EDGEN Murray Pte Ltd v Clough Projects International Pty Ltd

[2009] WASC 402

EDGEN MURRAY PTE LTD -v- CLOUGH PROJECTS INTERNATIONAL PTY LTD [2009] WASC 402

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2009] WASC 402
Case No:	CIV:1063/2008	Heard:	16 DECEMBER 2009
Coram:	KENNETH MARTIN J	Delivered:	22/12/09
No of pages:	8	Judgment Part:	1 of 1
Result:	Award of an allowance for costs thrown away payable forthwith
Category:	B
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Parties:	EDGEN MURRAY PTE LTD (ACN 122 476 377) CLOUGH PROJECTS INTERNATIONAL PTY LTD (ACN 109 444 902)
Catchwords:	Costs thrown away Pleading amendment Payable forthwith Mediation costs claimed Not allowed as costs thrown away
Legislation:	Nil
Case References:	Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd (unreported, 22 May 1998) Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297; (1992) 109 ALR 169

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : EDGEN MURRAY PTE LTD -v- CLOUGH PROJECTS INTERNATIONAL PTY LTD [2009] WASC 402 CORAM : KENNETH MARTIN J HEARD : 16 DECEMBER 2009 DELIVERED : 22 DECEMBER 2009 FILE NO/S : CIV 1063 of 2008 BETWEEN : EDGEN MURRAY PTE LTD (ACN 122 476 377)

Plaintiff

AND

CLOUGH PROJECTS INTERNATIONAL PTY LTD (ACN 109 444 902)
Defendant

Catchwords:

Costs thrown away - Pleading amendment - Payable forthwith - Mediation costs claimed - Not allowed as costs thrown away

Legislation:

Nil

Result:

Award of an allowance for costs thrown away payable forthwith

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Category: B

Representation:

Counsel:

Plaintiff : No appearance
Defendant : No appearance

Solicitors:

Plaintiff : Sparke Helmore
Defendant : Deacons

Case(s) referred to in judgment(s):

Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd (unreported, 22 May 1998)
Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297; (1992) 109 ALR 169


(Page 3)

1 KENNETH MARTIN J: This action commenced under the plaintiff's writ of summons on 18 January 2008. A statement of claim was endorsed upon the writ.

2 The defendant's application for costs, which is determined on the papers, arises out of the filing by the plaintiff of an amended statement of claim and an amended substituted reply and defence to counterclaim, both on 21 September 2009. The consequence of those amendments is claimed by the defendant to give rise to a significant amount of wasted cost and expenditure.

3 The action has been managed in the Commercial and Managed Cases (CMC) list since 18 February 2008. Prior to the September 2009 amendments, the defendant filed a defence and counterclaim, and there had been a good deal of interchange between the parties concerning the provision of further and better particulars of each of the pleadings. In addition, a mediation was conducted between the parties on 24 September 2008. The matter was not then resolved. Discovery seems to have occurred in phases between December 2008 and April 2009. Contention as regards the provision of particulars and further discovery appears to have erupted after the plaintiff filed a substituted reply and defence to counterclaim on 24 March 2009.

4 On 7 December 2009, I heard and determined an application brought by the plaintiff for further and better discovery in respect of certain contentious categories of documents. In the end, I refused that application.

5 Essentially, the plaintiff seeks moneys from the defendant which it says are due to it for steel it supplied for an offshore project in the Maari Field, which is approximately 80 km off New Zealand's Taranaki south coast. The plaintiff claims $US389,545.62 plus interest from the defendant. The defendant raises, by its defence and counterclaim issues which, if accepted, would extinguish the quantum of the plaintiff's claim by reason of alleged delay in the delivery of the steel product to the defendant. This gives rise to the plaintiff's exposure to liquidated damages by reason of the alleged delays. One of the key issues between the parties relates to the precise nature and terms of the contract which governed their working relationship at the time the steel product in question was supplied.

6 At an early point in the litigation, the parties appear to have been in relatively close accord as to the written purchase orders and

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communications which founded a contractual relationship between them and upon which the plaintiff delivered its steel. However, that relative alignment altered dramatically under the amendments to the statement of claim of 21 September 2009. By par 3 of the amended statement of claim, the plaintiff altered its plea to refer to an agreement of 7 June 2006, which is contended to be partly in writing, and partly implied or alternatively (I interpolate), wholly implied. Particulars under par 3.1 of the amended statement of claim identify the asserted written components of the agreement. The documents range from 28 February 2006 to 8 June 2006. A critical aspect of the amendments is seen in subpar 4.5 which contends for the existence of a term referred to as the 'Overarching Supply Condition'. This essentially is explained as an express term of the agreement, which provides that the plaintiff is to supply steel to the defendant on the basis of achieving only 'earliest supply'.

7 The agreement now contended for, as at September 2009 by the plaintiff, is a significant structural departure from the plaintiff's former plea which contended for a written agreement of 20 June 2006, which was wholly in writing.

8 By an amended defence and counterclaim of 27 November 2009, at par 3, the defendant contends for a partly written and partly to be inferred or implied agreement in or about June 2006, which is particularised in five subparagraphs.

9 It is immediately apparent that the plaintiff's amendments of 21 September 2009, made without leave, as practice in the CMC list permits, gave rise to some elements of wasted costs and expenditure for the defendant by reason of what is obviously a major shift in the plaintiff's underlying contractual case, between January 2008 and September 2009. The essential issue is the scope of the plaintiff's exposure to costs thrown away in those circumstances. The defendant seeks orders that the plaintiff should pay costs thrown away by reason of the amendment fixed at $24,649.50 to be paid forthwith. Each party has filed written submissions in support of its respective contentions concerning costs. The defendant's submissions of 3 September 2009 are supported by an affidavit of Jennifer Mary Hill of 3 December 2009.

10 At par 9 of its written submissions, the defendant says:

The defendant requests the court to exercise its discretion to order that the costs thrown away by reason of the amendment be paid forthwith as:

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(1) there has been a long delay in the close of pleadings as a result of the plaintiff's amended pleadings;

(2) the plaintiff's amended pleadings, filed and served on 21 September 2009, mark a fundamental departure from the case previously maintained by the plaintiff as the plaintiff has abandoned the allegation that it delivered steel in accordance with the delivery schedule contained in the purchase order and contends that the only requirement was for the 'earliest supply' of steel to the defendant described in the plaintiff's amended statement of claim as the 'Overarching Supply Condition';

(3) there is no reason why, … the plaintiff could not, had it acted diligently and competently, run the case it now seeks to put by its amended pleadings from the outset of the proceeding;

(4) the defendant has incurred considerable cost which is wasted as a result of the plaintiff's amended pleadings; and

(5) the proceeding is unlikely to be resolved in the near term.

11 Paragraph 20 of Ms Hill's affidavit provides the breakdown of costs thrown away figure of $24,649.50. Only two aspects of what is an hourly compilation table seem to be in serious contention as costs which, in terms of their conceptual subject matter, could potentially be the subject of allowance as costs thrown away. Those categories are 42.6 hours in claimed solicitor and counsel costs, amounting to $16,225.50, and are associated with the task of preparing for and attending the one day mediation in September 2008. The other component which is conceptually controversial is a claim of 3.8 hours (cost $1,628), for considering a substituted reply and defence to counterclaim of 24 March 2009, which was subsequently overtaken by a fresh substituted reply and defence to counterclaim on 21 September 2009.

12 The plaintiff's written submissions (pars 23 and 24) downplay the significance of the adjustments to the reply and defence to counterclaim. However, in my assessment, the new amendments warrant careful scrutiny. Thus, the defendant's 3.8 hour claim in respect of waste associated with the changes to this pleading, does not manifest a claim that is extravagant or inappropriate.

13 The remaining controversial maters therefore distil down to the claim for $16,225.50 in respect of wasted costs associated with the one day mediation held before a Registrar of this court on 24 September 2008, and the issue of whether the order for costs thrown away should be on the basis of payment of such costs, forthwith.

(Page 6)

14 As to that later issue, the plaintiff relies upon a decision of Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297; (1992) 109 ALR 169, per Olney J at 312, contending that special circumstances need to be shown in order to justify an order that interlocutory costs are to be paid forthwith. The plaintiff points out that the standard CMC list directions relating to amendment of pleadings provides that, unless a case manager orders otherwise, the costs thrown away by an amendment are to be the other party's costs, 'in any event'. But that phrase deals with the abiding entitlement of the party receiving the amendment to be granted the costs 'thrown away' - irrespective of the ultimate outcome of the trial. This is in stark contrast, say, to an order that the costs be in the cause. In my view, that standard CMC list draft order, by its use of the phrase 'in any event', does not bear upon the distinct issue which also arises in the court's discretion, as to when the party carrying the obligation to meet an order against it for costs thrown away, is to meet that obligation (ie, immediately or in the general 'wash-up' at the end of the trial when the outcome is known).

15 Both parties referred in their submissions to a decision of Branson J in Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd (unreported, 22 May 1998). The plaintiff correctly draws attention to somewhat unusual underlying facts in Life Airbag wherein the applicants had filed and served five different versions of a statement of claim over a period of 9 months, and that the first four versions were withdrawn after the respondents incurred the costs of strike-out applications. In those somewhat extreme underlying circumstances, a departure from what the plaintiff says is the general rule against a 'forthwith' payment of costs order was hardly surprising.

16 But in my assessment, the court's broad and general discretion concerning an award of costs in a context of costs thrown away exposure by reason of a pleading amendment, is not to be fettered by so-called rules of predisposition. The underlying facts in each particular case need to be the subject of independent consideration.

17 In the present case, five matters seem to me to be of significance in influencing the exercise of my discretion toward imposing an immediate obligation to pay the assessed level of costs thrown away.

18 First, the statement of claim amendments in September 2009, relating to the newly found content of the contractual agreement sued upon, is at the very heart of the plaintiff's action. The amendment reflects a strategic change in the formulation of the plaintiff's case. There has

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been a significant shifting of ground. This change carries with it manifest scope for wasted effort tied to working upon the premise of the former contract allegations, and a need for some reorientation by the defendant.

19 Second, this significant tactical shift by the plaintiff disturbs the underlying contractual status quo that otherwise prevailed for over 20 months. The platform underlying all exchanges in terms of pleadings, correspondence, particulars, discovery and inspection for 20 months has now changed.

20 A third consideration seems to me to be that the amendment has necessarily reopened issues of discovery and particulars in circumstances where the trial is still some distance off.

21 Fourth, the structural alteration to the plaintiff's case, as time passes, will acquire the status and focus of ancient history, or 'water under the bridge'. An award of costs on the basis of an obligation to render payment in respect of wasted effort forthwith, is appropriate, in my view, in circumstances where the contractual landscape for battle is now significantly different, at least conceptually, in regard to the alleged contractual relationship, for the duration of the litigation. That supports a view that the waste issue be dealt with now, rather than forgotten about until later - only then to be dealt with in the overall 'wash-up', whenever that might be.

22 Fifth, modern principles of case flow management litigation, particularly those applicable to the CMC list, demand that parties conduct their cases with insight and efficiency. The amenability of a court to allowing amendments to pleadings without leave, should not carry with it an accompanying exposure against the party on the receiving end to significant tactical ground-shifts without a viable and timeous avenue of redress, where correlative waste can be demonstrated.

23 Those five considerations, in aggregate, lead me to a view that it is appropriate, in the present case, to direct an award of costs thrown away on the basis that the costs as assessed are to be payable by the plaintiff forthwith.

24 That leaves the issue in respect of the defendant's claim for asserted wasted mediation costs, amounting to some $16,225.50. In my view, it would rarely be appropriate to treat the costs of a mediation as wasted costs. In the first place, there are pragmatic considerations against such an approach. Mediations are conducted on a confidential, without prejudice basis. The prospect of opening up an inquiry as to the utility or

(Page 8)

relevance of what has passed between the parties in wholly without prejudice and confidential circumstances seems to me to be conceptually inconsistent with the nature of the mediation process. Second, the fact that the parties are not instantly successful in reaching settlement of their dispute does not mean that the mediation process has failed, or is at an end. Mediation is an ongoing process. It is flexible and evolves. The parties' efforts towards their first mediation may not have borne immediate fruit on 24 September 2008. However, that is not to suggest that the mediation process, in due course, may not revive and supervene to ultimately produce an accord for the parties. I make these observations appreciating, as I do, that the plaintiff's contractual case has obviously shifted since September 2008. Nevertheless, it is impossible to reach a view that the settlement dialogue during September 2008 falls into the category of wholly wasted effort. I would anticipate in this matter that a further court sponsored mediation would likely be ordered by the court, before the matter is listed for trial dates.

25 In all the circumstances, it seems to me that the defendant is entitled to an award of costs thrown away in the amount of ($24,649.50 less $16,225.50) $8,424.

26 Those costs thrown away by reason of the amendments made by the plaintiff to its pleadings on 21 September 2009, are to be payable to the defendant, forthwith.