec. The second matter was the potential for the other defendants to the counterclaim to initiate their own claim or claims against Barwon. The appellant conceded that this was possible, albeit speculative.
The settlement of the Barwon claim against Aquatec resulted in neither of those parties alleging that a duty of care was owed to Barwon or that any party breached such a duty of care.[12] Various negligence claims against Aquatec were examined separately and dealt with by the trial judge. [13]
[12]Ibid [265].
[13]Ibid [277]-[328].
There was an additional claim made by Wynton Stone against Fisher Stewart alleging misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974.[14] Ultimately, the trial judge concluded that the cause of action was not made out.[15]
[14]Ibid [329]–[332].
[15]Ibid.
A substantial part of the judgment was devoted to analysis of s 131 of the Building Act. The analysis is not subject to challenge. Ultimately, his Honour observed that the s 131 claim was not pressed by Barwon or Aquatec, rather it was a claim pressed by Wynton Stone against Barwon, Minson Nacap against the co-defendants on the counterclaim. Ultimately his Honour concluded that none of the parties other than TTW owed Aquatec a duty of care and that TTW was not in breach of duty and that those findings were fatal to the s 131 claim by Aquatec against Minson Nacap.
On 25 July 2006, the proceeding returned before the trial judge over the matter of costs. His Honour observed that the debate between Barwon and Aquatec on that occasion revolved around a claim by Barwon for indemnity costs against Aquatec.[16] Barwon claimed indemnity costs on two bases: first, under rule 26.08 (2) of chapter 1 of the Rules of the Supreme Court, it submitted that it had obtained a result no less favourable than the terms of an offer of compromise served on 17 December 2003; and secondly, as a matter of discretion, having regard to what was described as “the high handed conduct of the litigation by Aquatec”.[17]
[16]See Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority (No 3) [2006] VSC 270, [11].
[17]Ibid.
His Honour observed that the counterclaim by Barwon was brought against Aquatec alone and that it was Aquatec who caused to be joined as defendants the other parties seeking orders pursuant to s 131 of the Building Act that any liability which it had to Barwon be apportioned between it and those defendants.
In its counterclaim, Barwon pleaded:
“29E. Barwon does not claim any relief against Minson, Montgomery Watson, Wynton Stone, JJP, Fisher and/or TTW additional to the relief sought against Minson, Montgomery Watson, Wynton Stone, JJP, Fisher and/or TTW consequent upon the joinder of those parties as Defendants to Barwon’s Counterclaim pursuant to the Order made by Mr Justice Byrne on 16 March 2001.”
His Honour considered that it was sufficient for his purposes at that stage to determine whether the plaintiff had or had not made a claim against the added defendants and concluded that by including paragraph 29E in its counterclaim, Barwon had done so, that is, made a claim against the added defendants. His Honour said:
“I interpret its primary position as pleaded as being that it is entitled to recover all of its loss against Aquatec as a claim for a sum due under a building contract. This is not a building action so that no question of apportionment arises. Its alternative claim for damages for defective work is a building action so that it is entitled to judgment against Aquatec only for its share of the responsibility for this loss. In such an event, it seeks judgment against each of the added defendants for their share.”[18]
[18]Ibid [19].
The offer of compromise was directed to all defendants as required under rule 26.09 and provided:
“This offer of compromise is served in accordance with the subject to Order 26 of the Supreme Court (General Civil Procedure) Rules 1996.
Take Notice that the Defendant (Plaintiff by counterclaim), Barwon Region Water Authority (“Barwon Water”) offers to compromise its counterclaim (including all claims and all counterclaims made in the name of Barwon Water against the Second to Seventh Defendants to counterclaim in the proceeding, which claims have been pleaded by Aquatec in Barwon Water’s name) (“Barwon Water’s counterclaim”), Aquatec’s claims against Barwon Water (“Aquatec’s claims”), and all claims against Barwon Water by the Second to the Seventh Defendants to counterclaim or any of them (“the Second to Seventh Defendants’ claims”), on the following terms:
1.Barwon Water will accept the net sum of $2,300,000 plus costs in accordance with Rule 26.03 in a full settlement of Barwon Water’s Counterclaim, Aquatec’s claims and the Second to Seventh Defendants’ claims.
2.Payment of the sum of $2,300,000 must be made to Barwon Water within 30 days after acceptance of this offer.
3.This offer will remain open for acceptance within 14 days after service of this offer.”
His Honour concluded:
“I leave to one side the question as to the applicability of Rule 26.09 generally to a claim for proportionate liability under the Building Act. The terms of the offer here make it clear that it is an offer to compromise Barwon’s own claims against all defendants, the claims made, presumably by Aquatec, in Barwon’s name against all the added defendants. Any claims that they and Aquatec might have against Barwon. It is not clear what claims the defendants have against Barwon except for a Trade Practices Act claim brought by Wynton Stone against it. It may be that the drafter of the offer apprehended that the defendants, other than Aquatec might seek or were seeking apportionment against Barwon. What is clear is that it was not possible for Aquatec alone to accept the offer in accordance with its terms. Rule 26.08(2) has no application.”[19]
[19]Ibid [21].
Having disposed of the submission with respect to Rule 26.08(2) his Honour then turned to the exercise of the discretion, the alternative basis upon which indemnity costs were sought. Consideration was given to the principles in Colgate Palmolive v Cussons Pty Ltd.[20] The submission was that Aquatec acted in a high handed way by joining the additional defendants to the proceeding and then abandoning its claims against them, thus, it was submitted that the claims against the added defendants were “hopeless” and thereby unnecessarily increased the costs of Barwon in conducting the proceeding.[21] It was further submitted before the trial judge that Aquatec never had a defence to the counterclaim of Barwon and that it refused to pay because it had not been paid by the other parties “down stream”.[22] His Honour concluded that these matters did not amount to sufficient reasons to warrant “what is an extraordinary and essentially punitive order for costs”.[23] His Honour further observed that Barwon brought upon itself the prospect of joinder of the other defendants by virtue of the way in which it pleaded its counterclaim.[24] Whilst observing that the proceeding was complicated and extended by the large number of defendants, this may be viewed as the cost for the advantages of the proportionate liability regime.[25] Thus, the trial judge declined to make an order for indemnity costs and made a conventional order that Barwon’s costs of the proceeding be paid on a party and party basis by Aquatec.
[20](1993) 46 FCR 225, 232-4.
[21]See Aquatec-Maxcon Pty Ltd v Barwon Region Water Authority (No 3) [2006] VSC 270, [22].
[22]Ibid [23].
[23]Ibid.
[24]Ibid.
[25]Ibid [24].
Leave to appeal was granted on the sole ground that it is arguable in the circumstances of the case that Rule 26.09 was engaged and that it was open to Aquatec alone to accept the offer of compromise made by Barwon on 17 December 2003 purportedly in accordance with Rule 26.08 and therefore that the judge erred in law and consequently in the exercise of his discretion in holding that it was not open to Aquatec to accept the offer.[26]
[26]The order of the Court of Appeal (Nettle and Ashley JJA) made 1 September 2006, as recorded in “Other Matters”.
Barwon now appeals essentially on two bases: first, Barwon made its offer of compromise to all defendants to the counterclaim, which was not accepted and the judgment in favour of Barwon was no less favourable than the terms of that offer; secondly, and as a consequence of the first bases, the offer was capable of acceptance by Aquatec alone and, accordingly, Rule 26.08 applied. Barwon confines itself, therefore, to the first aspect of the trial judge’s decision. It does not challenge the exercise of the discretion by his Honour with respect to the principles discussed in Colgate Palmolive (nor could it on the limited basis upon which leave to appeal was granted).
Barwon submitted that the joinder of the six additional defendants was intended to enable Aquatec to have the benefit of apportionment under s 131 of the Building Act. As a result, it was said that the complexity of the proceeding increased.[27] By comparison, Barwon did not plead any claim against the defendants and only sought relief against Aquatec. Following the joinder, Barwon amended its counterclaim pleading that Barwon did not seek any relief against the extra defendants “additional to relief sought against [those defendants]” consequential to their joinder. In other words, it was argued that in effect Barwon only sought relief against those defendants insofar as apportionment arose under s 131 of the Building Act. Next, it was submitted that when Barwon compromised the proceeding with Aquatec the latter abandoned its claims pursuant to s 131 of the Building Act against the other defendants. Thus, it was said, Aquatec was in a position to effect the step of settlement because it had joined the added defendants and had control of those claims until Aquatec reached its compromise with Barwon. It was submitted that the fact that the offer of compromise was made to all defendants did not mean any of them could have accepted it. The offer, it was submitted, could only have been accepted by Aquatec.
[27]By adding contribution claims to the preceding, thereby adding an obstacle to settlement.
In my view, the analysis is misconceived. The other defendants were joined by Aquatec because relief, in the nature of apportionment, was sought against them. It might even be inferred that Aquatec did not compromise its joinder under s 131 of the Building Act separately because the settlement with Barwon was not discrete. It wanted to resolve all aspects of the claim. As for what Aquatec might have otherwise done is not to the point. There was an issue between Aquatec and the other defendants and with Barwon arising from the counterclaim pleaded by Barwon against Aquatec (and later against the other defendants) and Aquatec could not settle without them. Indeed, it would have been foolhardy of Aquatec to settle with Barwon but without the added defendants. Commonsense dictates that Aquatec was not in a position to unscramble the litigation egg.
The appellant further argued that due to the form of the offer of compromise, the s 131 claims would have been discontinued at the level of the claims of Barwon. In my view, the argument oversimplifies the complexity and intertwining that may arise where contribution and apportionment are involved. It is not a simple disentanglement. When a party makes a claim against another party to proceedings in circumstances such as the present it runs the risk of the other party invoking apportionment rights. Once that occurs the initiating party runs the risk of litigation entanglement that may not be simple to unravel and, further, may impact on offers of compromise. So much is borne out by the specific terms of the offer of compromise. There were three components to the offer: first, the offer to compromise all claims or counterclaims made by Barwon against the other defendants (that is, Minson Nacap, Montgomery Watson, Wynton Stone, Barrett Fuller, Fisher Stewart and TTW) conveniently described as the first category of offer; the claims by Aquatec against Barwon, conveniently described as the second category of offer; and, thirdly, all claims against Barwon by the other defendants, that is, Minson Nacap, Montgomery Watson, Wynton Stone, Barrett Fuller, Fisher Stewart and TTW conveniently described as the third category of claims. It is obvious that Aquatec had the capacity to respond on its own to the second category of offer. It could not respond to the first and third categories.
The appellant further argued that the circumstances of this proceeding were unusual and acknowledged that on one view Aquatec was required to abandon the contribution claims before it could compromise the proceeding. However, it was argued that Aquatec always had the ability to do so – it was in the controlling position. I have dealt with that submission already. As an adjunct to the argument, the appellant urged that Order 26 not be treated as a code citing Henderson v Simon Engineering (Australia) Pty Ltd.[28] The public interest in the compromise of litigation was emphasised[29] and the need for the Court to take a flexible approach in the exercise of the discretion. However, such argument goes to the matter of discretion, which was not an issue in this appeal. The very fact of the unusual circumstances of this case and its complexity justify the approach taken by the trial judge on the matter of the offer of compromise. Notwithstanding the findings with respect to the causes of action in the primary judgment. There were several live causes of action between Aquatec and the other defendants and as between Aquatec and Barwon that were interconnected. The offer of compromise did not address or select between those causes of action, in all likelihood because it was difficult to do so.[30] The appellant argued that it was bound under Order 26 to include the other defendants in the offer of compromise. In my view that factor does not advance its argument, indeed, the requirement under the rule evinces a sound policy of involving all parties in any compromise to effect full settlement. However, it was said the Court should take account of the fact that it was not possible for Barwon to make the offer in any other way. Again this argument returns to the exercise of the discretion which is not before us.
[28][1988] VR 867, 872.
[29]Malliaros v Moralis [1991] 2 VR 501, 504-5.
[30]See Prior v Lansdowne Press Pty Ltd [1977] VR 65, 76.
There is an additional factor that supports this position: the construction of s 131 of the Building Act. It provides that after an award of damages has been determined in a building action the Court must apportion liability. Although the section has been repealed it is plainly a special provision for building cases and on that basis alone puts the case in a different category and, also, it contributed to the complexity of the proceeding, thereby operating against the application of Order 26. Indeed, the added complexity brought to bear by s 131 was reflected in the pleading of paragraph 29E of the amended defence and counterclaim.
There is another significant factor, namely, the way Barwon pleaded against Aquatec. It claimed in damages first and then on the certificate second. Hence, in my view, the claim does not solely stand as a debt claim as the appellant asserted. Furthermore, the other defendants claim damages as between themselves. In addition, when the terms of the pleadings and the terms of the offer of compromise are analysed there remained a potential for actions between Aquatec and the other defendants. It was the appellant’s own pleading that made this a “building action” as between it and Aquatec and thereby triggered s 131 of the Building Act as between Aquatec and the other defendants to the counterclaim.
Much of the appellant’s arguments were circuitous and brought it back to the
complaint that it was within Aquatec’s control to bring the contribution claims to an end “just as it had started them”. As I have already discussed, the argument falls short of the important fact that it was Barwon who instigated matters by its counterclaim when it ought have been aware of the litigation consequences that might follow joinder with commensurate apportionment of liability issues.
Finally, I observe that the Full Court of the Federal Court cited the judgment of the trial judge with approval in King v Yurisich (No. 2).[31] Similar to the observations of the Full Court in King there does not appear to be any basis under the offer of compromise rule in this Court for the proposition that an offer made to all respondents/defendants can be accepted by only one. As the Full Court observed, given that one party has no power to compel others it would be unacceptably harsh to insist upon acceptance in all the circumstances.[32] It follows that in the circumstances of this matter and in light of the confined nature of the appeal, the appellant’s arguments are unpersuasive. It follows that I would dismiss the appeal.
[31][2007] FCAFC 51 [7].
[32]Ibid [11].
KAYE AJA:
I agree that the appeal should be dismissed.
The short question is whether the offer of compromise by the appellant to the respondent was capable of being accepted by the respondent alone. The answer to that question is to be found in the nature of the claims made by the appellant in its counterclaim, and in the terms of the offer of compromise made by the appellant. It is clear that by paragraph 29E of the counterclaim, the appellant made a claim for damages against the second to seventh defendants. Indeed, on the appeal, counsel did not argue to the contrary. It is true that, in a practical sense, the appellant had no option other than to assert such a claim against the added defendants. If it had not
done so, then it ran the risk of “falling between two stools” if its claim on the certificate had failed, and if it had been reliant on its claim for damages. Nonetheless, the point remains that the appellant did make claims against the added defendants to its counterclaim.
In that context, the offer of compromise by the appellant was addressed, not just to the respondent, but to all of the defendants to the counterclaim, including the six added defendants. Further, by the offer of compromise, the appellant offered to settle three categories of claim in the proceeding. First, it offered to settle its counterclaim, including the claims made in its name against the added defendants to the counterclaim. Secondly, it offered to settle the claims by the respondent against it. Thirdly, it offered to settle all the claims against it by the second to seventh defendants to the counterclaim. In my view the first and third components of the offer precluded it being an offer which could have been accepted by the respondent alone. First, the respondent could not, unilaterally, settle with the appellant the counterclaim of the appellant, not just against the respondent, but also against the added defendants. The effect of s 131 of the Building Act was to abrogate the doctrine of joint and several liability in building actions, and to replace it with proportionate several liability.[33] Any settlement of the counterclaim by the appellant against the respondent would have left alive, at least in theory, the claims for damages by the appellant against the added defendants.
[33]Boral Resources (Vic) Pty Ltd v Robak Engineering & Construction Pty Ltd & Anor [1999] 2 VR 507 at 515, 526 (Chernov JA).
Further, the respondent could not, in a legal sense, resolve any claim against the appellant by added the defendants. The fourth defendant to counterclaim, Wynton Stone Australia Pty Ltd, had pleaded a claim for indemnity against the appellant in respect of any liability by it to the appellant pursuant to the appellant’s counterclaim. While the cross claim by Wynton Stone was, in reality, a plea in defence to the claim against it by the appellant under s 131 of the Building Act, nonetheless it did remain on foot as a cross claim. The respondent was not in a position to resolve it.
Thus, by its terms, the offer of compromise by the appellant was not capable of being accepted by the respondent alone. There is force in the argument by counsel for the appellant that, in a “real and practical” sense, the respondent was well placed to bring about the acceptance of the offer of compromise, had it been minded to do so, by resolving its position with the added defendants, and then proceeding to accept the offer. However, that argument, while compelling in a practical sense, does not meet the simple proposition that the offer of compromise, by its terms, could not have been accepted by the respondent alone. It follows that order 26.08 did not apply to the offer, and therefore the appellant was not entitled to indemnity costs by reason of the non-acceptance of the offer by the respondent.
WHELAN AJA:
I have read in draft the judgment of Warren CJ. I agree that this appeal should be dismissed.
The only issue on this appeal is whether the offer of compromise addressed to all seven defendants to the counterclaim was capable of acceptance by the respondent to the appeal (“Aquatec”) alone. The issue is whether Aquatec’s acceptance, in the absence of acceptance by the other defendants to the counterclaim, would have brought about a binding contract between Aquatec and the appellant (“Barwon Water”) on the terms contained in the offer.
In my view the trial judge was correct in his conclusion that it is clear that it was not possible for Aquatec alone to accept the offer in accordance with its terms.
The offer was directed to all seven defendants to Barwon Water’s counterclaim. By the terms of the offer Barwon Water offered to accept a “net sum of $2,300,000 plus costs” in full settlement of three separate categories of claims.
The first category of claims was what the offer described as “Barwon Water’s counterclaim”. Barwon Water initially counterclaimed only against Aquatec. As counsel for Barwon Water stressed, Barwon Water never sought the joinder of the second to seventh defendants to the counterclaim and in fact opposed it. Barwon Water made it clear in the course of the trial that its submission was that relief should be granted against Aquatec alone. Nevertheless, for no doubt prudent reasons, upon the joinder of the second to seventh defendants to the counterclaim, Barwon Water amended its counterclaim so as to claim relief against the added defendants should it be held, contrary to its own submission, that s 131 of the Building Act 1993 did apply. It did this by adding the allegation in paragraph 29E. As the trial judge pointed out at paragraphs 18 and 19 of his reasons, paragraph 29E of the amended counterclaim did constitute a claim by Barwon Water against the second to seventh defendants to counterclaim.
If Barwon Water had settled with Aquatec alone it may well be that Barwon Water’s claims against the second to seventh defendants to the counterclaim would have fallen away. But that outcome would not necessarily and inevitably have followed. It is conceivable that Barwon Water could have continued on against the other defendants, although this may have required amendment of the counterclaim. Further, on any view the issue of the costs of the second to seventh defendants to the counterclaim on Barwon Water’s claims against them would have remained unresolved if Aquatec had settled alone. Given that the terms of the offer required payment of a sum of money “plus costs”, the fact that the costs issues on the counterclaim would necessarily have remained unresolved upon Aquatec’s sole acceptance demonstrates that what the offer described as “Barwon Water’s counterclaim” could not be settled on the terms contained in the offer if the offer was accepted by Aquatec alone.
The second category of claims to be settled pursuant to the offer was Aquatec’s claims against Barwon Water. These claims could have been settled by an agreement between Aquatec and Barwon Water alone.
The final category of claims to be settled pursuant to the offer was “all claims against Barwon Water by the second to seventh defendants to counterclaim or any of them.” This category must have included, at the least, any claims for costs which the second to seventh defendants to counterclaim had at that point, and must also have included the Trade Practices Act claim which the fourth defendant to counterclaim, Wynton Stone Australia Pty Ltd, had brought. In my view this category would also have included any as yet unarticulated claims against Barwon Water by the second to seventh defendants to counterclaim. These claims could not have been settled by an agreement solely between Aquatec and Barwon Water.
The express terms of the offer made to all seven defendants to the counterclaim by Barwon Water were to accept a sum of $2,300,000 plus costs in settlement of specified claims, some of which could be settled by an agreement between Barwon Water and Aquatec alone and some of which could not. Accordingly, acceptance of the offer by Aquatec alone could not bring about a settlement contract containing the terms set out in the offer.
Counsel on behalf of Barwon Water referred repeatedly to the fact that as a matter of “practice and reality” Aquatec could have resolved the proceeding by accepting this offer. What counsel was saying, it seems to me, is that if Aquatec had indicated a willingness to pay $2,300,000 plus Barwon Water’s costs then one way or another the other claims would have been abandoned or resolved in some manner. Counsel pointed to the fact that that is what subsequently occurred when Barwon Water and Aquatec did settle between themselves. That may be correct, and it is a matter which might be taken into account in determining whether as a matter of discretion the ordinary costs rule should apply or not. It does not assist in resolving the only issue which is raised by this appeal which is whether, upon Aquatec’s acceptance, claims made by and against parties who had not accepted the offer would be settled. That cannot be so. The trial judge’s conclusion that it was not possible for Aquatec alone to accept the offer in accordance with its terms was correct.
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