Heavy Plant Leasing v McConnell Dowell Constructors (Aust)

[2018] NSWSC 1006

Supreme Court

New South Wales

Medium Neutral Citation:	Heavy Plant Leasing v McConnell Dowell Constructors (Aust) [2018] NSWSC 1006
Hearing dates:	15/06/2018
Date of orders:	15 June 2018
Decision date:	15 June 2018
Jurisdiction:	Equity - Technology and Construction List
Before:	McDougall J
Decision:	Order separate determination of only one of the quantum issues. Motion otherwise dismissed with costs.
Catchwords:	CIVIL PROCEDURE – application for separate determination – underlying proceedings complex – significant overlap in factual and evidentiary matters between all issues – danger of inconsistent findings on credibility – ordering separate determination unlikely to contribute to the just, quick and cheap resolution of disputes – application dismissed with exception of one narrow quantum issue.
Legislation Cited:	Australian Consumer Law, Schedule 2 to the Competition and Consumer Act 2010 (Cth) Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103 Idoport Pty Ltd v National Australia Bank (No 15) [2000] NSWSC 1215 Tepko Pty Ltd v Water Board (2001) 206 CLR 1
Category:	Procedural and other rulings
Parties:	Heavy Plant Leasing Pty Limited (In Liquidation) (Plaintiff) McConnell Dowell Constructors (Aust) Pty Ltd (Defendant)
Representation:	Counsel: M K Condon SC / P G Sharp (Plaintiff) D Cook SC / J Wright (Defendant)     Solicitors: Squire Patton Boggs (Plaintiff) Norton Rose Fulbright Australia (Defendant)
File Number(s):	2017/51274

Judgment

1. HIS HONOUR: The plaintiff (HPL) seeks an order that issues defined in its amended notice of motion filed in court today be decided separately from and after the decision of all other issues in the proceedings. The defendant (MacDow) opposes that course.

2. The proceedings are complex and the sums of money bandied around in the quasi-pleadings are large indeed. The dispute between the parties arises out of a subcontract by which HPL agreed to perform earthworks for MacDow relating to the construction of a coal seam gas processing facility in Queensland. To the extent that it matters, the original subcontractor, Reed Construction Australia Pty Ltd, ran into financial difficulties and the parties agreed to a novation whereby HPL stepped into Reed Construction's shoes.

3. HPL performed work for MacDow pursuant to the subcontract. It submitted payment claims for that work. MacDow provided payment schedules, sometimes in time and sometimes not. Among other things, MacDow purported to set off, against amounts that might otherwise be owing to HPL, amounts paid by MacDow to suppliers or subcontractors to HPL.

4. On 14 March 2013, HPL's bank, Australia and New Zealand Banking Group Limited, appointed receivers and managers and HPL appointed administrators. Four days later, on 18 March 2013, MacDow terminated the subcontract and "expelled" HPL from the site. The termination relied, among other things, on an express contractual power to terminate that had been enlivened by the appointment of receivers and managers and the appointment of administrators.

5. HPL says that its insolvency (a convenient although not entirely accurate term) was substantially caused by MacDow’s wrongful failure to pay amounts due under the subcontract. Thus HPL says, the termination of the subcontract was invalid or unlawful. HPL claims damages. It says that MacDow engaged in unconscionable conduct for the purposes of the Australian Consumer Law[1] , and claims damages for that also.

   1. Schedule 2, Competition and Consumer Act 2010 (Cth).

6. In the events that happened, MacDow was required to ensure completion of the works itself. It engaged another subcontractor to do so. Under the subcontract with HPL, if (as happened) that subcontract was terminated and MacDow was required to appoint another subcontractor, the "extra over" cost to MacDow of having to do so was recoverable. The contractual formula is simple to state in outline but extremely difficult to apply in practice. It requires, among other things, a re-measurement and revaluation of all of the work done by HPL, a projection of the further amounts that would have been paid to HPL to complete its works and a mathematical balancing up, once all of those things have been done, with the total paid to the new subcontractor. I mentioned that there had been large sums bandied about. MacDow says that the amount payable by way of the extra over claim is, in round figures, $17.4 million.

7. In those circumstances, it is obvious, as HPL says, that the costs of preparing for hearing on all issues, including the issues of the quantification that are the subject of its amended notice of motion, will be very great. It is equally obvious that if HPL fails at the level of principle – that is to say, if it fails to establish that the termination of the subcontract was unlawful – then much if not all of that exercise of quantification will prove to have been unnecessary.

8. Rule 28.2 authorises the Court to order the separate trial of issues, and the order in which issues so separated are to be tried. In terms it is an exception to the general and well-recognised principle that all issues should be decided at once, by the same tribunal of fact and law. In what follows, I am assuming a trial by judge alone.

9. The general order of things, that all issues should be tried together and once by the one judge, reflects what is generally seen to be the just, quick and cheap way of resolving the issues in dispute. Thus, it is seen to be the mode of resolution of the dispute that is most conducive to achievement of the overriding purpose set out in s 56 of the Civil Procedure Act 2005 (NSW). It is obvious to see why that is so.

10. First of all, witnesses may give evidence on more than one issue. If their evidence relates to multiple issues to be heard at different times, then they will have to give evidence twice (or in an extreme case, perhaps more). If their credibility is in issue then the first judge will have to decide that point. On ordinary principles, that judge should not hear the second round of issues if credibility remains in issue. Thus, there is engendered a risk of inconsistent findings on credibility. That risk is magnified if (for example) the evidence given in the first round of hearings is relatively brief, so that there is no real opportunity for assessment of credibility.

11. Again, assessment of credibility, as well as of the facts more generally, is best undertaken in the context of as much material as is possible available to the judge who is required to undertake that task. It is commonplace that an assessment of credibility, and of the probabilities, is most assisted by reference to all the testimonial evidence and all the documentary evidence. If there are split hearings, that advantage may be lost.

12. Again, it is common experience that where issues in a proceeding are interrelated (as is commonly the case in cases in the Commercial List and the Technology and Construction List) an understanding of the overall factual background, and of the particular facts relevant to all the issues, will facilitate the decision of the related issues. If there is to be a split hearing, that advantage will be lost.

13. Those, no doubt, are some of the reasons why it has been said, in cases of high authority, that the benefits of separate hearings are often exaggerated or overstated. See, by way of example only, Kirby and Callinan JJ, in Tepko Pty Ltd v Water Board [2] .

    2. (2001) 206 CLR 1 at [168].

14. Having said all that, the discretion that r 28.2 gives is there, and is to be used where appropriate. The discretion is in terms unconfined. It is a discretion to be exercised in accordance with the dictates of s 56 of the Civil Procedure Act. Thus, in considering whether to make an order for separate determination, the Court must consider whether to do so is likely to be conducive to the just, quick and cheap identification and resolution of all the issues in dispute.

15. There are many cases where this is something that ought be done. Experience tells us that disputes will often throw up an issue that can be resolved without significant evidence (perhaps apart from documentary evidence) and if decided one way will avert the need for expensive preparation on issues of damages. In most such cases, it is easy to see why the court would be tempted to make an order under r 28.2.

16. In other cases, whilst a particular issue cannot be seen to be determinative or dispositive, it may nonetheless be seen as the real issue of principle separating the parties. If the Court decides that issue, then there is a possibility (one would hope more than a possibility) that the parties, guided by the decision on the particularly contentious point, will be able to resolve the remaining issues between themselves.

17. In both the examples I have given, the advantages of separate determination are, in principle at least, clear.

18. I am by no means satisfied that this is a case where it is likely that there will be any such advantage. I accept completely that if the case is prepared for hearing on all issues, and the fundamental contractual questions are thereafter resolved against HPL, a lot of work and a lot of money will be wasted. I accept, also, that if the resolution of the principal contractual issues goes against HPL, the work remaining to be done to bring the proceedings to finality will be more limited than it would if that resolution went the other way. And I accept that in cases of this nature, where the issues are as complex as they are, preparation will be time consuming and expensive in any event and however the litigation is structured.

19. However, with one exception to which I shall return, I am not certain that it is possible to achieve such a separation between the issues that the separate determination will achieve anything by way of efficiency and costs savings. On the contrary, it seems to me at present, this is a case where it is at least likely, and probably more fairly inevitable, that the outcome of ordering separate hearings will be fragmentation and delay.

20. Because the discretion is generally uncontrolled save for the requirement that it be exercised judicially and in accordance with s 56, statements of principle as to the mode of exercise do not seem to me to have a great deal of bearing upon the question. However, since counsel referred to it, I shall refer to the judgment of Ward JA in Allandale Blue Metal Pty Ltd v Roads and Maritime Services [3] . Her Honour considered what she called the "legal principles" applicable to the r 28.2 discretion at [87] and following. Her Honour did so by reference to the oft cited judgment of Einstein J in Idoport Pty Ltd v National Australia Bank(No 15) [4] . Many of the matters to which his Honour had referred and to which in turn Ward JA referred have been mentioned already.

    3. [2013] NSWCA 103.

    4. [2000] NSWSC 1215.

21. There was a question in Allandale as to the "threshold” for the operation of r 28.2: whether it was no more than that there should be some prospect of substantially narrowing the field of controversy, or whether there was some critical matter which far more likely than not would lead to a saving of time and expense if dealt with in a preliminary hearing. Ward JA did not decide that point (and in my respectful view, neither approach can be said to be correct, to the exclusion of the other, as a matter of principle).

22. What her Honour did say, and what I respectfully adopt, is that the exercise of the discretion involves a balancing exercise as to the likely utility, in the expeditious and cost-effective case management of the proceedings having regard to the interests of justice as between the parties, of posing the question for separate determination in advance of the hearing. Her Honour gave, as an example, a case where a potential for huge costs savings ought to be balanced against a lesser prospect of a substantial narrowing of the litigious controversy.

23. In the present case, the submissions for HPL emphasise what was said to be the improbability of MacDow's extra over claim going to trial if HPL does not succeed. In those circumstances, it was submitted, there would be no utility in that claim’s proceeding. However, as MacDow responded, the question is not a binary one. It is for example conceivable that HPL could lose on the issue of termination but could succeed on claims raised along the way, including its entitlement to progress payments, either in terms of payment claims served or in terms of a quantum meruit claim for the work the subject of those payment claims. In that event, it seems to me, MacDow, would be required to run its extra over case in any event, with a view to demonstrating an entitlement to recover an amount at least sufficient to offset the amount of any progress payments (or their quantum meruit equivalent) to which, hypothetically, HPL might be held entitled.

24. Again, it was put for HPL that if it succeeded in its main claim, then by hypothesis the termination would be shown to have been unlawful and its claim for damages would be clear. But that then asks what is the basis on which the damages should be assessed. MacDow's rejoinder was that in the state of affairs in which HPL found itself in March 2013, and accepting that the precise termination was, by hypothesis unlawful, nonetheless the probabilities were that HPL would have become insolvent in any event. Thus, again, MacDow submitted, it may be seen that there would be no significant narrowing of the issues, even in the event of that success.

25. Because the issues are complex, and because their precise identification and evaluation will depend critically on the evidence to be given at a hearing (whether a separate hearing pursuant to r 28.2, or a hearing on all issues, is irrelevant), it is in my view very difficult to see that there would be a significant saving of time and money if there were to be separate hearings. This is a clear case where, peculiarly, it seems to me, the resolution of the issues will be best done if all are considered at once, in the light of all evidence, and with the benefit that an understanding of the overall background gives.

26. Thus, it seems to me, this not an appropriate case to make the order sought.

27. There are other reasons why in my view this is so. One is that, as is common ground, if there is to be a separation of issues, the same witnesses will have to give evidence more than once. That is of particular concern in MacDow's case, because many of its witnesses of fact would have to give evidence both on the liability issues, in particular as to termination of the subcontract, and on damages issues in the event that HPL makes good its liability case. Those witnesses would have to be recalled, no doubt at considerable inconvenience to themselves and expense, and give evidence a second time. As I noted earlier in the reasons, that would also raise straight away the prospect of inconsistent analysis of credibility.

28. It is not just witnesses of fact who might have to be called twice. There is at least a prospect that the expert evidence to be called from MacDow dealing with matters of valuation would have to be given in separate hearings because that evidence also is relevant to both ways in which the case is put.

29. Finally, in this context, it must be noted that the relevant events occurred late in 2012 and in the first quarter of 2013. We are already more than five years past that time. The complexity of the issues, even limited to liability, is such that it is unlikely that there would be a hearing before the latter half of next year at the very earliest. If that hearing is to be limited to the liability issues, then on the assumption that the dissatisfied party tries its chances in the Court of Appeal, the prospect of any hearing on the separate issues (should it ever get to that) taking place before 2022 is limited indeed.

30. The Court would then be faced with the position where witnesses would be asked to give evidence of events that had happened ten years ago, in circumstances where no doubt they had been working on other projects, and quite possibly for other employers in the intervening years. I accept, as was put for HPL, that there will be a prodigious documentary record available to assist in the refreshing of recollections. But that does not seem to me to be a complete answer. And of course, if the proposition is that the witnesses can be proofed in any event, against the possibility that a hearing on damages issues will be required down the track, that would avert a significant part of the suggested costs savings.

31. In principle, as I have said, I am not satisfied that this is an appropriate case to make the orders sought.

32. I mentioned earlier that there was a discrete category of claims that did seem to me to be capable of separate determination. That refers to a particular class of damages claimed by HPL. It is claiming, in substance, the costs of its receivership and administration and liquidation and the costs of litigation funding. I do accept, as was put for HPL, that the quantification of those costs would be time-consuming and expensive. I accept, further, that in the event it becomes necessary to decide the amount of those costs, that will almost certainly be the task of some hapless referee, and some equally hapless judge called upon to consider the adoption of the report.

33. That does seem to me to be something that could be put off conveniently. It does not seem to me to involve any real element of duplication or double handling. Nor does it seem to me that the problems of loss of memory and passage of time are of particular significance.

34. Thus, in principle, I am of the view that the quantification of the costs of receivership, administration and liquidation of HPL, the costs incurred by its receivers, administrators and liquidators of running the litigation against MacDow, and the fees if any payable to the litigation funds, should be left to separate and subsequent determination. Otherwise, in my view, the amended notice of motion should be dismissed.

35. I have not tried to formulate the precise term of the orders. Nor have I dealt with the question of costs. The parties should formulate the appropriate orders to give effect to these reasons. I shall hear counsel on costs.

[Counsel addressed.]

36. The only issue as to costs is whether the plaintiff's prospective success in relation to the categories of loss that I said should be the subject of subsequent determination means that the defendant should not have all its costs. That one issue seems to me to be so minor in the scale of things that any attempt to reflect it by reducing the costs otherwise payable would be more likely to work injustice on the defendant than to do justice to the plaintiff. The costs discretion is one to be exercised, so far as possible, to enable the Court to do justice between the parties.

37. I direct the parties to submit an order under r 28.2 to give effect to these reasons by 5pm on Tuesday 19 June 2018. I list the matter for directions on 29 June 2018. I order the plaintiff to pay the defendant's costs of the notice of motion.

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Endnotes

Decision last updated: 29 June 2018