Minson Nacap Pty Ltd v Aquatec Maxcon Pty Ltd (No 2)
[2000] VSC 449
•1 November 2000
| SUPREME COURT OF VICTORIA AT MELBOURNE | |
| COMMERCIAL AND EQUITY DIVISION | Not Restricted |
BUILDING CASES LIST
No. 5083 of 2000
| MINSON NACAP PTY LTD (ACN 006 306 994) | Plaintiff |
| v | |
| AQUATEC-MAXCON PTY LTD (ACN 002 250 482) | Defendant |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 October 2000 | |
DATE OF JUDGMENT: | 1 November 2000 | |
CASE MAY BE CITED AS: | Minson Nacap Pty Ltd v Aquatec-Maxcon Pty Ltd (No.2) | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 449 | |
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Practice and Procedure – amendment to defence – withdrawal of admission in defence – nature of prejudice.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr A.C. Neal | Deacons |
| For the Defendant | Mr R.J. Manly | Gadens Lawyers |
HIS HONOUR:
Before the court is a draft amended defence and counterclaim which the defendant, Aquatec-Maxcon Pty Ltd (“Aquatec”) seeks leave to deliver by way of amendment to its current defence dated 18 August 2000. The application to amend, which involves the withdrawal of an admission of the existence of a sub-contract between the parties, is opposed on behalf of the plaintiff in the unusual circumstances which now confront this proceeding.
The Background
The litigation arises out of a project for the design and construction for the Otway Region Water Authority, now the Barwon Region Water Authority, of waste water treatment plants at Lorne and Apollo Bay respectively. The tender for the project was put together in collaboration between Aquatec, Montgomery Watson Pty Ltd and the plaintiff, Minson Nacap Pty Ltd (“Minson”). The structure of the tender, and of the project as it turned out, was that Aquatec was the principal contractor under a contract with the Authority, Minson was its design and construct subcontractor, and Montgomery Watson, in turn, the design subcontractor under Minson. The head contract between Aquatec and the Authority was entered into on or about 18 February 1997. The value of the work to be carried out by Minson was about $3.5M.
The work was put in hand and the project proceeded, at least until July 1998 when Minson left the project. I express myself this way because there are in the pleadings cross-allegations that each other party repudiated the subcontract and that it was terminated by acceptance. It appears from the affidavit of Raymond Thomas McFarlane, an engineer consultant to Aquatec, sworn 8 September 2000 that the head contract between the Authority and Aquatec was terminated for alleged defective work in July 1998 and that the Minson subcontract was terminated a day or so later. Prior to termination of the subcontract the certified value of the work performed reached a maximum of $3.7M, although it was later reduced, apparently because of this defective work. I infer from this that, subject to the rectification work, the contract work of Minson was very close to completion. This, it would seem, is a very substantial qualification because the evidence shows that the claimed cost of making good the defective work is in excess of $7M.
On 14 April 2000 Minson commenced this proceeding against Aquatec making a number of claims which I shall summarise as follows:
(a)Sums totalling $460,174.15 which were certified for payment in progress certificates 10 and 11 but not paid. This claim is made under cl. 42.1 of the subcontract.
(b)Sums totalling approximately $1.2M as amounts claimed in progress claims 13, 14 and 15 which were not certified and not paid. This claim is made under cl. 42.1 of the subcontract.
(c)$288,478 for unpaid variations of which part only had been certified. This claim is made as money due under cl. 40.5 of the subcontract, alternatively as damages for breaches of cll. 23(c) and 40 of the subcontract, alternatively the claim is put in restitution as unjust enrichment.
(d)$898,000 for unpaid delay or disruption costs at the rate of $5,000 per day. This claim is made under cl. 35.5 of the subcontract.
(e)$209,274 for acceleration costs. This claim is made under cl. 33.1 of the subcontract, alternatively it is put as costs incurred to mitigate Minson’s loss suffered by reason of the refusal of the superintendent to grant extensions of time, which refusal is said to be a breach by Aquatec of cll. 23(c) and 35.5 of the subcontract.
(f)Damages as a consequence of Aquatec’s calling upon performance bonds totalling $358,013.22. This conduct of Aquatec is said to be contrary to the terms of the bond, contrary to the terms of cll. 42 and 5.6 of the subcontract and contrary to an implied term of the subcontract. Further, it is said that this conduct is unlawful since the subcontract had been terminated contrary to an unidentified duty that it ought not to do so in certain circumstances and contrary to s. 51AA of the Trade Practices Act 1974.
(g)$2.2M approximately on a quantum meruit.
(h)Hungerfords damages.
(i)Interest.
(j)An indemnity or damages for tax payable on damages or judgment in favour of Minson.
In Minson’s statement of claim the subcontract is pleaded in paragraph 4 in these terms:
“4.By an agreement made on or about 18 March 1997 Aquatec engaged Minson as subcontractor to design and construct civil works for the project (‘the works’) for the sum of $3,580,132 according to the terms and conditions therein (‘the subcontract’).”
Then follow particulars which allege that the subcontract is partly in writing, partly oral and partly to be implied. The documentary component comprises five letters and faxes, general conditions AS4303-1995 and an annexure Part A. In paragraph 5 of the statement of claim 23 terms of the subcontract are set out, most of them apparently express terms for they are identified by a clause number in the general conditions.
Aquatec has defended this proceeding. It filed a defence dated 30 June 2000, in which it responds to Minson’s allegations in paragraph 4 of the statement of claim as follows:
“3.As to paragraph 4 thereof the defendant admits that in or about March of 1997 it entered into a subcontract with the plaintiff for the plaintiff to design and construct civil works for the project but save as aforesaid does not admit the allegations therein.”
No particulars are provided. In paragraph 4 of the defence Aquatec does not admit the terms alleged by Minson in paragraph 5 of its statement of claim.
It appears from the affidavit of Michelle Marie Taylor sworn 23 October 2000, the solicitor in the employ of Gadens Lawyers with the conduct of the proceeding, that it is being handled from the Brisbane office of those solicitors. The pleading is signed by Gadens Lawyers but not by counsel. Ms Taylor describes the pleading as “a holding defence”. It certainly contains little in the way of positive allegation. She says that she was instructed that there was some dispute between the parties as to the terms of the contract. Senior Counsel had been briefed but “had not had the opportunity to consider the defence of the defendant”.
In its second defence dated 17 July 2000, amended pursuant to R. 36.03, paragraph 3 is in these terms:
“3.As to paragraph 4 thereof the defendant admits that in or about March of 1997 it entered into a subcontract with the plaintiff for the plaintiff to design and construct civil works for the project.”
Then there follows particulars specifying that the contract was partly in writing, partly oral and partly to be implied. The documentary component is then set out. The list of correspondence in these particulars comprises 12 letters and faxes of which four are in the list of the five letters and faxes contained in Minson’s particulars. The general conditions AS4303-1995 and annexure Part A are also included in both particulars. In paragraph 3A of this pleading Aquatec deals with each of the alleged terms of the subcontract, admitting 11, denying five and otherwise pleading to the remainder. This defence is likewise signed by Gadens Lawyers and has no signature of counsel. Ms Taylor says that this pleading, too, was filed without the benefit of senior counsel’s advice.
On 4 August 2000 I gave leave to Minson to amend its statement of claim which it did by filing an amended pleading on 7 August. The amendments are not relevant for my present purposes. On 22 August a third defence dated 18 August 2000 was filed pursuant to leave granted on 4 August. Of this document Ms Taylor says no more than that she caused it to be filed and served. The pleading is again signed by Gadens Lawyers with no mention of the involvement of counsel.
The layout of the third defence is very different from its predecessors. The plea to the subcontract allegation, which is now found in paragraph (c), is in identical terms to paragraph 3 of the second defence but the general conditions are now said to be AS4300-1995. The pleas to the terms of the contract alleged in paragraph 5 of the statement of claim are, for the most part, unchanged in paragraph 3A.
On 4 August it was mentioned to me that the plaintiff intended to seek summary judgment pursuant to O. 23 and I gave directions with a view to this application being heard on 22 September. On that day the application was made and on 5 October I published my decision with reasons, in effect, giving judgment for Minson in respect of its claims (a) and (b) which I have summarised in paragraph [4] above.
In its opposition to the summary judgment application counsel for Aquatec proffered a draft fourth defence and, for the first time, a counterclaim dated 21 September 2000. In this proposed pleading, paragraph 3, dealing with the subcontract, was essentially unchanged from paragraph (c) of the third defence. Its response to the terms alleged in paragraph 5 of the statement of claim repeated the previous denials and admissions and other allegations and made 16 further allegations based on a number of identified clauses in the subcontract general conditions. The proposed pleading in paragraph 8 alleges, in the alternative to what had gone before, that no subcontract had been concluded between the parties. The proposed counterclaim alleged entitlement to $665,867.95 pursuant to certificate 12. This entitlement was said to arise under cl. 42 of the general conditions of the subcontract. Furthermore, it claimed $2,773,779 as damages for breaches of the subcontract and/or negligence being the losses caused by the defective work. Other consequential relief was also sought.
Of this proposed pleading, Ms Taylor says that the likelihood that there was in fact no subcontract became clear to senior counsel and to herself after they had considered 46 volumes of documents from the client and on 13 September she received instructions as to this from Aquatec. The proposed pleading was settled by senior counsel on 21 September and, as I have mentioned, it was the subject of debate before me on the following day. Surprisingly, given her evidence as to this chronology, the factual basis for the suggestion that there was no subcontract is set out in the affidavit of Thomas Urie Lawson sworn as early as 8 September and that of Shean Patrick Gannon sworn 14 September 2000.
On 13 October 2000 I pronounced orders on the summary judgment application. I refused a stay of execution on the judgment pending the hearing and determination of the counterclaim. I was asked to grant a stay on the basis that Aquatec was contemplating an appeal. I accepted an undertaking given by counsel on its behalf that such an appeal would be instituted within seven days and, on that basis I stayed the judgment for 14 days to enable Aquatec to bring the stay application before the Court of Appeal. I have been told that an application for leave to appeal has, indeed, been filed, but not within the seven day period. I was asked to extend the stay further but refused to do so on the basis that this was now a matter for the Court of Appeal. I have been told that one of the matters before the Court of Appeal is my refusal to permit Aquatec to amend its defence to withdraw the admission as to the subcontract as formulated in the September proposed draft pleading.
The Application to Amend
The application now before me seeks to amend the defence and to bring a counterclaim in the form of a further and different proposed pleading dated 12 October 2000. The document is said to have been delivered pursuant to my order of 5 October 2000. If, by this, it is intended to convey that I had given leave to amend on that date, it is not correct. I made no such order. An order giving leave to amend in terms of this document is what is now sought. The currently proposed plea to the allegation of the subcontract contained in paragraph 4 of the statement of claim is in these terms:
“4.1[Aquatec] denies each and every allegation in paragraph 4 thereof.
4.2[Aquatec] denies that any subcontract was concluded between [Minson] and [Aquatec] to the effect alleged or at all.
4.3If (which is not admitted and specifically denied) there was a subcontract between [Minson] and [Aquatec] then it was one whereby in or about March 1997 [Aquatec] agreed with [Minson] for it to design and construct civil works for the project (‘the subcontract’) for valuable consideration.”
The particulars given of the subcontract under paragraph 4.3 are the same as those in the September proposed draft pleading. Paragraph 5, dealing with the specific terms alleged by Minson, is in a different form but, as before, the terms are either admitted, denied or otherwise pleaded to and further terms are alleged. The counterclaim is essentially the same as that alleged in the September proposal but the damages claimed are now $7,268,336.
In opposing the application, counsel for Minson did not argue that the proposed amendments were bad in form or that, as pleaded, they did not raise arguable issues. He had no objection to the counterclaim or to the amendments other than paragraphs 4.1 and 4.2 insofar as they sought to resile from its previous admission. He submitted that Aquatec should not be permitted to withdraw an admission, deliberately made, without some explanation and without it being demonstrated that the admission, if allowed to stand, will prima facie seriously affect the defendant’s defence or its conduct of the defence[1]. I shall proceed on this basis but bearing in mind the fundamental principle that an amendment to a pleading that is good in form and arguable in content ought to be allowed unless it cause some prejudice to another party, which prejudice cannot be remedied by an order for costs or an adjournment.
[1]BP Australia Ltd v Carige (No.2) (1992) 112 FLR 119 at 123
I have examined with care the factual basis asserted by Aquatec for its contention that no subcontract was concluded. This is set out in the affidavits of Mr Lawson and Mr Gannon to which I have referred. I conclude that it cannot be said that the assertion is entirely without any foundation. I have already indicated that it was not suggested that the proposed amendment was bad in form or unarguable as a matter of law.
I am satisfied, too, that an explanation has been provided for making the admissions in the three successive earlier defences. This must be that it did not occur to those closest to the project over the past two and a half years that there was, in fact, no subcontract. It was only when the attention of counsel had been brought to bear on the documents that such an argument suggested itself and Aquatec, on 13 September, decided to offer this argument to the court. Accordingly, it was soon after this that it made its first appearance.
I turn to the question of prejudice. In a case such as the present this has two aspects: whether Aquatec would be prejudiced by a refusal to permit the denial to be put; and whether Minson would be prejudiced by a decision permitting Aquatec to advance the denial. Nothing was said on behalf of Minson in support of the second aspect of prejudice.
With respect to the first aspect of prejudice, I proceed on the basis that the judgment given on 13 October is determinative of the issues with which it deals. This is the entitlement of Minson to payment under cl. 42 for certified and uncertified claims. So long as this judgment stands these are no longer issues. Moreover, these matters are or may be before the Court of Appeal and I would not wish to take any step which might interfere with the disposition of any appeal which might confront that court.
Does the contention that no subcontract exists, then, have any relevance to any remaining issues in the pleadings? I return again to the statement of claim and to the claims which I have summarised above. All the claims other than those summarised in (a) and (b), with the exception of the $2.2M quantum meruit claim, depend upon the existence of the subcontract. I put to one side the consequential claims for interest and the like. In answer to these contractual claims, which appear in paragraphs 1-5 and 13-61 of the statement of claim, Aquatec in paragraphs 1-5 and 24-71 of its proposed defence joins issue and relies upon other terms of the subcontract. I put to one side paragraphs 11-23 of the proposed defence which respond to allegations which were the subject of the judgment and in some cases raise issues which were rejected in that judgment. In paragraphs 6-10 Aquatec alleges that Minson performed defective work in breach of the terms of the subcontract and in breach of its duty of care, with a consequent loss of $7,268,336. In paragraphs 73-74, Aquatec seeks to set off its loss against Minson’s claims, including, it would seem, those claims which have merged in the judgment. Paragraph 75 is a general denial. In paragraph 72 there is general denial also of the quantum meruit claim. The denial of the existence of the subcontract appears in terms in paragraph 4.2 of the defence. Otherwise, this pleading, as well as the whole of the counterclaim, proceeds on the basis that a subcontract existed and conferred rights on Aquatec.
In the circumstances, the proposed amendment to the defence in its present form cannot be permitted. As things stand at this moment, it will require redrafting to accommodate the judgment. This will require more than the simple deletion of certain paragraphs and I would not myself consider it appropriate that I undertake this task. Moreover, its form, even without the pleas to paragraphs 6-12 of the statement of claim, may in the future require some reconsideration in the light of the outcome of the appeal and the reasons which may then be given by the Court of Appeal. I will therefore stand it over until these be known.
I do so with some reluctance because a plaintiff in the Building Cases List is entitled to expect expedition. This may not, however, be an undue hardship in the present case since a proceeding (no 7091 of 2000) has been commenced by Aquatec against the Authority. I have given directions in this proceeding for the delivery of pleadings and it is to return for further directions on 14 December by which time more will be known about the appeal.
I will, therefore, refuse the defendant leave to file the October proposed defence and the new counterclaim. I will permit it to prepare a fresh draft if it be so advised and to renew its application either before the fate of the appeal is known, or afterwards. I will reserve costs since I treat the application as having, in effect, been stood over at this stage. There will be the usual liberty to apply.
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