Mine Trades and Maintenance - Electrical Pty Ltd v Freo Group Limited
[2012] WASC 78
•9 MARCH 2012
MINE TRADES AND MAINTENANCE - ELECTRICAL PTY LTD -v- FREO GROUP LIMITED [2012] WASC 78
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 78 | |
| Case No: | CIV:1975/2010 | 15 NOVEMBER 2011 | |
| Coram: | CORBOY J | 9/03/12 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | MINE TRADES AND MAINTENANCE - ELECTRICAL PTY LTD FREO GROUP LIMITED |
Catchwords: | Practice and procedure Application to join a party to claim a declaration that the defendant was not liable to that party Whether proposed issue hypothetical Whether defendant would be estopped from bringing a subsequent claim if leave refused |
Legislation: | Rules of the Supreme Court 1971 (WA), O 18 r 6 |
Case References: | Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 Chow v Registrar General of New South Wales [1998] NSWSC 305 Conquer v Boot [1928] 2 KB 336 Dyson v Attorney-General [1911] 1 KB 410 Honeywood as executrix of the estate of the late Neville Honeywood v Munnings [2006] NSWCA 215; 67 NSWLR 466 Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730 Re Clay [1919] 1 Ch 66 Rediffusion (Hong Kong) Ltd v Attorney General of Hong Kong [1970] AC 1136 Ruislip-Northwood Urban DC v Lee (1935) 145 LT 208 Unilever Plc v The Procter & Gamble Co [2001] 1 All ER 783; [2000] 1 WLR 2436 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
FREO GROUP LIMITED
Defendant
Catchwords:
Practice and procedure - Application to join a party to claim a declaration that the defendant was not liable to that party - Whether proposed issue hypothetical - Whether defendant would be estopped from bringing a subsequent claim if leave refused
Legislation:
Rules of the Supreme Court 1971 (WA), O 18 r 6
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr G M Slattery
Defendant : Mr J M Healy
Non-party : Mr S C Wong
Solicitors:
Plaintiff : Squire Sanders
Defendant : Contract Intelligence Pty Ltd
Non-party : Corrs Chambers Westgarth
Case(s) referred to in judgment(s):
Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334
Chow v Registrar General of New South Wales [1998] NSWSC 305
Conquer v Boot [1928] 2 KB 336
Dyson v Attorney-General [1911] 1 KB 410
Honeywood as executrix of the estate of the late Neville Honeywood v Munnings [2006] NSWCA 215; 67 NSWLR 466
Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730
Re Clay [1919] 1 Ch 66
Rediffusion (Hong Kong) Ltd v Attorney General of Hong Kong [1970] AC 1136
Ruislip-Northwood Urban DC v Lee (1935) 145 LT 208
Unilever Plc v The Procter & Gamble Co [2001] 1 All ER 783; [2000] 1 WLR 2436
(Page 3)
- CORBOY J:
The application and the result
1 Mine Trades and Maintenance - Electrical Pty Ltd (Mine Trades) and Freo Group Limited (Freo Group) entered into a contract (the Contract) by which Mine Trades agreed to provide electrical and plumbing services in connection with the construction by Freo Group of the Lochada construction camp. The construction camp formed part of the Karara iron ore project.
2 Mine Trades alleges that Freo Group has failed to pay the amount due for the contract work and for variations and additions to that work.
3 Freo Group disputes many aspects of the claim made by Mine Trades. The issues that arise include the terms of the Contract; whether Mine Trades completed the scope of the work under the Contract; whether some of the work claimed by Mine Trades as variations or additional work formed part of the scope of the work under the Contract; whether Freo Group made a payment to Mine Trades in discharge of any liability that it might have in respect of the claims made by Mine Trades and whether Mine Trades properly discharged its obligations under the Contract. Freo Group further alleges by a counterclaim that Mine Trades breached the Contract as a result of which it incurred additional costs in completing and rectifying the contract works. It also counterclaims for damages said to have been caused by breaches of another construction contract made with Mine Trades.
4 Freo Group applied for leave to join Downer EDI Engineering Transmission Pty Ltd (Downer) and another person as third parties to the action. Subsequently, it amended its application. It now seeks leave to join Downer as a defendant to the action under O 18 r 6(2)(b) of the Rules of the Supreme Court 1971 (RSC). It has foreshadowed seeking a declaration against Downer in the following terms:
It is declared that Freo Group Limited and each of its former and current directors, officers, employees, agents and advisers has no liability, whether present, unascertained, immediate, future or contingent or otherwise and whether based in contract, tort or statute (including without limitation in the Trade Practices Act 1974 (Cth) and Corporations Act (Cth)), to Downer EDI Engineering Transmission Pty Ltd arising directly or indirectly out of, or in any way relating to any claim, notice, demand, action, proceeding, litigation, prosecution, cause of action, investigation, judgment, damage, loss, cost, expense, fine, penalty or any other liability howsoever, whether in Australia or elsewhere, in connection with or
(Page 4)
- arising directly or indirectly out of or in any way relating to the tender, supply and installation of the Reverse Osmosis Potable Water Treatment Plant by Freo Group Limited at the Karara Iron Ore Project in Western Australia.
5 I have concluded that leave to join Downer for the purpose of seeking declaratory relief in that or any similar form should be refused.
The circumstances relating to the application
The evidence in support of the application
6 The application by Freo Group was supported by an affidavit made by Domenico Canci. Mr Canci is the general manager of Freo Constructions, which he described as being a division of Freo Group. He stated that:
(a) Freo Group entered into a 'head' contract (the Head Contract) with Western Construction Co (Western) for the construction of a mine camp (which I infer to be the Lochada camp) (par 4).
(b) The scope of works for the Head Contract included the design, supply and installation of a reverse osmosis plant for water treatment (the RO plant). The plant was required to make potable water available at the Lochada camp site (pars 3 - 5).
(c) In September 2009, Freo Group was advised that Downer had taken over the business of Western and was to be substituted as the head contractor under the Head Contract (par 4).
(d) The Contract required Mine Trades to design, supply and install the RO plant (par 6). Mine Trades advised that it proposed to install a plant that was to be supplied by Waterform Technologies (Waterform) (par 8).
(e) The RO plant was commissioned in February 2010 (par 10). Mr Canci was advised by emails received at various times after February 2010 that the plant was not operating properly (par 11).
(f) In May 2010, Mr Canci attended a meeting with representatives from Worley Parsons, Western, AMEC, Waterform and Mine Trades. Mr Canci did not explain the involvement of Worley Parsons and AMEC in the matter. The purpose of the meeting was to discuss how to resolve issues relating to the operation of the RO plant (par 13).
(Page 5)
- (g) Further problems were experienced with the plant and there were discussions about replacing or modifying the plant. Emails were exchanged between Mine Trades and Freo Group between about July and September 2010 about whether the design for the RO plant had been 'properly implemented' or whether 'the supplied design parameters had been incorrectly supplied (in particular in relation to the quality of the bore water that would be used as the feed water into the RO plant)' (pars 25 and 26). According to Mr Canci, Mine Trades maintained that the problems experienced with the RO plant related to biological fouling and were not due to any fault on its part (par 28).
(h) In March 2011, Mr Canci was advised by Paul Dooley that biological fouling with the RO plant had occurred. Mr Canci identified Mr Dooley as being 'of' Western but he did not provide any evidence about his position with that company or about the relationship between Western and Downer following the business of Western being taken over by Downer. Mr Canci stated that, as at March 2011, he did not know whether Western intended to make a claim against either Freo Group or Mine Trades in relation to the RO plant but the 'risk' was 'assessed' to be 'low' (par 29).
(i) In September 2011, Mr Canci was advised by Mr Dooley that the RO plant had again failed and that Western had removed the plant and arranged for a new system to be installed. Further (par 32):
Paul Dooley informed me that Freo Group would be hearing further from Western Construction as they had incurred approximately $500,000 in the cost of replacing the RO plant and in carting water to the camp. I have not as yet received anything in writing from Western Construction but I believe that there is now a significant risk that Western Construction will make a formal claim against Freo Group for the works that were performed under subcontract by Mine Trades and ultimately by Waterform [the supplier of the technology for the RO plant].
7 Freo Group attached to its written submissions (submissions dated 7 November 2011) a document that was, in effect, a proposed statement of claim against Downer. It was alleged by the document that:
(a) It was a term of the Head Contract that Freo Group would design, install and commission the RO plant.
(Page 6)
- (b) Freo Group achieved practical completion of the RO plant in February 2010.
(c) 'At all material times, Freo Group performed the works required under the [Head] Contract in compliance with the obligations contained therein and otherwise in a proper and workmanlike manner exercising the degree of skill and care expected of a construction contractor'.
8 The foreshadowed relief was a declaration in the terms reproduced earlier and costs.
The evidence in opposition to the application
9 Freo Group's application was opposed by both Mine Trades and Downer. Downer relied on an affidavit made by Matthew John Walford. Mr Walford is a commercial manager employed by Downer EDI Engineering Power Pty Ltd. He stated that Downer EDI Engineering Power was the parent company of Downer. He further stated that:
(a) As at 2 September 2011, the RO plant had failed and Downer had arranged for the hire of a plant to provide water to the Lochada village while it sourced a replacement plant (par 4(a)).
(b) There was a brief conversation between Mr Canci and Mr Dooley on 2 September 2011 in the reception area of Downer's Kwinana office. Mr Canci enquired about whether Downer had incurred any costs associated with the RO plant. Mr Dooley advised that Downer anticipated that it would incur costs of approximately $500,000 in hiring a plant and in procuring and installing a replacement plant. Mr Dooley 'indicated that Downer might wish to discuss liability for those costs with Freo Group once the replacement plant had been installed and commissioned' (par 4(b)).
(c) No claim had been made by Downer against either Mine Trades or Freo Group. Downer's primary objective, as at the date on which the affidavit was made (26 October 2011), was to provide a fully operational plant at the camp site. A replacement plant was due to be delivered in October 2011. Downer would only be in a position to investigate the reasons why the original plant had not operated to the required standard after the replacement plant had been commissioned and found to be operating satisfactorily (par 8).
(Page 7)
- (d) Downer did not know why the original plant did not operate satisfactorily. It had not formed a view as to who, if anybody, might be potentially liable for the substandard performance of the plant and consequently, it was unable to say whether it would make a claim against Freo Group or any other person in respect of the plant (par 9).
The substituted defence and counterclaim
10 Following the hearing of its application, Freo Group filed a substituted defence and counterclaim. That alleged, among other things, that:
(a) Mine Trades agreed under the Contract to:
(i) carry out the works described in the scope of work 'in accordance with its expertise and competence to ensure that the works were completed in a proper and timely manner in compliance with all appropriate standards and statutory requirements' (par 58.3);
(ii) provide materials, equipment and labour to design, supply and install a potable water treatment plant and distribution system (par 58.12);
(b) it was an implied term of the Contract that Mine Trades would bear the cost of rectifying any work that it supplied or installed that did not accord with the express terms of the Contract (par 62);
(c) in April 2010, Downer notified Freo Group that the RO plant was leaking (par 147);
(d) Mine Trades was notified of the leak the following day but it refused to fix the leak and in late May 2009, Freo Group engaged Waterform to repair the leak (pars 148 - 150).
11 Freo Group claims the cost of repair. There was no other reference to the RO plant in the substituted defence and counterclaim.
Declaratory relief
12 The following passage appears at 4-35 of The Declaratory Judgment (4th ed, 2011):
The primary role of the courts is, and has always been, to resolve existing disputes between the parties where the courts' decision will have
(Page 8)
- immediate and practical consequences for at least one of the parties. There are more than enough cases of this sort fully to occupy the time of the courts and, not unnaturally, the judges have vigorously objected to attempts made from time to time to divert them from what they regard as their task, that of deciding real issues, into deciding theoretical or hypothetical issues. There have, therefore, been a number of cases where the court has refused to grant a remedy because the issues were regarded as being theoretical or hypothetical …
13 The reference to courts refusing to grant a remedy reflects the view that a court has jurisdiction to entertain a claim for a declaration over a hypothetical issue but that it will decline to grant relief in the exercise of its discretion: see Rediffusion (Hong Kong) Ltd v Attorney General of Hong Kong [1970] AC 1136; Chow v Registrar General of New South Wales [1998] NSWSC 305.
14 The reluctance to make findings about hypothetical issues reflects more than a concern with the most efficient use of the court's resources. In Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ observed in a joint judgment that:
The purpose of a judicial determination has been described in varying ways. But central to those descriptions is the notion that such a determination includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy.
…
Because the object of the judicial process is the final determination of the rights of the parties to an action, courts have traditionally refused to provide answers to hypothetical questions. The jurisdiction with respect to declaratory relief had been developed with an awareness of that traditional attitude.
…one crucial distinction between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising a res judicata between parties [45] - [48]. (emphasis added)
15 Generally, a court will not allow a claim for a declaration that the plaintiff was not under a duty to the defendant if the defendant had not asserted that a duty was owed. The question is whether there is a real dispute between the parties on the point raised. The mere possibility of a claim is insufficient and a real dispute will not be created by one party merely reserving its rights: see for example, Re Clay [1919] 1 Ch 66; Ruislip-Northwood Urban District Council v Lee (1935) 145 LT 208 and
(Page 9)
- Unilever Plc v The Procter & Gamble Co [2001] 1 All ER 783; [2000] 1 WLR 2436.
Freo Group's concern
16 Freo Group stated that its motivation in seeking to join Downer was to ensure that it was not estopped from bringing a claim against Mine Trades in the event that Downer decided to commence proceedings against it. It was submitted that (defendant’s submissions 7 November 2011, pars 7 - 9):
Whether a claim will or won't be made by Downer … is not the test to determine whether Downer … ought to be joined as a third party to these proceedings.
The proper test to apply is to determine whether upon judgment being obtained in the present action, will Freo's Group cause of action for breach of contract and/or negligence against Mine Trades merge in that judgment and cease to have any independent existence?
That is, will a res judicata … prevent Freo Group claiming against Mine Trades for any loss that Freo Group suffers as a result of any subsequent claim by Downer … in respect to the RO plant after the current proceedings have been adjudged?
17 Freo Group contended that an affirmative answer was to be given to the question posed in its submissions, reference being made to Onerati v Phillips Constructions Pty Ltd (in liq) (1989) 16 NSWLR 730.
18 In Onerati, Giles J held that:
1. In curial proceedings, for the purposes of the principle of res judicata there is but one cause of action for breach of contract founded upon breach of a promise such as to carry out the work in a good and workmanlike manner. There is not a number of causes of action according to particular defects or classes of defect resulting from the breach.
2. Accordingly, judgment in one proceedings will be a bar to second proceedings to recover damages with respect to defects or classes of defect not the subject of the first proceedings.
3. This will be so even where the defects or classes of defects the subject of the second proceedings were not apparent to the plaintiff at the time of the first proceedings (746).
19 Those conclusions reflected what is sometimes referred to as the rule in Conquer v Boot [1928] 2 KB 336. Conquer v Boot and Onerati were
(Page 10)
- accepted and applied by the New South Wales Court of Appeal in Honeywood as executrix of the estate of the late Neville Honeywood v Munnings [2006] NSWCA 218; 67 NSWLR 466. It is to be noted that the decision of the Court of Appeal in Honeywood was delivered by Handley JA.
20 His Honour observed that cases such as Conquer v Boot and Oneratiinvolved an entire contract by which a building contractor agreed to build a house constructed in a proper and workmanlike manner using proper materials. The construction and delivery up for possession of a house built with defective workmanship and materials constituted a single breach of that composite obligation; each defect did not create a separate cause of action (and see the comments of Sankey LJ in Conquer v Boot at 342 - 343 - 'every particular brick or particular room that is faulty' did not give rise to a separate cause of action).
21 As I understood the submission made by Freo Group, it was concerned that it would be estopped from alleging that Mine Trades had breached the Contract in relation to the design, supply and installation of the RO plant if it was subsequently sued by Downer as it had already prosecuted a claim for breach of the Contract against Mine Trades. Any claim that Freo Group might possess for loss caused by a breach of the Contract by Mine Trades failing to perform the contract work to a required standard would have merged in the judgment. By analogy with Conquer v Boot and Onerati, that would include any claim in respect of the RO plant even if no claim had been made against it by Downer at the time of the judgment.
Determination of the application
22 The Head Contract was not put into evidence. Consequently, I do not know:
(a) whether any claim that Downer might make against Freo Group would be for breach of the Head Contract or in tort;
(b) whether a claim in contract would be for breach of a warranty and if so, the terms of that warranty or for breach of an obligation to exercise reasonable skill and care or an obligation to supply and install a plant that satisfied some standard;
(c) what effect the subcontract arrangements between Freo Group and Mine Trades might have on any claim by Downer against Freo Group;
(Page 11)
- (d) how the terms of the Head Contract might condition any duty owed by Freo Group in tort.
23 The Contract was also not put into evidence; what I know about that contract consists of whatever has been alleged by the parties in their pleadings. An essential step in the reasoning in cases such as Conquer v Boot and Onerati was that the contracts to build were construed as entire contracts to produce a particular result (a house built in a proper and workmanlike manner with proper materials). I do not know whether it is possible that the Contract might be construed in the same way - although, that would be surprising on what I know about the allegations made in this matter.
24 However, it is clear that the question about which Freo Group seeks a declaration is hypothetical whatever assumptions are made about the Head Contract and the Contract. No claim has been made by Downer against Freo Group. Obviously, Mr Dooley's comment does not constitute a claim or even the crystallisation of a dispute between Freo Group and Downer. It was a general comment made by somebody whose authority to speak for and bind Downer in any way is unknown. Downer did not know why the RO plant did not operate satisfactorily (accepting the evidence of Mr Canci and Mr Walford that the plant did not perform satisfactorily for the purpose of this application). How would it plead to the allegation in the proposed pleading that Freo Group did not breach the Head Contract? How would Freo Group prove the allegation? There is, at present, no controversy to quell; no facts or concrete situation to which any declaration could speak; no real question over the right of Freo Group to maintain a claim against Downer. In Re Clay, Swinfen Eady J quoted from Cozens-Hardy MR in Dyson v Attorney-General [1911] 1 KB 410 at 417:
But I desire to guard myself against the supposition that I hold that a person who expects to be made a defendant, and who prefers to be plaintiff, can, as a matter of right, attain his object by commencing an action to obtain a declaration that his opponent has no good cause of action against him. The Court may well say: 'Wait until you are attacked and then raise your defence,' and may dismiss the action with costs (77 - 78).
25 Those comments aptly describe the circumstances of this application. That is so despite the concern held by Freo Group. It is not possible to say whether that concern is entirely misconceived on the material that was before the court. However, it would be surprising if there was a merger of causes of action in contract and tort in relation to the design, supply and
(Page 12)
- installation of a stand alone plant by reason of Freo Group making its counterclaim in this matter.
26 Freo Group has not established that it is necessary that Downer be joined to ensure that all matters in dispute in this action be effectually and completely determined and adjudicated upon.
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