Multiplex Constructions Pty Ltd v Bligh Lobb Pink Pty Ltd
[2002] VSC 337
•23 August 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 8190 of 2000
| MULTIPLEX CONSTRUCTIONS PTY LTD (ACN 008 687 063) | Plaintiff |
| v | |
| BLIGH LOBB PINK PTY LTD and SECRETARY TO THE DEPARTMENT OF INFRASTRUCTURE | First Defendant Second Defendant |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 July 2002 | |
DATE OF JUDGMENT: | 23 August 2002 | |
CASE MAY BE CITED AS: | Multiplex Constructions Pty Ltd v Bligh Lobb Pink Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 337 | First Revision 3 September 2002 |
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Evidence – privilege – legal professional privilege – without prejudice privilege – whether privilege lost – communications in furtherance of fraud on court.
Practice and procedure – defendants’ application to stay proceeding or to strike out all or part of the statement of claim – abuse of process – ground that plaintiff had no belief that its claim was well-founded – plaintiff’s cross application to strike out defendants’ application – abuse of process – application without prospect of success.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mrs S. Crennan QC with Mr N. Pane | Nathan Kuperholz |
| For the Second Defendant | Mr G.J. Digby QC with Mr G.P. Harris | Mallesons Stephen Jaques |
HIS HONOUR:
On 17 March 1999 the plaintiff, Multiplex Constructions Pty Ltd (“MPX”), entered into two agreements with respect to the construction of the State Netball and Hockey Centre at Royal Park, Parkville.
(1)A construction agreement between MPX as contractor and the secondnamed defendant, the Secretary to the Department of Infrastructure, as proprietor for the design and construction of the centre[1]. The secondnamed defendant, which is generally known as the Office of Major Projects, is referred to in the documents as “OMP” and I shall adopt this terminology. This construction agreement was in fairly conventional terms based on the standard form of design and construct contract AS4300-1995. The superintendent appointed under the construction agreement was Ian Hatfield[2] of OMP with the usual powers of a contract administrator including those to direct variations[3]. The construction agreement also provided that the work should be brought to practical completion by 20 March 2000 with an entitlement for MPX to have time extended by the superintendent pursuant to cl. 35.5 for specified cause and to be paid for delay and disruption costs where time was extended for any delay caused by OMP or the superintendent or those for whom it or he was responsible[4]. Liquidated damages for late completion were fixed at $3,000 per day.
(2)A deed of novation between MPX, OMP and the firstnamed defendant, Bligh Lobb Pink (“BLP”)[5]. By a consultancy agreement dated 8 February 1999, BLP had been engaged by OMP to provide services as project architect in respect of the project for the construction of the centre. Under the deed of novation, MPX assumed the rights and obligations of OMP under this consulting agreement. As at 17 March 1999, the design for the centre was not complete.
[1]Statement of claim, para. 17.
[2]Item 7 Part A of the Annexure to the Construction Agreement.
[3]Clause 40.
[4]Clause 35.5(b)(i).
[5]Statement of claim, para. 12.
Practical completion was achieved in December 2000[6]. There is a disagreement between the parties as to whether this occurred on 6 December or 12 December, but this is of no consequence for present purposes.
[6]Statement of claim, para. 34, 35.
By writ filed on 22 December 2000, MPX sued BLP and OMP seeking damages against each. BLP was not concerned with the present application and I shall pass over the issues which concern it. In summary, the claims of MPX against OMP are as follows:
(i)For breach of a term and warranty in the novation agreement that no circumstance then existed which would entitle OMP to terminate the consultancy agreement and no current grounds of dispute between OMP and BLM[7]. As a consequence, MPX incurred delays and disruption in performing the construction contract[8] and suffered loss and damage[9]. Alternatively, misleading and deceptive conduct contrary to the Trade Practices Act and the Fair Trading Act in making the term and warranty referred to[10]. In reliance upon this conduct MPX entered into the construction agreement and suffered loss and damage[11].
[7]Statement of claim, para. 13, 14.
[8]Statement of claim, para. 15.
[9]Statement of claim, para. 16.
[10]Statement of claim, para. 16B.
[11]Statement of claim, para. 16C, 16D.
(ii)For the unpaid cost of variations performed. The sum claimed under the construction contract is $750,196[12]. This cost of variations is sought in the alternative as a claim for work and labour done and materials provided[13].
[12]Statement of claim, para. 20-23.
[13]Statement of claim, para. 24.
(iii)MPX asserts an entitlement under the construction agreement for an extension of the date for practical completion of 208 days which extension has been refused by the superintendent[14]. In its prayer for relief[15] it seeks a declaration as to this entitlement. Further, OMP is alleged to be in breach of a term of the construction agreement in that it failed to ensure that the superintendent acted in accordance with his obligations inasmuch as it failed to ensure that the superintendent did not refuse the 208 days’ time extension claim[16].
[14]Statement of claim, para. 25-28.
[15]Para 12.
[16]Statement of claim, para. 29.
(iv)A claim is brought under the construction agreement that OMP failed to pay delay and disruption costs incurred by MPX consequent upon these delays[17].
[17]Statement of claim, para. 30-32.
(v)For misleading and deceptive conduct contrary to the Trade Practices Act and the Fair Trading Act in making representations prior to entering into the construction agreement –
(i)that the work on the design was sufficiently advanced that MPX would receive details by specified dates[18];
(ii)that any time or cost consequences of protestor disruptions would be for the account of OMP[19].
In reliance upon these representations, MPX entered into the novation agreement and construction agreement and did not insist on changes to the construction agreement to make provision for the consequence of any inaccuracy in these representations and thereby suffered loss and damage[20].
(vi)A claim that OMP is in breach of a common law duty of care owed to MPX in selecting BLP as consultant under the consultancy agreement and in requiring MPX to enter into the novation agreement[21].
(vii)OMP is estopped from calling upon the bank guarantee provided by it under the construction agreement[22]. The same claim is said to be founded on a prohibition upon unconscionable conduct contained in s. 7 of the Fair Trading Act 1999[23].
(viii)For breach of cl. 3.1 of the construction contract inasmuch as OMP failed to pay to MPX $592,552[24].
[18]Statement of claim, para. 36.
[19]Statement of claim, para. 37.
[20]Statement of claim, para. 42-44.
[21]Statement of claim, para. 48-50.
[22]Statement of claim, para. 57.
[23]Statement of claim, para. 51-8.
[24]Statement of claim, para. 59-61.
The foregoing is taken from the further amended statement of claim of MPX dated 31 May 2002 (“the statement of claim”), the various schedules to this pleading, the further and better particulars supplied in response to the requests of OMP and from the agreements themselves. This pleading is a substantial and complex document seeking very large sums from OMP. In fact, this is the third, or perhaps the fourth, statement of claim put forward on behalf of MPX. This and the earlier documents, including that dated 26 October 2001, is and have been the subject of criticism on various pleading bases.
In addition to these complaints, OMP has on 19 April 2002 filed a summons which was amended on 25 July 2002. The relief sought by OMP is as follows:
“…pursuant to Order 23.01 of the Rules of this Court alternatively, pursuant to the Court’s inherent jurisdiction, that in respect of the plaintiff’s claims made in the proceeding, alternatively, in respect of the claims made by paragraphs 12 to 35 and 48 to 50 of Further Amended Statement of Claim dated 16 October 2001[25], that:
[25]In fact no statement of claim answering this description is on the file. I have been informed, however, that the paragraphs in that pleading have identical numbers to those in the statement of claim of 31 May 2002 save that paragraphs 16A, 16B, 16C, 16D and 39A have been added.
(a) judgment be entered for MPV;
(b) alternatively, each of the claims be permanently stayed;
(c)alternatively, each of the claims be struck out and the proceeding generally be stayed pending the payment of MPV’s costs;
(d)alternatively, each of the claims be struck out;
on the ground that those claims are an abuse of the process of the Court in that they are claims not made honestly and in good faith. Further that:
(e)Multiplex be ordered to pay MPV’s costs on a solicitor and own client basis.”
In support of this application which I shall refer to as “the OMP application” the following affidavits have been filed or are to be relied upon:
Deponent Date Filing Party Jim Delkousis 19/04/02 OMP Stephen Paul Lechner 29/04/02 OMP Andrew Alexander Douglas Suddick 30/5/02 MPX Stephen Paul Lechner 30/05/02 OMP David Wagstaff 23/07/02 OMP Andrew Alexander Douglas Suddick 23/07/02 MPX Phillip Evan Frazer Blunden 23/07/02 MPX David Geoffrey Watson 23/07/02 MPX Charlene Helen Linneman 23/07/02 OMP The OMP application has not yet been heard. The application presently before the Court is that brought on 31 May 2002 on behalf of MPX, pursuant to general liberty to apply, to strike out the OMP application on the ground that it is frivolous and an abuse of process. I shall refer to this cross-application as “the MPX application”. I should add that the affidavits of Mr Lechner of 30 May 2002 and Mr Wagstaff of 23 July 2002 speak of communications for which MPX asserted without prejudice privilege. I did not read those affidavits having upheld the claim for privilege in the course of the hearing.
A number of subpoenas for production have been filed on behalf of OMP seeking documents for use in the OMP application. Objections to production have been raised by certain of the persons named on the basis of solicitor client privilege. Finally, on 31 May 2002 I directed that MPX make discovery of documents relating to the OMP application. The solicitors for OMP complain about the sufficiency of the MPX discovery.
The Privilege Claims
It was accepted on behalf of OMP that documents for which privilege was claimed by the persons named in the subpoenas fell within the description of privileged documents. It was accepted, too, that the conversations for which without prejudice privilege was claimed took place in, or sufficiently close to, a mediation to be entitled to privilege under s. 24A of the Supreme Court Act 1986. What was contended for in each case was that the documents and conversations had lost any privilege because they were brought into existence or took place in the furtherance of a fraud on the Court. This argument presented on behalf of OMP proceeded on the basis that the same considerations, if found to exist, would destroy each privilege. I express no view upon this, being content to proceed on that basis, as were the parties.
Having heard argument, I determined that the privileges had not been lost and announced this conclusion, stating that I would provide reasons later. These are my reasons.
The submission put on behalf of OMP may be summarised as follows: the so-called exception to the legal professional privilege that it is not available to protect a communication made in the furtherance of crime or fraud extends to other wrongful conduct; second, this exception or an analogous one is available to destroy without prejudice privilege; third, the wrongful conduct includes the bringing of a proceeding which is an abuse of process; fourth, the bringing of a proceeding by a plaintiff who does not believe it is entitled to all of the relief sought is such an abuse of process; fifth, there is in this case sufficient evidence of this wrongful conduct; seventh, there is in this case sufficient evidence that the communications in question were in furtherance of this wrongful conduct.
Each of these propositions, except perhaps the first, is contentious. I mention in passing that the first proposition should not be seen as providing a mandate to sweep aside privilege in every case where the communication is made in the furtherance of unlawful conduct of whatever kind.[26] As to the third and fourth propositions, Griffith CJ in Varawa v Howard Smith & Co Ltd[27] said that the exception with respect to a case of fraud or intended fraud or intended crime has “never been held to apply to a case where all that is alleged is that the evidence will show that the plaintiff knew he had not a good cause of action”. Nor is this a case such as Pitts v Adney[28] where the maintenance of the privilege would have the consequence of deceiving the Court as to the facts by shutting out evidence which would rebut inferences upon which a party seeks to rely. In every case the assertion of privilege has the consequence that relevant evidence is prevented from being disclosed to the Court. This may have the consequence that other evidence is accepted in circumstances where it might not have been accepted had the protected contradictory evidence been led.
[26]Crescent Farm (Sidcup) Sports Limited v Sterling Offices Limited [1972] Ch 553 at 564-5 per Goff J, quoted with approval in The Attorney-General (NT) v Kearney (1985) 158 CLR 500 at 512, per Gibbs CJ, at 523, per Wilson J and at 529, per Dawson J.
[27](1910) 10 CLR 382 at 385.
[28](1961) 78 WN (NSW) 886.
On behalf of MPX, attack was primarily directed to the fifth proposition. It was put that the privilege cannot be set aside on the basis of the suggested exception unless there be material which substantiates or gives colour to the alleged wrongful conduct. What is required is prima facie evidence[29] of this conduct other than that contained in the otherwise privileged communications. In this case, counsel submitted, the evidence did not disclose such a prima facie case of unlawful behaviour, namely that the proceeding was issued by a plaintiff which did not in fact believe that it was entitled to each of 208 days’ time extension. In my consideration, below, of the prospects of success of the OMP application, I conclude that, on the evidence before me, there is no prospect that OMP will make out its assertion that MPX did not hold this belief on 22 December 2000. I conclude, a fortiori, that OMP has not shown a prima facie case of this assertion. Accordingly, the attack on the privileges failed at this point.
[29]The Attorney-General (NT) v Kearney (1985) 158 CLR 500 at 516, per Gibbs CJ.
The MPX Application
The suggested deficiencies in the MPX discovery meant that not all the material upon which counsel for OMP might wish to rely in support of the OMP application was yet before the Court. Furthermore, I was told that, on that application, cross-examination of deponents would be sought. Nevertheless, counsel for OMP stated that they were content that I deal with the MPX application to strike out the OMP application as an abuse of process of the court as things stood at the moment.
It was contended on behalf of MPX that the OMP application should be struck out as being without arguable foundation. I accept that I have jurisdiction to make such an order, but only if I am satisfied that the OMP application were so obviously untenable that it could not possibly succeed. I am mindful that I should not lightly reach such a conclusion.[30]
[30]General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 per Barwick CJ.
I turn then to examine the legal and factual foundation for the OMP application which is impugned by MPX. It rested, as counsel for OMP stated, on the fact that “MPX does not honestly believe that it has a claim for 208 days of time extension …” As the argument developed, it became apparent what was contended was that MPX does not honestly believe that it has a valid claim for each and every day of the 208 days' time extension. It was submitted that it was an abuse of process which the Court should not tolerate where a litigant brings a claim which it does not honestly believe to be well-founded or a claim which it knows not to be an honest claim. A moment’s reflection will show that these two types of claim are not identical.
The fundamental propositions of law underlying the OMP application were not controversial. It is an abuse of the Court process to bring a civil claim which is unarguably groundless as, for example, where it is not supported by any arguable view of the law or where the uncontrovertible facts are inconsistent with it. Such a claim may be summarily stayed, struck-out or dismissed pursuant to Rules 23.01, 23.02 or 23.03 or pursuant to the inherent jurisdiction of the Court. Moreover, the Court may punish a civil litigant or its practitioner by an award of punitive costs or for contempt of court where such a claim is knowingly brought. Finally, the Court may stay as an abuse of process a claim which, albeit arguable, is brought in circumstances where the plaintiff’s true intention is not to pursue the cause of action to a conclusion but for the predominant purpose of using the proceeding for a collateral or improper objective[31]. In the last-mentioned case, the onus upon the other party is a heavy one and the power to stay will be reserved for the most exceptional circumstances[32].
[31]Williams v Spautz (1992) 174 CLR 509 at 526-7, per Mason CJ, Dawson, Toohey and McHugh JJ.
[32]Williams v Spautz (1992) 174 CLR 509 at 529, per Mason CJ, Dawson, Toohey and McHugh JJ.
The factual basis for the OMP application’s contention that MPX has or had no belief that it was entitled to the whole of the 208 days’ time extension claimed falls into three broad categories:
(1)The project overran the date for practical completion by 208 days. The claim for time extension is for this very same period. The site records show that some time was lost for delays such as inclement weather and industrial action for which no time extension is allowable under the construction contract. Moreover, the contractual provisions preclude an extension of time where there is a concurrent non-extendable delay. In these circumstances, the prospect of MPX making out an entitlement to the whole of its overrun is remote, if not fanciful. Furthermore, most of the time extension claims were made late, on 6 December 2000 at the time when practical completion was achieved, and this proceeding was commenced before the expiry of the 28 days period given by the construction contract for the superintendent to assess the claim. This strongly suggests that the whole of the 208 days’ time extension claim was not expected to be granted.
(2)The conduct by MPX of this proceeding suggests that it has had no belief in its prospects. Reference was made to its frequent urging for mediation, to its deficient discovery, to the fact that it has presented no less than three statements of claim and to the fact that it has failed to provide particulars sought.
(3)OMP has retained an expert programmer, Mr Lechner, whose opinion, based on the MPX discovered documents reviewed by him, is that “I can see no rational or reasonable basis for [MPX] to claim that [OMP] was responsible for every day of Project delay on the [centre Project]”. MPX has not filed any material answering or contradicting this opinion.
It was put that the Court could properly infer from these facts that MPX had no honest and bona fide belief in the totality of its time extension claim and that this claim had been inflated with a view to forcing a commercial settlement from OMP.
The MPX cross application depends upon a submission that the OMP application itself is doomed to fail and that the Court should spare the parties and itself the time, expense and trouble of conducting a hearing which would inevitably lead to this conclusion. I approach this application in the same way as I will, if it survives, approach the OMP application. OMP should be permitted to present its application to stay or summarily dispose of the claim of MPX unless the OMP application is so obviously untenable that it cannot possibly succeed.
I commence my consideration of the submissions put on behalf of MPX by remarking that the OMP application is a very unusual one. It is not an application for summary judgment under Rule 23.03. Counsel for OMP said that they intended to seek to cross-examine the MPX deponents to show the state of mind of MPX as to the justice of its claim. It was said that I would be asked to make findings on this issue notwithstanding conflicts of evidence. The question as to what state of mind of MPX would warrant the orders sought in the OMP application was never entirely clear. Was it an affirmative belief that its time extension claims were wholly unfounded or was it the absence of a belief that these claims in their entirety would succeed? It was said that the MPX claim should be disposed of as an abuse of process notwithstanding that it should appear that MPX had the necessary state of confidence in its claim for most, but not all, of the 208-day time extension sought. Next, despite some uncertainty at the outset, it was put that the OMP application required a finding as to the subjective belief of MPX in the validity of its 208-day time extension claim; it was not a question as to whether a reasonable plaintiff in the position of MPX would have such a belief. It would seem, therefore, that an erroneous but genuinely held belief in MPX that its time extension claim would not be wholly successful would warrant its summary dismissal or stay. Next, it was submitted that the enquiry as to MPX’s state of mind should be directed to its mind on 22 December 2000 when the proceeding was commenced. If on that date it had a belief that its claim was not justified, the claim should be disposed of notwithstanding that its state of mind today might be otherwise, whether this be by reason of the disclosure of further facts or otherwise. Finally, the OMP application appears to proceed on the basis that the whole proceeding against OMP must be disposed of on the basis that it has become infected by the lack of confidence of MPX in only part of it.
Counsel on behalf of MPX, however, bypassed these legal issues, contenting themselves by attacking head-on the factual bases for the OMP application. First, they said that the OMP application did not address the fundamental claims of MPX in the proceeding. These I have summarised in [3] above. The claims made under the construction contract for extension of time represent but a minor part of the statement of claim presently under attack. The principal claims were for misleading and deceptive conduct for which MPX might have expected to recover all of its losses suffered in performing the construction contract[33]. Second, they argued that their client could not be taken as knowing that its claim for each of 208 days’ time extension was without prospect on the basis of the opinion of the expert retained by OMP that he saw no rational basis for it. The factual basis for this opinion represents part only of that which will be available at the trial of this proceeding. Furthermore, this factual basis has not been proved. Next, the assumption that Mr Lechner makes, on instructions, that no time extension is allowable for delays caused by industrial disputes, inclement weather and sub-contractors is not accepted by MPX. Finally, they contend that the Court could not draw the suggested inference from the manner in which the MPX claim has been conducted since December 2000.
[33]Counsel referred to Henville v Walker (2001) 182 ALR 37, as authority for this.
I agree that the OMP application is misconceived and is doomed to fail. I must confess to grave difficulty in accepting the fundamental legal propositions upon which it depends. If it were the case that the time extension claim was exaggerated, I very much doubt that this would amount to an abuse of process, at least without some evidence that MPX had no intention of pursuing the claim to its conclusion. But I heard no argument on this point and I do not base my decision upon it. To my mind, it could not be that a complex building case such as the present could be disposed of without trial on the factual bases suggested by OMP. Experience and an examination of the documents might reasonably lead one to the conclusion that it is likely that MPX will not recover the totality of its overrun, but I could not conclude, on the evidence before me and to the necessary degree of satisfaction, that it in fact had no belief in the prospect of such a result when it filed the writ. I have read Mr Lechner’s report with considerable interest. It is, however, apparent that the assumptions he was required to make may not necessarily be borne out when all the evidence in this case is in. Finally, my familiarity with the interlocutory steps in this case do not persuade me to draw from the conduct of the proceeding by MPX the inferences which counsel for OMP urge.
I am mindful of the caution which should accompany a decision to dismiss summarily an application before the Court. I am, nevertheless, persuaded that the OMP application is without prospect of success as a matter of fact. I also have doubts as to its legal prospects. I leave it with the further comment that I would discourage applications of this kind in building cases. The Rules provide adequate, albeit restricted, procedures to dispose of vexatious and frivolous claims and claims for which the defendant considers it has a good defence. If applications such as the present are encouraged, there is a real risk of litigation incurring delays and further costs at the behest of deep-pocketed defendants conducting enquiries or mini-trials with the tactical objective of harassing plaintiffs or fishing for weaknesses in their case or simply of deferring the time when they must answer the allegations against them.
The application of the secondnamed defendant brought by amended summons filed on 25 July 2002 will be struck out with costs.
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