Minister for Works v CIMIC Group Ltd
[2021] WASC 440
•9 DECEMBER 2021
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: MINISTER FOR WORKS -v- CIMIC GROUP LTD [2021] WASC 440
CORAM: HILL J
HEARD: ON THE PAPERS
PUBLISHED : 9 DECEMBER 2021
FILE NO/S: CIV 2340 of 2019
BETWEEN: MINISTER FOR WORKS
Plaintiff
AND
CIMIC GROUP LTD
First Defendant
JOHN HOLLAND PTY LTD
First Third Party
JOHN HOLLAND HOLDINGS PTY LTD
Second Third Party
Catchwords:
Practice and procedure - Costs - Application for costs following discontinuance of the proceedings by the plaintiff - Whether parties acted reasonably in commencing and defending proceedings - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA) O 23 r 2
Result:
Costs in the cause of CIV 3025 of 2019
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| First Defendant | : | No appearance |
| First Third Party | : | No appearance |
| Second Third Party | : | No appearance |
Solicitors:
| Plaintiff | : | Herbert Smith Freehills |
| First Defendant | : | DLA Piper Australia - Perth |
| First Third Party | : | Pinsent Masons (Australia) - Melbourne |
| Second Third Party | : | Pinsent Masons (Australia) - Melbourne |
Cases referred to in decision:
ACN 116 149 092 Pty Ltd v Coopers Brewery Ltd [2006] FCA 1119
IBN Corporation Pty Ltd v Banjyma Aboriginal Corporation [2009] WASC 279
McClure v Mayor and Councillors of the City of Stirling [No 3] [2009] WASC 247; (2009) 170 LGERA 138
One.tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548
Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
Walter v Buckeridge [No 4] [2011] WASC 313
HILL J:
On 31 July 2019, the State commenced these proceedings against CIMIC Group Limited (CIMIC). By the proceedings, the State claims approximately $17 million under a parent company guarantee provided by CIMIC to the State as part of the contractual arrangements for the construction of the Perth Children's Hospital (PCH). The claim arises from the failure by John Holland Pty Ltd to pay liquidated damages which the State contends are payable as a result of the delay in achieving practical completion of PCH by 13 April 2017.
On 20 August 2019, CIMIC issued third party notices to John Holland Pty Ltd and John Holland Holdings Pty Ltd (collectively, John Holland). CIMIC claimed an indemnity from John Holland for any amount it was found liable to pay the State.
On 26 November 2019, John Holland Pty Ltd commenced proceedings (being CIV 3025 of 2019) against the State seeking damages of an amount in excess of $180 million in connection with the construction of PCH. On 14 October 2020, in CIV 3025 of 2019, the State filed a defence and counterclaim against John Holland Pty Ltd and CIMIC. The counterclaim against CIMIC seeks payment of an amount of approximately $17 million under the parent company guarantee. On 27 November 2019, CIMIC filed third party notices in those proceedings against John Holland claiming an indemnity for any amount it is found liable to pay the State.
On 8 December 2020, the State sought and obtained leave of the court to discontinue these proceedings. Orders were made for submissions to be filed by the parties in respect of any application by CIMIC and John Holland for costs and the applications for costs were otherwise to be determined on the papers.
Both CIMIC and John Holland seek orders for the State to pay their costs of these proceedings to be assessed if not agreed. The State opposes these orders and contends the appropriate orders are that the costs of CIMIC and the State be costs in the cause of the counterclaim in CIV 3025 of 2019 and the costs of CIMIC and John Holland be costs in the cause of the third party proceedings in CIV 3025 of 2019.
For the reasons which follow, I do not consider the State should be ordered to pay the other parties' costs. In my view, the costs of these proceedings should be costs in the cause of CIV 3025 of 2019.
Legal principles
Pursuant to O 23 r 2(3) of the Rules of the Supreme Court 1971 (WA) (Rules), the court may grant leave to a plaintiff to discontinue an action on such terms as it thinks fit, including as to the costs of the action.
Where the court orders the action to be discontinued under O 23 r 2(3), it is not automatic that the plaintiff will be ordered to pay the costs of the other parties to the proceeding.[1] The rule is wide enough to enable the court to make any order for costs which is required by the justice of the case. In considering the appropriate order as to costs, relevant facts include the conduct of the parties in the matter and the reasons for the discontinuance of the proceedings.[2]
[1] IBN Corporation Pty Ltd v Banjyma Aboriginal Corporation [2009] WASC 279 [15].
[2] McClure v Mayor and Councillors of the City of Stirling [No 3] [2009] WASC 247; (2009) 170 LGERA 138 [4].
If both parties have acted reasonably in commencing and defending the proceedings and continued to act reasonably until the discontinuance of the proceedings, the proper exercise of the discretion as to costs will usually mean that the court makes no order as to costs. As was stated by McHugh J in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin, where there has been no hearing on the merits of the case:[3]
The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. …
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.
[3] Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624 - 625.
However, even if a party acts reasonably in commencing proceedings, it does not follow there should be no order for costs in the event the proceedings are discontinued. The question must be looked at from the perspective of both the plaintiff and the defendant.[4]
[4] Walter v Buckeridge [No 4] [2011] WASC 313 [13] - [14], [19].
In considering the appropriate costs order, it is necessary to consider the reason for the discontinuance of the proceedings. As was noted by Burchett J in One.tel Ltd v Deputy Commissioner of Taxation:[5]
In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.
[5] One.tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 [6].
In ACN 116 149 092 Pty Ltd v Coopers Brewery Ltd,[6] Finn J granted leave to the plaintiff to discontinue the proceedings but ordered it to pay the defendant's costs. Finn J stated:[7]
As I foreshadowed, I am satisfied that an order for costs is appropriate. While it cannot be said that the institution of this proceeding was in any way unreasonable - it was one of a complex of legal manoeuvres in a hostile takeover bid ‑ it was done in the full knowledge that, consequent upon the decision of Perry ACJ, Coopers would act to alter its constitution to remove Lion Nathan Australia's pre‑emptive rights and exemptions unless either that decision was reversed on appeal or the holding of the necessary extraordinary general meeting could be prevented. Neither of these contingencies eventuated. From its inception this matter contained the seeds of its own futility, yet ACN was prepared to proceed and to put Coopers to its defence. In so doing ACN assumed the risk of the proceedings becoming futile. It cannot escape the consequences of that by the assertion that it nonetheless conducted itself reasonably. It gambled and it lost. It is entirely appropriate that it pay Coopers' costs occasioned by the discontinued claim including reserved costs and its costs of this motion.
[6] ACN 116 149 092 Pty Ltd v Coopers Brewery Ltd [2006] FCA 1119.
[7] ACN 116 149 092 Pty Ltd v Coopers Brewery Ltd [22].
Submissions of CIMIC and John Holland
CIMIC contends that prior to the commencement of these proceedings, the State was aware that John Holland disputed any liability for liquidated damages and was preparing a claim against the State. Notwithstanding this, the State commenced these proceedings against CIMIC which 'required CIMIC to join [John Holland] as a third party'.
CIMIC submits that the State's claim in these proceedings was a 'pay now, argue later' claim which has ultimately not succeeded. It contends the State deliberately pursued a forensic strategy in commencing these proceedings which has now been abandoned given subsequent events. In these circumstances, the State took the risk the proceedings would become futile. For this reason, the State should bear the costs of the discontinuance.
For the same reasons, John Holland (as third parties) also sought an order for the State to pay their costs of the proceedings. John Holland contends that the State's conduct in these proceedings caused both CIMIC and John Holland to incur costs unnecessarily and it is only appropriate that it bears the costs of the forensic decision the State made.
State's submissions
The State contends the submissions of CIMIC and John Holland mischaracterise the claim made by it in these proceedings and, as a result, misstate the effect of the discontinuance of the proceedings.
The State emphasises that it continues to press its claim for payment under the parent company guarantee against CIMIC; this is now pursued in CIV 3025 of 2019. The State says it could have continued the claim against CIMIC in these proceedings and separately sought to advance its claim against John Holland in CIV 3025 of 2019 but did not do so in the interests of case management.
Disposition
In this case, for the following reasons, I do not consider it is appropriate to order the State to pay the other parties' costs of these proceedings. In my view the costs the parties incurred should be costs in the cause of the relevant proceedings in CIV 3025 of 2019.
First, I do not find the State acted unreasonably in commencing these proceedings. It is clear there is an issue between the parties as to whether liquidated damages are payable and, if so, whether a claim can be made on the parent company guarantee. This issue has not been resolved. It will be resolved as part of the proceedings in CIV 3025 of 2019. In this regard, I do not accept that the claim in these proceedings has become futile or has been surrendered, abandoned or withdrawn; it is simply being litigated in different proceedings.
Second, the third party notices filed in each of the proceedings are identical. The issues as between CIMIC and John Holland in relation to the parent company guarantee will be determined in CIV 3025 of 2019.
Third, I accept that at the time the proceedings were commenced, the State was aware that John Holland Pty Ltd intended to bring a claim in relation to the construction of PCH. However, this, of itself, did not mean that it was inevitable these proceedings would need to be discontinued. One option was for these proceedings to be consolidated with the proceedings commenced by John Holland Pty Ltd. The State, instead, has opted to bring the claim in this proceeding as a counterclaim in CIV 3025 of 2019.
Fourth, the decision to discontinue these proceedings was made at a relatively early stage of the proceedings, albeit after pleadings had been filed. In contrast to the pleadings in CIV 3025 of 2019, the pleadings are short and confined. While I accept the parties have incurred costs in these proceedings, I do not consider that most of these costs will be wasted as the same issues will require determination in CIV 3025 of 2019.
Conclusion
For these reasons, I will order that:
(a)the costs of CIMIC and the State be costs in the cause of the counterclaim in CIV 3025 of 2019;
(b)the costs of CIMIC and John Holland be costs in the cause of the third party proceedings in CIV 3025 of 2019.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ME
Associate to the Honourable Justice Hill
9 DECEMBER 2021
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