Fluor Australia Pty Ltd v Sherritt International Corporation
[2002] VSC 420
•30 September 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 6527 of 2000
| FLUOR AUSTRALIA PTY LTD | Plaintiff |
| v | |
| SHERRITT INTERNATIONAL CORPORATION AND ANOTHER | Defendants |
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JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 27 SEPTEMBER 2002 | |
DATE OF JUDGMENT: | 30 SEPTEMBER 2002 | |
CASE MAY BE CITED AS: | FLUOR AUSTRALIA PTY LTD v SHERRITT INTERNATIONAL CORP & ANOR | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 420 | |
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practice and procedure – Application to strike out statement of claim – Liability contingent on outcome of arbitration – Arbitrator's award in relation to part of claims only – Incomplete cause of action – Portions of statement of claim unsustainable.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A.M. Ryan | Allens Arthur Robinson |
| For the Defendants | Mr J. Santamaria QC with Mr R. Peters | Arnold Bloch Liebler |
HIS HONOUR:
This is the return of a summons issued by the defendants on 25 September 2002. By it, those parties seek an order that the plaintiff’s amended statement of claim, which is dated 1 February 2002, be struck out. Consequential orders are also sought.
It is necessary to sketch the background to the dispute. On 21 August 1997, the plaintiff entered into two agreements with Anaconda Operations Pty Ltd ("Anaconda"). They concern the construction of a cobalt and nickel treatment plant at Murrin Murrin in Western Australia. The plaintiff’s role, among other things, was to "complete the design and construction of the plant" and to provide assistance to Anaconda in the "commissioning, production and ramp up and other operational support following [the plant’s] mechanical completion."[1]
[1]Amended statement of claim, paragraph 29.
Rightly or wrongly, Anaconda was not happy with the plaintiff’s performance, or at least some aspects of it. It accordingly invoked those provisions in the contracts which provided for the resolution of disputes by arbitration. Arbitral proceedings subsequently commenced. On 7 September 2002, the arbitrators handed down the first of what may be expected to be a series of awards; certainly, the interim award of 7 September does not purport to resolve all the issues submitted to arbitration. It is concerned only with what is known as "Area 3200" of the Murrin Murrin plant, one of numerous ares into which the plant is divided. Of the other areas, disputes in relation to those known as Areas 3300 to 3700 are still before the arbitrators.
The decision to go to arbitration was a step which, in the plaintiff’s eyes, left it more exposed than it deserves to be. For while the plaintiff (as I understand it) denies most if not all of Anaconda’s allegations, it contends that, if they are made out, then it is entitled to be indemnified by the defendants.
This is the classic "third party" claim. Unfortunately, however, it is "a very great shortcoming of arbitration as a dispute resolution process … that it does not easily admit" such a claim: see the judgment of Byrne J delivered on 29 May 2002, in an earlier application to strike out the statement of claim in this matter[2]. This "shortcoming" doubtless explains the absence of the defendants from the arbitration.
[2][2002] VSC 203 at [37].
It certainly explains the proceeding presently before me. It began with the filing of the writ on 18 August 2000. The statement of claim was last amended pursuant to an order of Byrne J. This was made on 30 November 2001. As now drawn, the amended statement of claim identifies the defendants as related companies whose business it is to provide "services in relation to mineral extraction processes and process technologies".[3] These, by an agreement made on or about 4 March 1995, the first defendant agreed to provide for the Murrin Murrin project. A further agreement, on this occasion made on or about 10 May 1996, provided that the first defendant "would perform the Work with a view to assisting the project general contractor to have the commercial plant ready for commissioning at the earliest practicable date".[4] "The Work" was defined in the amended statement of claim as meaning, among other things, the provision of (a) assistance during the detailed design stage and (b) ongoing services.
[3]Amended statement of claim, paragraph 2(c).
[4]Amended statement of claim, paragraph 11(a).
Meanwhile, the plaintiff had tendered for the engineering, procurement, construction and management services required to bring the project to successful completion. On 7 June 1996, that tender was accepted. I assume that the plaintiff then took on the role of the "project general contractor". At all events, the plaintiff thereafter proceeded with the preparatory steps which were necessary to be taken before it was in a position to provide the services for which it had tendered. But in doing so it relied upon the advice of the defendants. Indeed, by a memorandum of understanding entered into between Anaconda and the plaintiff on 2 July 1997, the detailed design of the plaintiff was to be "based upon the process design developed by [the first defendant] as part of the … Work[s]."[5] (The second defendant was brought in because, according to the amended statement of claim, the two defendants were now working in tandem to fulfill the first defendant’s obligations under its agreements of 4 March 1995 and10 May 1996.)
[5]Amended statement of claim, paragraph 28.
Each defendant was, according to the plaintiff, aware of the plaintiff’s reliance on each of them, a reliance which extended up to and beyond the plaintiff’s entry into the two agreements of 21 August 1997 by which (as I understand it) Anaconda’s acceptance of the plaintiff’s tender was given its contractual embodiment. It was a reliance justified by the defendants’ expertise and by the respective roles at Murrin Murrin of the plaintiff on the one hand and the defendants on the other. In particular, the plaintiff was necessarily guided (and at times perhaps constrained) in what it did by the work of the defendants. In these circumstances (so the plaintiff alleges) the defendants owed a duty to the plaintiff to exercise reasonable skill and care in the discharge of their duties under their own agreements (of 4 March 1995 and 10 May 1996) with the Anaconda interests.
This at all events is my present understanding of the way the plaintiff puts its case. A cause of action in misleading and deceptive conduct contrary to s.52 of the Trade Practices Act 1974 is also pleaded against the defendants. I confess, however, to a less than perfect understanding of the detail of the amended statement of claim, and it should not be thought that the above is more than a background sketch of its effect. What is certain is that the plaintiff alleges that the defendants owed it a duty of care, that they are in breach of that duty and of s. 52, and that the plaintiff is or has thereby become liable to Anaconda for the cost of rectification.
By summons dated 15 April 2002, the defendants sought judgment in respect of the vast majority of the plaintiff’s claims as pleaded in the amended statement of claim. The basis of the application was that the plaintiff had not suffered, and would not suffer, loss and damage unless and until its defence to Anaconda’s claims in the arbitration failed.
It is trite law that a cause of action in negligence has three elements, one of which is damage. Likewise, damage is an element in the cause of action based upon a breach of s. 52. It is equally trite that (a) all the elements of a cause of action must be present before the cause of action is complete, and (b) the cause of action must be complete at the time the relevant proceeding is commenced. As was said by Byrne J in his Honour’s judgment on the summons of 15 April (a judgment to which I referred in paragraph [5] above):
"It is common ground that the cause of action of the plaintiff must be complete at the time the proceeding is commenced. A claim in negligence and one for misleading and deceptive conduct may not, therefore, be brought if the plaintiff has suffered no consequential loss and damage. Prospective or contingent loss will not suffice."[6]
[6][2002] VSC 203 at [8].
It is true that the question whether a plaintiff has suffered any present loss and damage does not necessarily admit of a simple or mechanical answer.[7] On the other hand, an examination of both the evidence presently available and the pleadings in the present case leads one to the inevitable conclusion that this plaintiff has suffered a present loss to an extent far less than that pleaded as the extent to which the plaintiff is or has become liable to Anaconda. The amended statement of claim describes its alleged loss and damage in four different ways, set out by Byrne J in his judgment as follows:
[7]Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514.
"(1)As a result of … [the deficiency] Fluor is liable to Anaconda for the cost of rectification.
(2)As a result of …. [the deficiency] Fluor has become liable to Anaconda for the cost of rectification.
(3)[The deficiency] has contributed to Fluor’s liability to Anaconda …
(4) As a result of … [the deficiency] Fluor has incurred costs."
Three claims adopt the fourth formula. They were not the subject of the application for judgment then before his Honour. They have been categorised as the "mature claims", and the defendants remain content to accept that, as pleaded, they form part of a complete cause of action. They were not the subject of contention before me.
The defendants do submit, however, that to the extent that the arbitrators have found against Anaconda, no cause of action will ever exist as between the plaintiff and the defendants (subject only to a successful appeal). They also argue that, to the extent that the arbitrators have yet to bring down an award, the plaintiff has as yet suffered no loss, and may never do so; the balance of the findings of the arbitrators may be entirely in the plaintiff’s favour. In other words, were the trial of the plaintiff’s claim against the defendants to be heard and determined today, the measure of the plaintiff’s loss (which would, of course, be subject to proof in the usual way) would be limited to the "mature claims" and to the amount which, by their interim award, the arbitrators have required the plaintiff to pay to Anaconda. This is, as I understand it, a very small amount ($2,579) in the context of an arbitration, in which, over all the "Areas" in dispute, some $300,000,000 is at stake.
By their first interim award, the arbitrators dismissed in its entirety Anaconda’s principal claim in this first installment of the arbitration: a claim, that is, for damages in the sum of $87,992,000 for the cost of rectification of certain internal cladding. This is an amount for which the plaintiff, as the amended statement of claim is presently drawn, continues to claim from the defendants. Assuming no successful appeal, this claim will have to be dismissed. Indeed, in my opinion, it should never have been brought.
It follows that, in so far – if at all - as Byrne J held (incidentally, before the publication of the interim award of 7 September) that the measure of the plaintiff’s loss would have then to be measured on a contingency basis, I respectfully disagree. It was not then appropriate to attempt any kind of assessment at all. The cause of action was not complete; and it follows that there was before the Court no dispute upon which the Court could adjudicate. The Court was not then even in a position, as it seems to me, to consider an application for declaratory relief. Courts do not give advisory opinions, and do not adjudicate upon theoretical questions. Just as a court would not (subject to any statutory provisions to the contrary) entertain an application for a declaration in favour of symptom-less workers whose employers have carelessly subjected them to asbestos dust, so no court would, in my opinion, entertain an application by the present plaintiff for a declaration against the defendants that they would be liable to the plaintiff should Anaconda succeed in maintaining in the arbitration one or more of its claims against the plaintiff. Such an exercise might well be a gigantic waste of time.
I have already noted that some of the claims made in the amended statement of claim (that is, the "mature claims") were, as was accepted before Byrne J, claims in respect of which the plaintiff alleged that it had suffered a present loss. There is no question but that the plaintiff should be allowed to pursue those claims against the defendants. Likewise, it must be allowed to pursue its claims for indemnity from the defendants in respect of the head or heads on which Anaconda has thus far succeeded in the arbitration. In my opinion, however, there is no basis for permitting the plaintiff to proceed with the balance of its present claim.
It was submitted before me that Byrne J had merely stayed the proceeding pending the publication of any interim award. He had declined to strike it or any part of it out. Although it is true (the submission continued) that the stay granted by his Honour has now necessarily expired following the events of 7 September, I should nevertheless adopt the same approach in considering the present application to strike out. Nothing material has occurred since his Honour’s judgment of 29 May to suggest that a stay is no longer appropriate.
I, however, agree with counsel for the defendants that things have changed materially: for one thing, the balance of the hearing before the arbitrators will not resume until September 2003. That was not known when the matter was before Byrne J. But I also think that the plaintiff ought not be allowed to continue to prosecute causes of action which are not yet complete. If, on publication of future awards, the presently missing elements are supplied, then of course the plaintiff will be in a position properly to commence proceedings improperly brought now. No arguable question of limitations will arise.
In my opinion, the plaintiff must recast its "Area 3200" claims to take account of the interim award, any issues otherwise identified as requiring attention, and – to the extent that such account is justified – the defendants’ request for particulars delivered last June. At the same time, and for the reasons that I have endeavoured to articulate, the further amended statement of claim should not include allegations of a breach by the defendants of a duty of care where the breach, or any damage which may flow from it, is contingent upon the arbitrators’ findings in the arbitration presently on foot between the plaintiff and Anaconda.
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