LCT-MRE Nominees Pty Ltd (as trustee of the LCT-MRE Trust and in its personal capacity) v Thiess Pty Ltd (No 2)

[2022] NSWSC 969

Supreme Court

New South Wales

Medium Neutral Citation:

LCT-MRE Nominees Pty Ltd (as trustee of the LCT-MRE Trust and in its personal capacity) v Thiess Pty Ltd (No 2) [2022] NSWSC 969

Hearing dates:

23 and 30 June and 7 July 2022

Decision date:

22 July 2022

Jurisdiction:

Equity - Technology and Construction List

Before:

Ball J

Decision:

(1)   Grant leave to the plaintiffs to file an Amended Technology and Construction List Statement in the form provided to the Court on 11 July 2022 with the following paragraphs deleted:

(a)   Paragraph 69, particulars (i)(d)(1) and (2);

(b)   Paragraph 71B(d);

(c)   Paragraph 71F(c);

(2)   Reserve to the trial judge the question of when the amendments take effect;

(3)   Order that the plaintiffs pay the defendants’ costs thrown away by reason of the amendments;

(4)   Order that the plaintiffs pay the defendants’ and cross-defendants’ costs of the motion filed on 7 June 2022.

Catchwords:

CIVIL PROCEDURE — Pleadings — Amendment — Form and content of pleading — Whether proposed amendment alleges design deficiencies with sufficient clarity — Whether proposed amendments alleging certain other defects should be allowed where, had the allegations been made earlier, the defendants could have brought a cross-claim

Cases Cited:

LCT-MRE Nominees Pty Ltd (as trustee of the LCT-MRE Trust and in its personal capacity) v Thiess Pty Ltd [2022] NSWSC 317

Category:

Procedural rulings

Parties:

LCT-MRE Nominees Pty Ltd (as trustee of the LCT-MRE Trust and in its personal capacity) (First Plaintiff)
LCT-MRE Pty Ltd (Second Plaintiff)
Thiess Pty Ltd (First Defendant | First Cross-Claimant)
John Holland Pty Ltd (Second Defendant | Second Cross-Claimant)
CIMIC Group Ltd (Third Defendant)
WSP Australia Pty Ltd (First Cross-Defendant)
ACN 006 475 056 Pty Limited (Second Cross-Defendant)
ACN 061 447 621 Pty Limited (Third Cross-Defendant)
GE Power NZ Holdings Pty Ltd (Fourth Cross-Defendant)
UGL Rail Pty Ltd (Fifth Cross-Defendant)
AECOM Services Pty Ltd (Sixth Cross-Defendant)

Representation:

Counsel:
L Shipway (Plaintiffs)
PS Braham SC (First to Third Defendants | First and Second Cross-Claimants)
J Giles SC (First and Second Cross-Defendants)
AF Girgis (Sixth Cross-Defendant)

Solicitors:
Allens (Plaintiffs)
Corrs Chambers Westgarth (First to Third Defendants | First and Second Cross-Claimants)
Johnson Winter & Slattery (First and Second Cross-Defendants)
HFW Australia (Sixth Cross-Defendant)

File Number(s):

2017/77595

Publication restriction:

None

Judgment

Background

1. In these proceedings, the plaintiffs, who are the operators (referred to as “Concessionaires”) of the Lane Cove Tunnel (LCT), sue the defendants to recover the costs of rectifying alleged defects in the LCT. The first and second defendants (the Contractor) were responsible for designing and building the LCT under a contract (the D&C Deed) entered into on 4 December 2003 with two special purpose companies established by the New South Wales government, whose rights and obligations under the D&C Deed were novated to the plaintiffs on 9 August 2010. The third defendant guaranteed the Contractor’s obligations under the D&C Deed. Various estimates are given for the costs of rectification which range up to an amount of more than $600 million if the repairs cannot be made until after the plaintiffs’ concession expires in 2048 and ownership of the LCT reverts to the State.

2. The alleged defects relate primarily to the lining of the LCT which is a form of concrete known as “shotcrete”. The defendants have filed cross-claims against a number of subcontractors who were engaged by the defendants to provide various services in relation to the design and construction of the LCT. However, relevantly they have not filed a cross-claim against Readymix Holdings Pty Limited (Readymix), which was engaged to supply and install the shotcrete and to prepare it in accordance with design parameters set by the Contractor. Nor have they filed a cross-claim against various entities in the LAF Group, who were responsible for manufacturing, supplying and applying a fire retardant product known as “Vermitex®” to elements of the LCT.

3. The LCT was completed in 2007. These proceedings were commenced in March 2017. They have progressed slowly, partly because of delays caused by difficulties in obtaining access to the LCT, which, apart from quarterly closures for limited periods of time for maintenance, is used continuously.

4. Originally, it was the plaintiffs’ pleaded case that:

1. A number of defects had developed in the LCT principally relating to cracking, seepage from and debonding of the shotcrete lining;

2. As a consequence of those defects, the LCT does not or will not meet the performance standards set out in the D&C Deed and, in particular, will not remain at all material times fit for its intended purpose and have a minimum design life of 100 years.

5. By a notice of motion filed on 7 June 2022, the plaintiffs seek to make substantial amendments to its claim to plead in effect that the design of the LCT was defective in a number of respects and that the construction of the tunnel was defective in a number of respects. The alleged defects in design and construction again relate principally to the shotcrete lining.

6. The amendments themselves have a somewhat long and complicated history. The claims sought to be introduced by them were the subject of extensive correspondence between the parties commencing in October 2019. The notice of motion was filed following a judgment delivered by Stevenson J on 23 March 2022 (see LCT-MRE Nominees Pty Ltd (as trustee of the LCT-MRE Trust and in its personal capacity) v Thiess Pty Ltd [2022] NSWSC 317) in which his Honour concluded that the plaintiffs should be entitled to rely on further expert evidence ostensibly filed in reply to expert evidence filed by the defendants which raised issues concerning the design and construction of the LCT.

7. The notice of motion first came on for hearing before me on 23 June 2022. At that time, the defendants objected to the amendments generally on the basis that they raised an entirely new case at a late stage in the proceedings and in circumstances where the defendants had first raised the scope of the plaintiffs’ allegations as early as October 2019. The defendants also objected to the form of many of the amendments because they did not contain a clear pleading of the relevant design and construction obligations and specifically how those obligations had been breached.

8. At the hearing, I accepted the criticisms of the pleading of the amendments raised by the defendants and stood the matter over until 30 June 2022 to give the plaintiffs an opportunity to reformulate the amendments, which is what they did.

9. At the hearing on 30 June 2022, the defendants continued to maintain their position that, insofar as the amendments sought to raise a case that the LCT breached the design and construction standards set out in the D&C Deed, they should not be permitted. Apart from further substantial delay that would be occasioned if the amendments were allowed, the defendants contended that they would be irremediably prejudiced by the amendments because some causes of action arising from the amendments were likely to be statute barred and had the amendments been made at an earlier time the defendants could have joined Readymix and one or more companies in the LAF Group as cross-defendants. They also continued to object to a number of specific paragraphs of the proposed Amended Technology and Construction List Statement principally because the paragraphs did not adequately plead the breaches relied on by the plaintiffs.

10. During the course of the hearing on 30 June 2022, I indicated that in principle I was prepared to allow the plaintiffs to plead a case that the Contractor had failed to design and to construct the LCT in accordance with the obligations placed on it by the D&C Deed provided that appropriate orders could be made to ameliorate any consequential prejudice the defendants might suffer. It appeared to me that the amendments were necessary to identify the real issues in dispute between the parties. As a result of the orders made by Stevenson J, the plaintiffs were entitled to rely on the evidence they say supports the amended case. It would be unsatisfactory to say the least for the case to proceed to a hearing, but not deal with allegations which went to the heart of the plaintiffs’ case and which were supported by evidence that, as a result of Stevenson J’s judgment, the plaintiffs were permitted to rely on.

11. One step I indicated that I intended to take to ameliorate any prejudice the defendants might suffer was to set the matter down for hearing with the intention that any further amendments (or evidence) that could not be accommodated by that hearing date would not be permitted except in the most exceptional circumstances. That, at least, would ameliorate any prejudice arising from further delays. Obviously, the hearing date needed to accommodate the fact that the defendants have not yet filed their evidence in response to the evidence filed by the plaintiffs in accordance with Stevenson J’s orders and the fact that the cross‑defendants have not filed their evidence. However, I indicated that it would be selected on the basis that the plaintiffs did not intend to file any further evidence except for evidence strictly in reply. Mr Shipway, who appeared for the plaintiffs, confirmed that that was the position. Accordingly, I stood the matter over to 7 July 2022 to allow the parties to consider when an appropriate hearing date might be.

12. At the hearing on 30 June 2022, Mr Braham SC, who appeared for the defendants, also raised some objections to specific paragraphs of the proposed Amended Technology and Construction List Statement. The plaintiffs were given a further opportunity to make amendments to address the points raised by Mr Braham.

13. The matter next came before me on 7 July 2022. At that time, I fixed the matter for hearing commencing on 19 February 2024 and gave some other directions relating to the preparation of the case for hearing. I also gave the plaintiffs one last opportunity to amend their Technology and Construction List Statement and indicated that I would rule on any remaining objections on the papers.

14. The defendants continue to object to four specific paragraphs of the proposed Amended Technology and Construction List Statement (without resiling from their objection to the whole of the proposed amendments). The paragraphs to which objection is taken are paras 71D, 69 particulars (i)(D)(0) and (1) (the reference to sub-paragraph (0) appears to be an error and it appears that the correct reference should be to sub-paras (1) and (2)), 71B(d) and 71F(c). The plaintiffs no longer advance a case based on the use of the Vermitex product which is objected to by the defendants. Consequently, the non-joinder of companies in the LAF Group is no longer an issue on the application.

Paragraph 71D

15. Paragraph 71D is in the following terms:

71D.   The Contractor is in breach of the obligation set out in paragraph [71C] because the design of the concrete lining as installed was not able to withstand the stress acting on the lining such that the lining was susceptible to suffer widespread cracking when the lining ought to have been designed so as to withstand that stress.

Particulars

An anticipated load of 2.6 MPa calculated before construction did not account for topography and stresses increasing over the length of the LCT and the stresses of up to 3.5 MPa that acted on the concrete lining after construction.

The Concessionaire relies on the report of Dr Sainsbury dated 24 May 2019, including paragraph [29].

16. Paragraph 71C pleads that by reason of various provisions of the D&C Deed “the Contractor was obliged to ensure that the design of the concrete lining as installed in the eastern portals of the LCT’s mainline tunnels accounted for the stresses that would act on the lining after construction”.

17. The defendants object to para 71D on the ground that it does not identify any error in design.

18. I do not accept that submission. Taking the paragraph as a whole, a fair reading of the allegation is that the design was defective because the shotcrete lining was designed for anticipated loads of up to 2.6 MPa whereas, because of the topography and the length of the LCT, the lining should have been designed to cope with loads of up to 3.5 MPa. That is plainly an allegation that the design was deficient.

Paragraphs 69, 71B(d) and 71F(c)

19. These paragraphs can be taken together. The relevant particulars to paragraph 69 and para 71B(d) concern alleged defects in the precise formula of the shotcrete lining that the Contractor chose to use. Taking para 71B(d) as an example, it pleads that the Contractor was in breach of an obligation to prepare or to procure a design of the shotcrete lining that was impermeable and took proper account of the micro-environment affecting the lining because it “used a mix design selected by the Contractor that was known to the Contractor to result in excessive shrinkage (no conduct by a non-party having caused or contributed to that decision) and by reason of the mix design results in a lining that is susceptible to cracking greater than 0.3 mm (including through-cracking) when it ought to have been designed so that it was not so susceptible”. The plaintiffs give as particulars of that allegation various paragraphs of expert reports dated 2 August 2021 and 5 November 2021 prepared by Dr Bernard.

20. Paragraph 71F(c) concerns the alleged failure to wet cure the shotcrete lining. It is in the following terms:

71F   The Contractor is in breach of the obligation set out in paragraph [71E] because:

…

(c)   further or alternatively:

(i)   the shotcrete lining was not wet cured during construction;

(ii)   the failure to wet cure the lining came about solely because the Contractor decided that wet curing was not necessary (no conduct by a non-party having caused or contributed to that decision); and

(iii)   the failure to wet cure caused the lining to be susceptible to cracking greater than 0.3mm (including through-cracking).

The plaintiffs give as particulars of that allegation various paragraphs of reports prepared by Mr Braybrooke and Dr Bernard.

21. The evidence is that on 31 March 2005, the defendants signed a contract with Readymix for the design and supply of the shotcrete mix. Clause 3 of that contract included an indemnity in favour of the defendants in respect of all claims etc “arising as a result of any negligent act, neglect or default of the Supplier … related to its obligations under this Supply Agreement” up to a limit specified in the contract. Based on specifications provided to it, Readymix proposed four different mix designs. Three of the variants included “MBT Rheocure 736 Admixture”, which is an internal curing agent. The defendants and Readymix trialled the four variants, and various reports were produced concerning the results. Ultimately the “base” mix, which included Rheocure 736, was selected and it appears that Readymix supplied shotcrete that corresponded to that mix. The defendants contend that had the allegations that are now sought to be raised by the plaintiffs been raised earlier it could have filed a cross-claim asserting that if the plaintiffs’ claim succeeds then they are entitled to recover some or all of their liability from Readymix. A number of claims of that type are now likely to be statute-barred. In addition, if the cross‑claim were brought now, it is likely that it would result in further delays to the proceedings.

22. The plaintiffs have sought to address this issue by confining the allegation to one based on the Contractor’s conduct. So, for example, para 71B(d) contains the allegation that “no conduct by a non-party having caused or contributed to [the Contractor’s decision to select a mix design known to result in excessive shrinkage]”. The allegation in para 71F(c) is an allegation that the Contractor was solely responsible for the decision not to wet cure the shotcrete. Those assertions are said to be supported by the evidence. In relation to the mix design, the plaintiffs assert that the contemporaneous documents demonstrate that Readymix had no involvement in the choice of the mix design, and that it was the Contractor who made the choice not to test the shotcrete mixtures for the full 56 days mandated by the shotcrete specification. In relation to wet curing, the plaintiffs submit that it was the Contractor who concluded that “there are no appreciable differences between the results obtained for each of the curing methods examined …”.

23. I do not accept the plaintiffs’ submissions. The fact that the Contractor may have made the final decision does not negate the possibility that, in making that decision, it relied on what it was told or not told by Readymix. To take an example, it is the plaintiffs’ case that the shotcrete should have been wet cured. However, three of the four mixtures apparently chosen by Readymix had an internal curing agent, which might suggest that wet curing was not essential. And the fact that the material currently available to the parties suggests that Readymix had no involvement in the relevant decisions does not establish that there is no other evidence which might suggest otherwise. If the allegations had been made earlier, it would have been open to the defendants to investigate the precise involvement of Readymix in selecting the four samples and the choice of the ultimate mixture with a view to considering joining Readymix as a cross-defendant.

24. It is no answer to the point made in the previous paragraph to say that the defendants could have investigated the role of Readymix earlier and that a cross-claim against Readymix was available even on the case as originally pleaded. Even assuming that that is the case, the fact that the defendants made particular forensic decisions based on the case pleaded against them does not mean that they should be deprived of the opportunity to make different decisions based on a different case. I accept that it is now too late to join Readymix in the proceedings, both because possible claims against it are likely to be statute barred and because, if it were joined, that is likely to lead to further delay. Consequently, the relevant amendments should not be permitted.

Orders

25. One issue raised by the amendments is the time from when the amendments should take effect. There is a question whether the amendments raise new claims which are now statute barred. There is also a question of when the defendants were first put on notice of the amended case and whether and in what respects it will be necessary for them to amend their cross-claims and, if they do, whether the claims raised by the amended cross-claims would themselves be statute barred. Taking those matters into account, during the course of the hearing, I indicated that I thought that that question of when the amendments should take effect was best left to the trial judge. No party strongly objected to that course of action.

26. During the course of the hearing, I also indicated that it was possible that the Court could revoke leave to amend if it became apparent that the defendants would be irremediably prejudiced by the amendments because, for example, they were not permitted to amend their cross-claims. The defendants sought to reflect that possibility in proposed short minutes of order which proposed that the Court note that the amendments were allowed on the basis that “leave may be revoked if it appears likely that the defendants will suffer prejudice by reason of the cross defendants opposing any necessary consequential amendment to the cross claims”. I considered it unnecessary to qualify the orders in that way. It is sufficient to observe in this judgment that leave to amend is granted on the basis that it is open to the defendants to make an application for the leave to be revoked if it transpires that they will be prejudiced by the amendments in a way that was not apparent at the time the amendment application was made.

25. During the course of the hearing, I indicated that the plaintiffs should pay the defendants’ costs thrown away by reason of the amendments. I also indicated that I thought that it was appropriate that the plaintiffs pay the defendants’ and cross-defendants’ costs of the motion.

26. Accordingly, the orders of the Court are:

1. Grant leave to the plaintiffs to file an Amended Technology and Construction List Statement in the form provided to the Court on 11 July 2022 with the following paragraphs deleted:

1. Paragraph 69, particulars (i)(d)(1) and (2);

2. Paragraph 71B(d);

3. Paragraph 71F(c);

2. Reserve to the trial judge the question of when the amendments take effect;

3. Order that the plaintiffs pay the defendants’ costs thrown away by reason of the amendments;

4. Order that the plaintiffs pay the defendants’ and cross-defendants’ costs of the motion filed on 7 June 2022.

**********

Decision last updated: 22 July 2022