Novawest Contracting Pty Ltd v Altona Industrial Centre Pty Ltd
[2011] VSCA 104
•2 May 2011
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2010 0167
| NOVAWEST CONTRACTING PTY LTD | Applicant |
| v | |
| ALTONA INDUSTRIAL CENTRE PTY LTD | Respondent |
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| JUDGES | TATE JA and HARGRAVE AJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 8 April 2011 |
| DATE OF JUDGMENT | 2 May 2011 |
| MEDIUM NEUTRAL CITATION | [2011] VSCA 104 |
| JUDGMENT APPEALED FROM | Novawest Contracting Pty Ltd v Altona Industrial Centre Pty Ltd and CPG Australia Pty Limited [2010] VCC 1804 (Judge Ginnane) |
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PRACTICE AND PROCEDURE – Application for leave to appeal from interlocutory decisions of County Court – Decisions not attended with sufficient doubt to justify leave – Application refused.
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| Appearances: | Counsel | Solicitors |
| For the Appellant | Dr K P Hanscombe SC with Ms K Bowshell | Patrick J Cannon Coburn & Associates Pty Ltd |
| For the Respondent | Ms K E Judd SC with Mr M T Settle | HorseForce Legal |
TATE JA:
I agree with Hargrave AJA.
HARGRAVE AJA:
The applicant for leave to appeal, Novawest Contracting Pty Ltd, is a building and construction contractor. The respondent, Altona Industrial Centre Pty Ltd, is the owner and developer of land in Altona. Altona Industrial engaged Novawest to perform construction works on the land for the purposes of the development. There were two contracts, one for the first three stages of the development (‘primary contract’) and one for the fourth stage of the development (‘further contract’).
Each of the contracts was, relevantly, in identical terms. It incorporated General Conditions of Contract (AS 2124-1992). Each of the contracts contained the following liquidated damages provision:
35.6 Liquidated Damages for Delay in Reaching Practical Completion
If the Contractor fails to reach Practical Completion by the Date for Practical Completion, the Contractor shall be indebted to the Principal for liquidated damages at the rate stated in the Annexure for every day after the Date for Practical Completion to and including the Date of Practical Completion or the date that the Contract is terminated under clause 44, whichever first occurs.[1]
[1]Emphasis added.
The Annexure stated in each case that the agreed amount for liquidated damages is $500 per day with no limit on the amount which can be claimed.
The primary contract states that the Date for Practical Completion was 7 May 2004.
The further contract states that the Date for Practical Completion of stage 4 was 15 July 2005.
The first three stages of the development, under the primary contract, are alleged to have been completed. The fourth stage of the development, under the
further contract, is alleged not to have been completed.
The respondent contends that each of the dates for practical completion were extended by the Superintendent under the contracts to a date which was ‘earlier than 28 March 2008’. In an affidavit sworn by the Superintendent, he deposed that he no longer works for the employer employing him at the time he acted as Superintendent under the contracts, and cannot recall the exact dates to which he extended the times for practical completion under the contracts, other than to say that those dates were both before 28 March 2008.[2]
[2]It was submitted on behalf of the applicant that the Superintendent’s affidavit discloses that he has no recollection at all of the date to which he extended the date for practical completion in respect of the further contract. I do not accept this submission. Reading para 17 of his affidavit in conjunction with para 324 of the amended counterclaim, the Superintendent has sworn that he extended the date for practical completion to a date earlier than 28 March 2008 for both the primary contract and the further contract.
The applicant sued the respondent in the County Court, claiming amounts alleged to be due under the primary contract as varied on a quantum meruit basis and for damages for breach of contract. The respondent filed a counterclaim for liquidated damages as a result of the failure by the applicant to bring the works to Practical Completion by the extended date for Practical Completion. That counterclaim is in the following terms:
323.Each of the primary and further contracts included terms to the following effect:
(a)the Contractor would bring the works the subject of the contract to practical completion by 7 May 2004 (primary contract) and by 15 July 2005 (further contract) or within any extended time fixed pursuant to clause 35.5: clause 35.2;
(b)if the Contractor should fail to bring the works to practical completion (as defined by the contracts) by the date for practical completion, it should be indebted to the Proprietor for liquidated damages at the rate stated in the annexure for every day after the date for practical completion to and including the date of practical completion: clause 35.6;
(c)by Annexure A to the primary and further contracts, the rate of liquidated damages was agreed at $500 per day under each contract.
324.The Superintendent extended the date for practical completion of:
(a)Stages 1-3 of the works to a date earlier than 25 March 2008; and
(b)Stage 4 of the works to a date earlier than 25 March 2008.
PARTICULARS
The Defendant refers to paragraphs 15-24 of the Affidavit of James O’Donahue dated 7 February 2010, filed in this proceeding. Further and better particulars of the extended dates for practical completion of the stages of the works will be given after discovery and inspection of documents.
325.In breach of the primary contract, the Contractor did not bring the works thereunder to practical completion until 20 August 2008.
PARTICULARS
The Defendant relies on Statements of Compliance issued by Hobsons Bay City Council dated 20 August 2008 copies of which are in the possession of the Defendant’s solicitors and may be inspected by appointment.
326.In breach of the further contract, the Contractor did not bring the works thereunder to practical completion and the works remain incomplete.
PARTICULARS
The Defendant refers to the particulars enjoined to paragraph 324 hereof. As at the date of the Writ herein, Hobsons Bay City Council had not issued a Statement of Compliance.
327.In the premises, the Contractor is indebted to the Proprietor.
PARTICULARS
Liquidated damages calculated from the extended date for practical completion, being a date earlier than 25 March 2008, until 20 August 2008 at the rate of $1,000 per day pursuant to the primary and the further contracts and thereafter at the rate of $500 per day pursuant to the further contract.
The applicant applied to a judge of the County Court, pursuant to r 23.02(a) and (c) of the County Court Rules of Civil Procedure, to strike out these paragraphs of the counterclaim. The applicant contended that these paragraphs should be struck out because it was an essential element of the respondent’s cause of action that it plead the exact date for practical completion of each of the contracts. In response to that application, the respondent served a notice to produce on the applicant, seeking that it produce documents relevant to the extended dates for practical completion at the hearing of the strike out summons. The applicant then issued a summons seeking to set aside that notice to produce.
The trial judge, acting on his understanding of the position adopted by both parties, said that it was ‘not really disputed’ that the counterclaim was defective, ‘as a matter of appropriate pleading’, because it failed to state an exact date for practical completion as contended for by the respondent. However, this did not lead the trial judge to strike out the liquidated damages pleadings. Instead, after determining that the application to set aside the notice to produce should be dismissed, he extended the time for compliance with the notice to produce, ordered production and inspection and gave the respondent leave to file and serve an amended counterclaim to reflect any information received from those documents as to the date for practical completion.
The applicant applies for leave to appeal against these interlocutory decisions. The applicant acknowledges that the relevant principles to be applied are that leave to appeal will not be granted unless the decision below is attended with sufficient doubt to warrant appellate intervention and is productive of substantial injustice.[3] Further, the applicant seeks leave to appeal against the exercise of discretion in relation to matters of practice and procedure. Accordingly, this Court must exercise ‘particular caution’ before interfering.[4]
[3]Niemann v Electronic IndustriesLtd [1978] VR 431, 433.
[4]Herald & Weekly Times v Buckley (2009) 21 VR 661, [90].
Is there sufficient doubt about the refusal to strike out the liquidated damages counterclaim?
In my opinion, although the trial judge apparently accepted that the respondent did not seriously dispute the need to specify an exact date for practical completion, the judge was wrong to state that, as a result, the pleading was ‘not an adequate pleading’. In my opinion, the paragraphs quoted above did disclose a cause of action and were adequately pleaded in all the circumstances of the case. The respondent has pleaded sufficient material facts to establish that at least some amount of liquidated damages is due by the applicant, notwithstanding that the precise calculation of the amount will depend upon proper identification of the date for practical completion. The respondent has unambiguously pleaded that this date was earlier than 25 March 2008, and that practical completion under the primary contract did not occur until 20 August 2008 and has not occurred yet under the further contract.
The respondent has openly admitted that it does not, at present, know the exact date for practical completion, and has disclosed that the Superintendent does not know it either. In those circumstances, although a claimant who knew the date for practical completion would ordinarily be required to plead it, the trial judge was correct to refuse to exercise his discretion to strike out the pleading. Rather, the course which he adopted of granting leave to amend following inspection of documents produced under the notice to produce was a just, sensible and practical one, especially in a managed list such as the County Court Commercial List, Building Cases Division. It would in my opinion be unjust to strike out the liquidated damages claim until the respondent has had an opportunity to identify and particularise the relevant dates following inspection of all relevant documents in the applicant’s possession or, if necessary, by third party discovery or subpoena.
On behalf of the applicant, reliance was placed upon the statement by Lord Oliver, speaking for the Privy Council, in Wharf Properties Ltd v Eric Cumine Assocs (No 2)[5] that:
It is for the plaintiff in an action to formulate his claim in an intelligible form and it does not lie in his mouth to assert that it is impossible for him to formulate it and that it should, therefore, be allowed to continue unspecified in the hope that, when it comes to trial, he may be able to reconstitute his case and make good what he then feels able to plead and substantiate.[6]
[5](1999) 52 BLR 1.
[6]Ibid 23.
It was submitted that the respondent is in just that position and that it seeks to overcome it by requiring production of documents from the applicant to make good an otherwise improperly formulated case. I do not accept that submission. The liquidated damages claim has been formulated in an intelligible form and there is no reason to suppose that there is not a good case. Indeed, on the facts pleaded, there is a good case for at least liquidated damages on a daily basis from 28 March 2008 until 20 August 2008 in respect of the primary contract and from 28 March 2008 until the date of practical completion under the further contract.
It was further submitted on behalf of the applicant that no claim for liquidated damages can arise until the relevant works have reached practical completion. I do not accept that submission either. The contract clearly states that the liquidated damages accrue daily after the date for practical completion until either the date of practical completion or termination of the contract. It is common ground that the contract has not been terminated. Accordingly, there is a continuing cause of action for liquidated damages under the further contract until the date of practical completion occurs. The respondent was not required to wait until practical completion of the works under the further contract before mounting its liquidated damages claim. It is enough that the date for practical completion has been passed without the project being completed.
Should the notice to produce have been set aside?
The notice to produce sought two categories of documents relevant to the extended dates for practical completion. It was sensibly confined and easy to comprehend.
It was submitted on behalf of the applicant that the respondent had failed in its onus to demonstrate that the notice to produce had a legitimate forensic purpose. To the contrary, so it was contended, the notice to produce was a ‘fishing’ notice. I do not accept that submission. A fishing subpoena or notice to produce is one which is searching for a case, endeavouring to see whether there is a case at all. The case as pleaded demonstrates that the respondent has a good claim for liquidated damages. The notice to produce seeks to do no more than obtain details of the quantum of that case. That is not a fishing notice to produce.
More particularly, the applicant submitted that the notice to produce lacked a legitimate forensic purpose because:
(1) The onus was on the respondent to demonstrate a legitimate forensic purpose. This required it to explain on oath why it does not know the date for practical completion, and to disclose what searches it has made for evidence of that date.
(2) Taking the evidence as a whole, there was no reasonable basis beyond speculation that the applicant is likely to have documents establishing or evidencing the date for practical completion.
I do not accept that these matters should cause this Court to interfere with the judge’s exercise of discretion.
As to the first matter, the respondent has, at least by necessary inference arising from the form of its pleading, disclosed that it does not know the date for practical completion. If it did, it would have pleaded it. It was unnecessary for it to go on oath to establish this. Further, the affidavit of the Superintendent disclosed the extent of the searches which had been made to discover the date.
As to the second matter, it is objectively probable that the applicant will have documents which either establish or evidence the date for practical completion. Reliance was placed upon the affidavit sworn by a director of the applicant, Harold Parth. In that affidavit, Mr Parth deposed:
The files that Novawest holds for the works performed under the contracts are numerous and constitute 12 manila folders which have been paginated and contain at least 3000 pages and a further 17 manila folders which have not been paginated but I believe contain a similar number of pages. Furthermore, it may be that Novawest has misplaced or did not receive correspondence from the Superintendent regarding extensions of time which
correspondence the Superintendent or [respondent] is more likely to have in their control.[7]
[7]Affidavit of Harold Parth sworn 27 October 2010, [19].
That evidence does not assist the applicant. It demonstrates only that the applicant has a great many documents concerning the relevant construction project. It does not inform the Court as to whether it is likely that the folders include correspondence with the Superintendent as to the extension of the dates for practical completion. The mere reference to the possibility that documents may have been misplaced or not received is pure speculation.
The other ground of objection to the notice to produce was that it was oppressive, because there are many documents in the two categories sought. There is no merit in that submission. The evidence filed on behalf of the applicant did not establish that it would be oppressive for it to search through the documents sought. Indeed, I would be most surprised if those documents were not easily accessible by the applicant, which is a substantial building and construction contractor. Important documents such as those relating to requests for extensions of the date for practical completion, and the Superintendent’s responses, would in all probability have been retained as important documents to substantiate the applicant’s position under the relevant building contract. Further, the exhibits to Mr Parth’s affidavit indicate that the applicant had no difficulty in locating documents relevant to the role of the Superintendent at material times, with correspondence in that regard being produced.
Is there any substantial injustice?
For the reasons given above, the decisions appealed from are not attended with sufficient doubt to warrant appellate intervention. Accordingly, the applications for leave to appeal should fail on that ground. However, were they not so, I would not have been satisfied that there is any substantial injustice arising from the decisions sought to be appealed. The applicant has sued under the building contract and on a quantum meruit basis, seeking to recover damages from the respondent. It would be wholly unjust if the respondent was prohibited from raising a counterclaim for liquidated damages under the same contract, on the sole ground that it is unable to specify a date, the date for practical completion, which ought be ascertainable if the notice to produce is diligently complied with. However, if for some reason the applicant does not have the relevant documents evidencing the date for practical completion, there are other avenues available to the respondent such as third party discovery or subpoenas to obtain that date. In the alternative, if the evidence of an exact date is for some reason not available from any source, that would not be fatal to the respondent’s claim for liquidated damages. In such an unlikely event, the Court hearing the trial of the proceeding can determine the matter on the balance of probabilities – for example, by a finding that the date for practical completion was no later than a certain date.
Conclusion
For the above reasons, leave to appeal should be refused.
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