Canyon (Aust) P/L & Ors v Aktieselskabet Dampskibsselskabet Svendborg & Ors No. Scciv-02-1559

CANYON (AUSTRALIA) PTY LTD AND OTHERS v AKTIESELSKABET DAMPSKIBSSELSKABET SVENDBORG AND OTHERS
[2004] SASC 36
Civil

DEBELLE J There are three applications before the court. Before identifying the applications, it is helpful to provide a brief summary of the issues in this action.
An Action for Damages
The plaintiff, Canyon (Australia) Pty Ltd was the operator of a petroleum exploration licence held by the other plaintiffs. The plaintiff engaged the defendants Maersk Contractors Pty Ltd (“Maersk Contractors”) and Maersk Drilling (Australia) Ltd ApS (“Maersk Drilling”) to explore for oil and gas in part of Gulf St Vincent in this State using an offshore drilling rig. Maersk Drilling was the bare boat charterer of the rig. The plaintiffs allege that the other defendants were the principals of Maersk Contractors and Maersk Drilling.
On 16 November 1996, when the drilling rig was being positioned over the drilling site in Gulf St Vincent, the rig punched through the earth’s crust causing damage to the legs of the drilling rig which rendered the rig inoperable. The rig had to be removed from the site and transported to a dockyard for repairs. The plaintiffs claim damages for the loss and damage suffered by them in consequence of this incident which they allege was caused by the negligence of the towmaster of the rig who had been engaged by the defendants. Shortly stated, the plaintiffs’ claim for damages is to recover expenditure which had been wasted totalling some US$5.17 million. In addition, they claim a further A$312,000 for reimbursement of certain suppliers and government departments in connection with remedying and oil spilling consequence of the collapse of the rig.
The defendants have filed a defence and counterclaim. Shortly stated, the defendants’ case is that the plaintiffs owed Maersk Drilling a duty of care to provide accurate information about the site conditions at the drilling site and to verify survey information. The defendants allege that the plaintiffs breached that duty of care in providing inaccurate information, in failing to verify the accuracy of the information, and in failing to inform the towmaster that a survey report was inaccurate or unreliable. They also allege that the plaintiffs made misrepresentations as to the conditions at the drilling site. They deny liability and, in the alternative, plead that the plaintiffs were guilty of contributory negligence. They seek to set off against the plaintiffs’ claim for damages a claim by Maersk Drilling for damages in the sum of USD$11,565,000 for loss of income it incurred while the rig was being repaired.
A Counterclaim by Palace who is not a Party to the Action
In addition to the defence, a counterclaim is made by two parties, Maersk Drilling and Palace Drilling Corporation (“Palace”). Palace is not a defendant. Nevertheless, it has been included as a plaintiff on the counterclaim and it is that fact which gives rise to the present applications. Notwithstanding that Maersk Drilling and Palace are plaintiffs on the counterclaim and the plaintiffs in the original action are defendants on the counterclaim, I will continue to refer to the plaintiffs in the original action as “the plaintiffs”.
In the counterclaim, Maersk Drilling and Palace repeat the allegations of negligence and the misrepresentations pleaded in the defence. Maersk Drilling also alleges that the plaintiffs acted in breach of contract in that in 1997 they instituted an action in the State of Texas in the United States of America. The counterclaim by Maersk Drilling has two components. The first is a claim for damages in the sum of US$11,565,000 for the loss of income suffered by Maersk Drilling while the rig was being repaired. The second is a claim for damages for US$852,429 being legal expenses incurred in defence of the proceedings in the United States of America.
Palace pleads that it is the owner of the drilling rig. It relies on the allegations of negligence and misrepresentation and claims damages in the sum of US$26,831,168 being the cost of salvage operations and repairs to the rig. The claims of Maersk and of Palace are founded essentially on two causes of action. They are an action in negligence and an action for misrepresentation in reliance on s 52 of the Trade Practices Act 1974 (Cth), s 10 of the Fair Trading Act 1987 (WA) and s 56 of the Fair Trading Act 1987 (SA).
The plaintiffs commenced this action on 1 November 2002, some two weeks before the limitation period expired: s 35 of the Limitation of Actions Act 1936. The defence and counterclaim were filed on 3 November 2003. Maersk Drilling and Palace have pleaded in the counterclaim that in the event that it is necessary to do so they will seek an extension of time to institute the counterclaim pursuant to s 48 of the Limitation of Actions Act 1936.
An Application to Strike Out the Counterclaim by Palace
It is against that background that the plaintiffs have applied for an order that the counterclaim of Palace be struck out and for an order that paragraphs 7 ‑ 12 of the counterclaim of Maersk Drilling be struck out. In response to the plaintiffs’ application, the defendants apply to add Palace as a plaintiff to the counterclaim or, alternatively, to add Palace as a defendant to the original action so that it may be a plaintiff on the counterclaim. The defendants submit they are entitled as of right to an order joining Palace as a party pursuant to Rule 27.01. In the alternative, they apply for a grant of leave to do so.
Section 23 of Supreme Court Act
Before the Judicature Act reforms in 1875, a counterclaim (as distinct from a set‑off) could not be joined with the original action. A defendant could not, therefore, bring a crossclaim against a plaintiff in the plaintiff’s action. The Judicature Act reforms remedied that position to enable courts to grant all relief necessary as between the plaintiff and defendant. Section 23 of the Supreme Court Act 1935 is the current provision which enables the defendant to prosecute a counterclaim. It reads:
“23 (1) The court shall have power to grant to any defendant, in respect of any equitable estate or right, or other matter of equity, and also in respect of any legal estate, right, or title claimed or asserted by him -
(a) all such relief against any plaintiff or petitioner as the defendant has properly claimed by his pleading, and as the court or judge might have granted in any suit instituted for that purpose by the same defendant against the same plaintiff or petitioner; and
(b) all such relief relating to or connected with the original subject of the cause or matter, and in like manner claimed against any other person, whether already a party to the same cause or matter or not, who has been duly served with notice in writing of such claim, pursuant to any rules of court, as might properly have been granted against that person if he had been made a defendant to a cause duly instituted by the same defendant for the like purpose.”
For present purposes, it is necessary to refer only to s 23(1)(a). It will have been noticed that it enables the court to grant to any defendant relief claimed against the plaintiff. It does not enable any other person than the defendant to bring a counterclaim in the same action. Thus, a person who is not a defendant cannot be joined as a co‑plaintiff in the counterclaim: Pender v Taddei [1898] 1 QB 798. Although Rule 48 regulates the procedure on a counterclaim, it does not alter the fact that the right to bring the counterclaim is grounded on s 23. Furthermore, while Rule 48.05 authorises the defendant on his counterclaim to join persons in addition to the plaintiff as defendants, no part of Rule 48 authorises the joinder of additional plaintiffs to the counterclaim. It is not possible, therefore, as a matter of law for defendants to join Palace as a plaintiff.
Joinder as of Right?
The claim for joinder as of right is founded on s 27 of the Supreme Court Act, 1935 and the provisions of Rule 27. Section 27 directs the court to do complete justice between the parties so as to determine all matters in controversy between the parties so as to avoid multiplicity of proceedings. It reads:
“27 The court in every cause or matter pending before it shall have power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as it deems just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of every legal or equitable claim properly brought forward by them respectively, in such cause or matter, so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided.”
It will be noticed that s 27 is essentially directed at doing justice between the parties, that is to say, the proper parties to the action. The object of avoiding a multiplicity of actions is the rationale for joining additional parties: JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432 at 442. It has the additional purpose of seeking to avoid the same issue from being tried twice with possibly different results.
When relying on Rule 27, the defendants first point to the terms of Rule 27.01 which provide:
“27.01      Two or more persons may be joined as plaintiffs or defendants in any proceedings:
(a)     where
(i)if separate proceedings were brought by or against each of them, a common question of law or of fact would arise in all the proceedings; or
(ii)all rights to relief claimed in the proceedings, whether they are joint, several or alternative, are in respect of, or arise out of, the same transaction or series of transactions; or
(b)    where the Court gives leave to do so.”
Noting that the definition of “proceedings” in Rule 5 includes a counterclaim, the defendants contend that Rule 27.01 authorises the joinder of a plaintiff to a counterclaim where either paragraph (i) or paragraph (ii) of Rule 27.01(a) are satisfied or if leave of the court is granted under Rule 27.01(b). They then point to the proposition that the rule may well authorise joinder of separate causes of action accruing to various plaintiffs against different defendants so long as the causes of action arise out of the same transaction or series of transactions: Payne v Young (1980) 145 CLR 609 per Mason J at 618. Thus, the defendants say, an order for leave should be made under Rule 27 adding Palace as a plaintiff to the counterclaim or alternatively as a defendant in the original action.
I do not think that Rule 27 can be used to enable joinder as of right. Each of the paragraphs in Rule 27.01(a) is expressed in the alternative. The rule is, therefore, more liberal in its operation than the former Order 16 rule 1. Notwithstanding the terms of Rule 27.01(a), I think that the court nevertheless retains a discretion and that the rule does not enable joinder as of right. That is a consequence of the fact that the opening words of the rule are expressed in terms which authorise joinder but do not require it. The rule states that persons may be joined if certain conditions are satisfied. It does not state that, if the conditions are satisfied, persons must be joined. There are sound policy reasons for that conclusion. It is sufficient to note that there will be instances where joinder will unduly complicate or delay a fair trial or otherwise be inconvenient. That policy receives express recognition in Rule 27.04 which provides:
“Where a joinder of parties or of causes of action or any matter raised by a counterclaim will unduly complicate embarrass or delay a fair trial of the proceedings or is otherwise inconvenient, the Court may disjoin parties or may order separate trials or make such other order as is just.”
To put the same proposition another way, it would be futile to join parties and then make an order pursuant to Rule 27.04 undoing the effect of that order. The fact that the court retains a discretion in the case of applications made under Rule 27.01(a) is not inconsistent with Rule 27.01(b). Rule 27.01(b) is a kind of dragnet provision investing the court with authority to join parties where it is appropriate to do so and the circumstances do not satisfy either of the alternatives in Rule 27.01(a). Rule 27.01 does not, therefore, provide any right to the defendants to join Palace either as a plaintiff on the counterclaim or as a defendant to the original action.
Joinder by Leave?
I turn to the question whether it is appropriate to grant leave to add Palace as a party. I deal first with the submission that Palace should be added as a plaintiff to the counterclaim. As already mentioned, s 23 does not entitle a defendant to join as additional plaintiffs on the counterclaim persons who are not defendants. By invoking Rule 27, the defendants seek to do indirectly what s 23 does not permit them to do directly. They should not be permitted to do so: Pender v Taddei (supra). Rule 27 is not intended to be a means of circumventing the operation of s 23 (a fact confirmed by Rule 27.04). For those reasons I would not grant leave to have Palace as a plaintiff.
I turn to the question whether leave should be granted to join Palace as a defendant. There is no ground which justifies adding Palace as a defendant. The plaintiffs had no dealings with Palace. The first and most relevant answer to the application for joinder is that the plaintiffs seek no relief against Palace and the conduct of the defence by the defendants does not require the joinder of Palace. In other words, the joinder of Palace is not necessary to determine effectually the issues between the existing plaintiffs and the existing defendants. If regard is had to the terms of Rule 27.05, the only relevant provisions are Rule 27.05(a), (e) and (f). For reasons just given the requirements of Rule 27.05(e) are not satisfied.
It must be acknowledged that Palace has an interest in the original action in that it also seeks a determination of questions of fact surrounding the incident on 16 November 1996 when the drilling rig was damaged. In that sense there is a common interest which might satisfy Rule 27.05(a) or (f). However, for the reasons which follow, it is not just and will be inconvenient to join it as a party in these proceedings.
The claim by Palace raises a number of complicated legal and factual issues in addition and unrelated to the issues in the claim and counterclaim as between the plaintiffs and defendants. They include questions whether the plaintiffs owed a duty of care to Palace, whether any representations were made to Palace by or on behalf of the plaintiffs or any of them, as well as a detailed examination of the very substantial claim for damages. At present, there is very little by way of particulars of the claim for damages. It is a claim in excess of USD$26.8 million for the cost of salvage operations and the cost of repairs to the rig. Only the total sum is quoted. There can be no doubt that before trial it will be necessary for extensive discovery as to the components of that claim as well as an exchange of detailed reports as between experts. Equally, there can be no doubt that the trial of the issues as to damages will be extremely long and complex. The examinations of those issues will wholly distort the proper prosecution of the claim as between the plaintiffs and defendants. For these reasons, although there are some common issues, in the exercise of the court’s discretion I do not think it proper to grant leave to the defendants to add Palace as a defendant for the purpose of enabling it to prosecute a counterclaim. A further factor which causes me to exercise the discretion against the defendants’ application is that it is made for the purpose only of seeking to enable Palace to be a plaintiff on the counterclaim. In other words, the application is but another attempt to circumvent the intent of s 23 of the Supreme Court Act.
The general rule is that the plaintiff is entitled to pursue its remedy against the defendant of its choosing and ordinarily cannot be compelled to sue a person it does not wish to sue: Dollfus Mieg Et Compagnie S.A. v Bank of England [1951] 1 Ch 33 at 38; Acehill Investments Pty Ltd v Incitec Ltd (2002) 85 SASR 452 at 458. A very strong case must be established to join an additional defendant: Dollfus (supra) at 39. If that were not so, legal proceedings could become quite unmanageable with different causes of action against different parties. The application to join Palace seeks to circumvent the operation of s 23. That should not be permitted. In addition, a rule of court should not be a means of enlarging the scope of the provision in an act of Parliament unless there is an enabling provision which permits it to do so. For all of these reasons, an order should not be made adding Palace as a plaintiff in the counterclaim.
I repeat, Rule 27 is intended to have a liberal operation. As already mentioned, its purpose is not only to avoid a multiplicity of actions but also to avoid the same issue from being tried with possibly different results. Notwithstanding those considerations, this is not a proper case to add Palace, as a party, either as a plaintiff on the counterclaim or as a defendant.
The defendants rely on the decision of the Court of Appeal in Montgomery v Foy, Morgan and Co [1895] 2 QB 321 where an order was made adding defendants so that they might bring a counterclaim against the plaintiff in the original action. The claim concerned payment for freight of goods. The plaintiff shipowner sued for a declaration that it was entitled to payment of freight which had been paid to a stakeholder. The defendants were the agents for the shipper. It was possible for the plaintiff to sue the shippers of the cargo for the freight. An application was made to join the shippers of the goods as a declaration to enable them to counterclaim against the plaintiff shipowner for a short delivery and injury to the cargo. Thus, the plaintiff had a cause of action against the proposed defendant. In the case at bar, the plaintiffs have no cause of action of any kind against Palace. The decision in Montgomery v Foy, Morgan and Co is, as Kaye LJ noted (at 325) a peculiar case. I do not think it should be followed in this instant.
These are sufficient reasons to dismiss the defendants’ application.
Counterclaim is Out of Time
The plaintiffs also relied on the fact that the claims by Palace are statute barred. Stripped to essentials, the claim by Palace is grounded on two causes of action. I identify each and indicate why it is out of time.
The first cause of action is in negligence. Palace pleads that the plaintiffs owed a duty of care to it and that they breached that duty of care and were negligent in providing inaccurate and misleading information concerning conditions at the drilling site and in failing to take adequate steps to verify the accuracy of the information as to the condition of the seabed at the drilling site. The incident occurred on 16 November 1996. The claim is out of time in that it has been instituted more than six years after the cause of action in negligence arose: s 35 of the Limitation of Actions Act.
The second cause of action is for alleged misrepresentations as to the conditions at the drilling site. It is founded on s 52 of the Trade Practices Act 1974 (Cth), s 10 of the Fair Trading Act 1987 (WA) and s 56 of the Fair Trading Act, 1987 (SA). The time limit for actions founded on the respective provisions of the Fair Trading Acts of Western Australia and of South Australia is a period of three years after the date on which the cause of action accrued: s 77(4) and s 79(2) of the Fair Trading Act (WA) and s 84(2) and s 85(3) of the Fair Trading Act (SA).
Mr de Kerloy, who appeared for the defendants, submitted that there was no time limit which barred the actions by Maersk Drilling or Palace under the Trade Practices Act in that Maersk Drilling and Palace sought orders under s87 of that Act. His submission misconceived the operation and effect of s 87 of that Act. Both the claims of Maersk Drilling and the claim of Palace are founded on s 52 of the Trade Practices Act. Both Maersk Drilling and Palace claim damages and other orders. The relevant conduct occurred before the Trade Practices Amendment Act (No. 1) 2001 (Cth) was enacted. The time limit for a claim for damages, therefore, was three years from the date of the cause of action accrued: s 82(2) of the Trade Practices Act. The power to make other orders in addition to an award of damages is found in s 87 of the Trade Practices Act and in particular in s 87(1A) and the time limit for instituting proceedings is three years from the date when the cause of action accrued: s 87(1CA). Mr de Kerloy submitted that the orders were sought pursuant to s 87(1) so that there was no time limit. However, s 87(1) operates where a party applies for an injunction. Palace does not seek an injunction so s 87(1) does not assist it. The orders sought by Maersk Drilling include an order for an injunction. However, the claim for the injunction is not founded on the Trade Practices Act but, instead, is a claim for breach of contract. Maersk Drilling seeks an injunction restraining any continuation of the alleged breach of contract. The claim in no respect is grounded on the Trade Practices Act so that s 87(1) has no application. Furthermore, even if the claim by Maersk was within time, that does not assist Palace in avoiding time limits. Thus, the time limits prescribed by s 82(2) and s 87(1CA) apply to both the claims of Maersk Drilling and Palace. The claims are consequently out of time.

In the counterclaim, Palace states that it will seek an extension of time within which to institute the counterclaim. The question whether the time should be extended is a question which should be left to the trial of the action. That will involve an examination of another list of issues quite unrelated to the issues joined between the plaintiffs and defendants in the action and will embarrass or delay the hearing of the plaintiffs’ action. This is a further reason why it is entirely inappropriate for Palace to be joined as a defendant.
For these reasons, the application to join Palace as a plaintiff to the counterclaim or as a defendant is dismissed.
The application to strike out paragraph 7 ‑ 12 of the counterclaim of Maersk Drilling was not argued. The plaintiffs have not withdrawn the application. I will fix a date for hearing argument on that question.

[2004] SASC 36

13 February 2004