Pioneer Concrete (NT) Pty Ltd v Watkins Ltd

[1983] FCA 122

Re: PIONEER CONCRETE (N.T.) PTY. LIMITED
And: WATKINS LIMITED; RANGER URANIUM MINES PTY. LIMITED; CALCARIA PTY.
LIMITED; NORTHERN CEMENT PTY. LIMITED; WRIGHT ENGINEERS PTY. LIMITED; DAVEY
McKEE PACIFIC PTY. LIMITED; COFFEY & PARTNERS PTY. LIMITED; READYMIX CONCRETE
PTY. LIMITED
(1983) 66 FLR 179
No. N7624 of 1982
Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NORTHERN TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Smithers J.(1), Franki(2) and St. John(3) JJ.

CATCHWORDS

Practice - Third party procedure - application for directions pursuant to O.20 r.7 for trial in appropriate manner of question or issue - whether question or issue is "proper to be so tried" - construction of O.20 r.7 by reference to O.20 r.1 - whether issue or question is "substantially the same matter" as the subject matter of the principal action - exercise of discretion - role of Judge in managing the total litigation.

Supreme Court Rules (Northern Territory)

Practice - Third party procedure - Summons by defendant for trial of third party actions at same time as principal action - Whether question or issue is proper to be so tried - Whether issue or question is substantially same matter as subject matter of principal action - Exercise of discretion by trial judge - Rules of the Supreme Court of the Northern Territory, O.20, rr.1, 7(1).

HEADNOTE

The first respondent had commenced an action in the Supreme Court of the Northern Territory arising out of the performance by it of concreting work for the second respondent which the second respondent alleged to be defective. The first respondent alleged that the concrete had been purchased from the appellant as it was obliged to do pursuant to the contract with the second respondent and that if the concrete were defective the appellant's failure in this regard constituted a breach by the second respondent of its contract with the first respondent, it being a term of that contract that the concrete supplied by the first respondent would be tested by the fifth and sixth respondents and would conform to the standard specified in the contract.

The first respondent sought damages against the second respondent and the appellant and certain declarations and also sought relief against the third respondent. The appellant and second respondent issued a notice claiming contribution or indemnity from each other. The appellant was granted leave to join the fourth, fifth, sixth, seventh and eighth respondents as third parties. A summons by the appellant for an order under O.20, r.7(1)(b) of the Rules of the Supreme Court of the Northern Territory that the issues set out in the third party notices be determined at the trial of the principal action was dismissed with costs.

On appeal,

Held: (1) Per Smithers and Franki JJ. - Order 20, r.7 of the Rules of the Supreme Court of the Northern Territory did not require that the court be satisfied that there was a prima facie case of entitlement to the relief claimed in the third party notice.

(2) Per Smithers and Franki JJ. - Order 20, r.1 specifies exclusively the categories of claims in which the third party procedure provided in O.20 was available to a defendant, while O.20, r.7 dealt with the practical processing of a third party notice which complied with the provisions of O.20, r.1.

(3) Per Smithers and Franki JJ. - The trial judge had erred by failing to find that the relief or remedy claimed in the third party notices was substantially the same as any relief or remedy claimed by the first respondent against the appellant within the meaning of O.27, r.(1)(b).

Re Burford (1932) 2 Ch 122; Barclays Bank v. Tom (1923) 1 KB 221, applied.

(4) Per St. John J. - Having regard to the common interest of all the parties in the question of whether the concrete was defective and if so what was the cause of it being defective, the learned trial judge could easily have come to the conclusion that those questions were proper to be tried at a trial at which all parties appeared.

(5) Per curiam - The trial judge had failed properly to exercise the discretion conferred by O.20, r.7 and the matter should be remitted to the Supreme Court.

(6) Appeal allowed.

HEARING

Sydney, 1983, March 7; April 13-14; June 22. #DATE 22:6:1983

APPEAL

The appellant, a defendant in proceedings commenced by the first respondent in the Supreme Court of the Northern Territory, appealed from an order dismissing its summons under O.20, r.7 of the Rules of the Supreme Court of the Northern Territory seeking an order that the issues set out in third party notices issued by the appellant be determined at the same time as the trial of the action brought by the first respondent.

B.S.J. O'Keefe Q.C. and S.J. Archer, for the appellant.

D.P. Drummond Q.C. and C.A. Sweeney, for the first respondent.

R.A. Parsons, for the second respondent.

P. Shiels, for the third respondent.

N.R. Carson and J.D. Heydon, for the fourth respondent.

K. Mason Q.C. and L.G. Foster, for the fifth and sixth respondents.

R.A. Adams-Smith and A.A. Howie, for the seventh respondent.

A.J. Myers, for the eighth respondent.

Cur. adv. vult.

Solicitors for the appellant: Allen Allen & Hemsley.

Solicitors for the first respondent: Morris, Fletcher & Cross.

Solicitors for the second respondent: Pavey Whiting & Byrne.

Solicitors for the third respondent: Gillespie-Jones & Associates.

Solicitors for the fourth respondent: Dawson Waldron.

Solicitors for the fifth and sixth respondents: Baker & McKenzie.

Solicitors for the seventh respondent: Minter Simpson & Co.

Solicitors for the eighth respondent: Gillots.

T.J. GINNANE

ORDER

1. The appeal be upheld and that orders 1 and 2 of 29 October 1982, namely that the appellant's application for third party directions be dismissed and the appellant pay the costs of and incidental to the application for third party directions, be set aside.

2. The summons for directions be remitted to the Supreme Court of the Northern Territory for hearing in accordance with the principles adverted to by this Court.

3. Each respondent pay one eighth of the appellant's costs of the appeal.

4. The question of costs of the summons for directions before the Supreme Court of the Northern Territory be determined by that Court.

JUDGE1

This is an appeal against an order of a Judge of the Supreme Court of the Northern Territory dismissing an application by the appellant that the issues set out in certain third party notices issued pursuant to the order of Toohey J. be determined at the trial of the action No. 48 of 1981 brought by the first respondent (Watkins) against the second respondent (Ranger) and the appellant (Pioneer) and the third respondent (Calcaria) and for other relief.

The action arose out of the performance by Watkins of extensive works in and about the construction for Ranger of an ore treatment plant during 1979 to 1981 pursuant to a contract between Watkins and Ranger. According to Watkins' amended statement of claim, it was necessary in the performance of the works for Watkins to lay, and it did lay, a large area of concrete. It is alleged by Ranger that much of the concrete was defective in that it did not conform to the standard specified in the relevant contract. The concrete used by Watkins was supplied to it by Pioneer. Watkins alleges that pursuant to its contract with Ranger it was obliged to purchase from Pioneer the concrete required by it for the works. Watkins alleges that if Pioneer supplied defective concrete, Pioneer's failure in that respect constituted a breach by Ranger of the contract between Ranger and Watkins.

Watkins alleges also that it was a term of the agreement between itself and Ranger that concrete testing would be carried out by the fifth and sixth respondents and also that Ranger impliedly warranted that the concrete supplied to it by Pioneer would conform to the standard specified in the contract. Based on these allegations Watkins claimed as against Ranger:
(a) a declaration that in so far as Pioneer supplied concrete that was defective such supply constituted a breach by Ranger of its contract with Watkins;
(b) damages of $3,165,071.00 for Ranger's alleged breach of contract;
(c) a declaration that Watkins is not liable to refund to Ranger the sum of $930,000.00 paid by Ranger to Watkins in respect of defective concrete;
(d) the sum of $4,720,862.00, which includes the sum referred to in paragraph (b) above, in respect of costs incurred by Watkins in accelerating its work rate in consequence of the breaches mentioned above and other alleged breaches by Ranger; (e) other relief.
Watkins also claimed relief in the nature of damages of $7,058,042.00 against Ranger for the breaches alleged.

In the alternative to its claims against Ranger, Watkins claimed against Pioneer:
(i) a declaration that the supply by Pioneer to Watkins of defective concrete constituted a breach by Pioneer of its contract with Watkins;
(ii) damages of $3,165,071.00.

On 2 June 1981 Pioneer issued a notice claiming against Ranger contribution or indemnity on the ground that in breach of its contract with Pioneer, Ranger failed to provide Pioneer with concrete tests, and on the ground of negligence of Ranger in relation thereto. On 8 July 1981 Ranger issued a notice against Pioneer claiming contribution and indemnity from Pioneer in respect of alleged breaches of agreement between Ranger and Pioneer in failing to supply to Watkins concrete of the required standard, failing properly to test concrete supplied and for negligence in respect of the manufacture, production and quality of concrete supplied by it to Watkins.

On the application of Pioneer by summons an order was made by Toohey J. under O.20 r.1 of the Supreme Court Rules (Northern Territory) that Pioneer have leave to issue and serve third party notices upon the 4th, 5th, 6th, 7th and 8th respondents. Pursuant to that order third party notices, in forms specified, were issued and served on those respondents. In substance, the form in each case other than that of the notice served on the 4th respondent was the same. It informed the third party of the claim by Watkins against Pioneer. A copy of Watkins' Statement of Claim was attached. It informed the third party that Pioneer claimed against it -
"(a) to be indemnified against the plaintiff's claim and the costs of this action; or
(b) alternatively, contribution to such extent of the plaintiff's claim against the second defendant as to the Court seems just and equitable,
on the grounds that in or about the months of September and October, 1979 you negligently failed:
(i) to test or arrange for the testing of concrete then being supplied by the second defendant to the plaintiff;
(ii) to report or arrange for the reporting of the results of the tests of such concrete in a prompt and efficient manner;
(iii) to supervise either adequately or at all the carrying out of such tests and the reporting of the results of such tests; and
(iv) to alert or warn, or cause the alerting or warning of, the second defendant immediately that test carried out upon such concrete indicated that it was defective;
which failure caused or contributed to the damage suffered by the plaintiff."
The notice served on the 4th respondent, Northern Cement Pty. Ltd. sought relief on the grounds of negligence and of breach of contract.

On 11 August 1981 Pioneer issued a summons seeking an order that the issues set out in the third party notices be determined at the trial of the action; that Pioneer be given leave to deliver to the third parties and Ranger statements of claim in the forms annexed to the summons; and that certain directions in respect thereof be given; and an order for such further or other relief as to the Court seemed just. All parties were represented at the hearing of this summons. The summons was dismissed and Pioneer was ordered to pay the costs of the other parties. It is against that dismissal that this appeal is brought.

This application was made under O.20 r.7(1)(b) of the rules of the Supreme Court of the Northern Territory. Order 20 r.1 and r.7 are in the following terms:-
ORDER 20
Third Party Procedure
1. - (1.) Where in any action a defendant claims as against any person not already a party to the action (in this Order called the third party) -
(a) that he is entitled to contribution or indemnity;
(b) that he is entitled to any relief or remedy relating to or connected with the original subject matter of the action and substantially the same as some relief or remedy claimed by the plaintiff; or
(c) that any question or issue relating to or connected with the said subject-matter is substantially the same as some question or issue arising between the plaintiff and the defendant and should properly be determined not only as between the plaintiff and the defendant but as between the plaintiff and defendant and the third party or between any or either of them;
the Court or a Judge may give leave to the defendant to issue and serve a third party notice."

. . .

"7.-(1.) If the third party enters an appearance the defendant giving notice may, after serving notice of the intended application upon the plaintiff, the third party and any other defendant, apply to the Court or a Judge for directions and the Court or a Judge may -

(a) where the liability of the third party to the defendant giving the notice is established on the hearing of the application, order such judgment as the nature of the case requires to be entered against the third party in favour of the defendant giving the notice;

(b) if satisfied that there is a question or issue proper to be tried as between the plaintiff and the defendant and the third party or between any or either of them as to the liability of the defendant to the plaintiff or as to the liability of the third party to make any contribution or indemnity claimed, in whole or in part or as to any other relief or remedy claimed in the notice by the defendant or that a question or issue stated in the notice should be determined not only as between the plaintiff and the defendant but as between the plaintiff, the defendant and the third party or any or either of them, order such question or issue to be tried in such manner as the Court or the Judge directs; or

(c) dismiss the application."

In dismissing the summons the learned Judge expressed the view that on the proper construction of r.7(1)(b) the applicant must satisfy him that:-
". . . first of all he has a prima facie case under either paragraph (a) or (b) or (c) of sub-rule one of rule one of that order. Namely; that he is entitled to contribution or indemnity or under paragraph (b), that he is entitled to some relief or remedy related to or connected with the original subject matter of the action and substantially the same as some relief or remedy claimed by the plaintiff."

It has been argued that in taking this view his Honour was in error in two respects namely first, that on the application for directions under O.20 r.7 it was not relevant to enquire whether the claims in the third party notices fell within one of the categories specified in O.20 r.1, and secondly, that it is not necessary on such an application, that the Judge be satisfied that the applicant had a prima facie case of entitlement to the relief claimed against the third party. As to this second matter there must be a question as to whether the learned Judge really intended to express the requisite degree of satisfaction to be carried to his mind quite as far as the words would indicate. But the requirement was stated twice in the same words and must be taken as indicating that his Honour felt that more was required to be shown than a prima facie case of the existence of claims within the scope of O.20 r.1.

As to the first alleged error, I think that, in substance, the learned Judge was correct in his assessment of the effect of O.20 r.1 on the problem before him. Leave having been given ex parte for the issue and service of the notice, a party served might challenge the notice on the ground of non compliance with the terms of O.20 r.1 and apply to have the notice set aside. No such application was made and the appellant sought directions under O.20 r.7(1). The appellant's application was the first occasion on which the notices were before the court, inter partes. In my opinion, a party objecting that the notices did not disclose a claim within one of the categories specified in O.20 r.1(1)(a), (b) or (c) might on that application urge dismissal, on that ground. Order 20 r.1 specifies, and does so exclusively, the categories of claims in which the third party procedure provided in O.20 is available to a defendant. Order 20 r.7 provides for the examination of the third party notices for the purpose of dealing with the practicalities arising thereunder. Under O.20 r.7(1)(a) the situation may be shown to be so clear that a judgment may be entered against the third party in favour of the defendant forthwith. In relation to cases where there is conflict r.7(1)(b) provides for specified situations in which the Judge may order questions or issues to be tried in such manner as he may direct.

The situations specified, according to the literal words of r.7(1)(b), exist where the Judge is satisfied, not that the claims made in the notice fall within one of the categories specified in that sub-rule, but that there is a question or issue proper to be tried as between the plaintiff and the defendant and the third party or between any or either of them, "as to" various specified matters. Those matters are, namely, first, the liability of the defendant to the plaintiff; second, the liability of the third party to make contribution or indemnity claimed; third, other relief or remedy claimed in the defendant's notice. A fourth situation in which r.7(1)(b) is applicable is where the judge is satisfied that a question or issue stated in the notice should be determined not only as between the plaintiff and defendant but as between them and the third party or any or either of them.

However, there is a question of construction of r.7(1)(b). The terms of r.7(1)(b) relating to the third situation mentioned above describe "relief or remedy", in which a question proper to be tried may arise, in quite general terms. There is no limitation of the kind of relief or remedy referred to. In this respect r.7(1)(b) is in contrast with r.1(1)(b). In r.1 the relevant relief or remedy is limited to relief or remedy relating to or connected with the original subject matter of the action and substantially the same as some relief or remedy claimed by the plaintiff.

Similarly, with respect to the fourth situation mentioned above, which arises under r.7(1)(c) the question or issue stated in the notice and alleged to be a question or issue which should be determined between the parties or some of them, is, any question or issue of unlimited nature. But in r.1(1)(c) the question or issue claimed to be such that it should properly be determined between the parties or some of them is limited to a question or issue relating to or connected with the subject matter of the original action and which is substantially the same as some question or issue arising between the plaintiff and the defendant.

Thus on the literal wording of r.7 directions might be given in a case where the relief or remedy claimed, or the question or issue stated in the notice, does not fall within a category of claims specified in O.20 r.1, and accordingly, are of such a nature that leave to issue and serve that third party notice could not have been given. It is impossible to think that on the proper construction of the rules such a state of affairs could be contemplated. However, on the basis that O.20 r.7 is dealing with the practical processing of a third party notice which does, or is assumed, to comply with the provisions of O.20 r.1 there is no difficulty. On that basis there is no reason to express in r.7 the limitations on the relief or remedy, (r.7(1)(b) third situation) or on a question or issue stated in the notice (r.7(1)(b) fourth situation) because none of these could extend beyond the limits stated in respect thereof in O.20 r.1(1)(b) and (c). It would not be rational to limit the class of claims and questions which would support an application for leave to issue the notice and then to authorise the giving of directions in a wider class of claims and questions. It follows that, as a matter of construction, one should read O.20 r.7 as applicable only to those claims and questions which are within the classes of claims and questions defined in O.20 r.1 as those in respect of which leave to issue and serve a notice may be given thereunder. Order 20 must be read as a whole.

When one comes to apply r.7(1)(b) it is seen that the enquiry to be made by the Judge, as stated therein, is whether there is a question or issue proper to be tried as between the plaintiff and the defendant and the third party or between any or either of them "as to" the liability of the defendant to the plaintiff or as to the liability of the third party to make any contribution or indemnity claimed, or as to the entitlement of the defendant to any other relief or remedy, or whether a question or issue, if any, stated in the notice, should be determined not only as between the plaintiff and the defendant but as between all the parties or any or either of them. From the context it appears that the expression "as to" the liability in question should not be read as meaning as to whether or not there is such liability but rather in the sense of "arising in the course of investigating such liability". The test is not whether the question of the existence of one of the liabilities referred to is proper to be tried as between the specified parties, but whether there is a question or issue proper to be so tried in the course of determining one of the liabilities referred to.

Having regard to the discussion above, in relation to "other relief or remedy", it would seem that in 0.20 r.7(1)(b) the words "relating to or connected with the original subject matter and being substantially the same as some relief or remedy claimed by the plaintiff against the defendant" should be deemed to be inserted immediately following the words "relief or remedy". Similarly, in relation to the "question or issue stated in the notice" in the fourth situation as referred to in r.7(1)(b) there should be understood to be inserted after those last quoted words, the words "relating to or connected with the said subject matter and being substantially the same as some question or issue arising between the plaintiff and the defendant". It will be seen therefore, that in the application of r.7 to the problem arising on the application for directions one does not go back to r.1 and apply it as such, but one construes 0.20 r.7 in the context of the terms of 0.20 read as a whole, and in particular of r.7 being read in the light of r.1. The practical result is the same on either approach.

Accordingly in the present case it would have been sufficient for Pioneer to satisfy the Judge, on the application for directions, that there was a question proper to be tried as between relevant parties in respect of the liability of a third party to make any contribution or indemnity claimed. Pioneer failed to do this. It would also have been sufficient for Pioneer to have satisfied the Judge that there was a question proper to be tried as between the relevant parties in determining whether Pioneer was entitled to any other relief or remedy claimed in the notice being relief or remedy relating to or connected with the subject matter of the original action and being substantially the same as some relief or remedy claimed by Watkins against Pioneer. In this respect Pioneer failed before the learned Judge because the learned Judge was not satisfied that any other relief or remedy so described was sought in the third party notices nor that any such question or issue was disclosed therein. In these respects the learned Judge would appear to have been in error.

It was said by the Respondents that the third party notices do not disclose any issue or question proper to be tried as between relevant parties. It was pointed out that nowhere does a claim for damages appear in express terms. All that Pioneer seeks is "to be indemnified against the plaintiff's claim and the costs of the action" and alternatively, "contribution to such extent of the plaintiff's claim against the defendant Pioneer, as to the Court seems just and equitable".

It is conceded in this case that these claims are not made as claims for contribution or indemnity in the sense in which those words are used in 0.20 r.1 or r.7. It is said however, for Pioneer that in the third party notices the words "indemnity" and "contribution" should not be read in a technical sense but according to the ordinary meaning thereof. In 0.20 r.1 and r.7 the words "indemnity" and "contribution" are to be read as referrable to those cases where a right of indemnity arises from contract express or implied or where the relation between the parties is such that either in law or equity there is an obligation upon the one party to indemnify the other, where from the circumstances the law implies that the common intention is that the party requested shall be indemnified by the party requesting. See per Lord Wrenbury in Eastern Shipping Co. Ltd. v. Quah Beng Kee (1924) A.C. 177 at 182. Typical situations giving rise to a claim for indemnity and contribution are those between co-sureties and between trustee and cestui que trust. However, if Pioneer's claim to be indemnified against the plaintiff's claims against it, standing in contract or negligence as alleged therein, is not a claim for indemnity as so defined, it nevertheless would seem that the claim made in the third party notice must be read according to the ordinary meaning of the expression "to be indemnified" in the context in which it appears. That context comprises an introductory statement that in the action in which the notice is given Watkins claims against Pioneer damages for breach of contract as appears in the Statement of Claim a copy of which was attached. In respect of the third parties other than the fourth respondent, it comprises also a statement that the claim for indemnity is based on the ground, in substance, that the third party negligently failed to perform a duty to Pioneer to test the concrete manufactured by Pioneer and inform it of defects in the quality thereof. It is apparent therefore that the appellant claims relief which it nominates as, "to be indemnified against the plaintiff's claim", but which really constitutes relief by way of a money judgment in respect of a third party's negligence to the extent of the appellant's liability to the plaintiff for its breach of contract, and that the appellant so claims, on the ground that the alleged damage suffered by the plaintiff was caused or contributed to by the negligence of the third party. The appellant's liability to the plaintiff, if any, is for damages for breach of contract. The third parties' liability to the appellant if any, is for damages for negligence. In this context it would seem that the words in question extend to cover all that is within their ordinary me ning. The definition of the word "indemnify" appearing in the Shorter Oxford English Dictionary includes "to keep free from any hurt, harm or loss, to compensate for loss suffered or expenses incurred".

If one construes the words in question according to their ordinary dictionary meaning they appear quite apt to describe a situation in which the claim against the third party was for a money judgment for damages measured by the contemplated liability of the appellant to the plaintiff. In my opinion therefore the third party notices do contain a claim for "other relief or remedy", namely damages. If this were not so it would be appropriate that an application pursuant to 0.32 r.6 for amendment to express the relief sought, namely damages, in more direct terms be favourably entertained. The third party claims certainly relate to and are connected with the claim of the plaintiff against the appellant.

The next question is whether any and which of the third party claims are for relief or remedy "substantially the same as some relief or remedy claimed by the plaintiff". There are of course considerable differences between the relief claimed by the appellant against the third parties and that claimed by the plaintiff against the appellant. The former, except for one item of relief sought against Northern Cement is in negligence; the latter is in contract. In respect of the claim against each third party, other than Northern Cement, such claim is for damages for failing to inform Pioneer that the third party had ascertained that certain concrete made by Pioneer for the purpose of sale to Watkins for use by Watkins in the construction of the ore treatment plant was defective, although it knew that Pioneer was relying upon being given such information in the event that the third party ascertained that the quality of concrete made by it was below the standard required for such purpose, thereby inducing a false belief in Pioneer that the concrete being made by it was of the required standard, so that Pioneer contined to manufacture concrete of the same defective standard and to supply the same to Watkins for the said purpose. The latter claim is for damages suffered as the direct result of a breach of contract to supply concrete manufactured to the specified standard.

The claims made in the third party notices against Northern Cement seek relief for breach of an implied term in the contract between Pioneer and Northern Cement for the supply of cement by Northern Cement to Pioneer that such cement sold by Northern Cement known as Iligan Cement, would be reasonably fit to be used in the manufacture of concrete to be used in the construction of Ranger's ore treatment plant, in circumstances where Pioneer had made known to Northern Cement that the purpose for which it required such cement was to use it to manufacture concrete in performance of a contract between Pioneer and Ranger so as to show, as was the fact, that Pioneer relied on the skill and judgment of Northern Cement, the cement being goods which it was in the ordinary course of that Company's business to supply. The third party claim against Northern Cement was also based upon the allegation that Northern Cement negligently represented to Pioneer that the cement supplied by it was of a certain specification such representation being false. It was alleged in the third party notice also that the breach of contract and the negligence alleged caused or contributed to the damage suffered by Watkins being the subject of Watkins' claim against Pioneer.

In the case of each third party claim the measure of damages claimed is the amount of that part of the liability of Pioneer to Watkins for damages suffered by Watkins for its breach of its contract with Ranger as was caused by the alleged failure of the third party. It is apparent that in the claim by Watkins against Pioneer it will be necessary for Watkins to prove that the concrete supplied by Pioneer to it did not conform with the standard required by its contract with Pioneer. In the relief or remedy claimed by Pioneer against the third parties it will be necessary for Pioneer to prove that the concrete did not conform to that same standard. Watkins will need to prove against Pioneer what the standard was and Pioneer will need to prove against each third party that it knew that concrete supplied by Pioneer to Watkins was required to meet that standard. Watkins will need to prove against Pioneer the extent of loss and damage suffered by it as a result of Pioneer having supplied concrete of quality below the standard. Pioneer will need to prove against each third party what that damage was and how much of it was due to the negligence or breach of contract of that third party.

There are thus identical and significant facts which require to be proved in the action against Pioneer and by Pioneer in the third party proceedings.

Returning to the problem as to whether the relief or remedy claimed in the notice is substantially the same as any relief or remedy claimed by the plaintiff against the defendant, the observations of Lord Hanworth M.R. in In Re Burford (1932) 2 Ch. 122 at 138 are most significant, namely,
"When I come, therefore, to consider the meaning of clauses (b) and (c) of r.12, sub-r.1, I think it is plain that the words 'substantially the same' which appear in both those clauses relate to the facts which have to be examined for the purpose of ascertaining what is the relief or remedy to which the parties are entitled. 'Substantially' must have been put in in order to embrace within the rule something which was not exactly a repetition of the relief or remedy asked for. I think, therefore, that where the same facts have to be conned over in order to ascertain the liability and to give some relief to one or other of the parties, in such a case the rule now provides that it is unnecessary to have separate actions and separate proceedings, but that a third party notice may be served."
and further light is thrown on the problem by Lawrence L.J. at pp.140 and 141 where he said:-
"The words 'substantially the same,' should, I think, be interpreted as 'the same in substance although not in form,' because it is impossible that the issues between the defendants inter se should ever be the same in form as those between the plaintiffs and defendants. The claim by a defendant against his co-defendant must necessarily be a different claim from that of the plaintiff against the defendants. What I think is meant by the rule is that if the claim made by a defendant against his co-defendant is connected with the claim which the plaintiff makes against both defendants, and is one which in the event of the plaintiff being successful will determine which of the two defendants ought to bear the ultimate loss, it is one in which the claim made by the defendant against his co-defendant is substantially the same as that made by the plaintiff against both the defendants within the meaning of the rule."
Thus the similarity required by O.20 r.7(1)(b) is a practical and non technical similarity. It does not depend upon the relevant items of relief being both of the same legal classification, such as, that each is for specific performance of a contract. It may be satisfied if, in a broad sense, the relief or remedy the subject of each claim is the same. In this case each is the same, in that, Watkins' claim is for loss due to the defective quality of the concrete supplied to it for use in an ore treatment plant, and Pioneer's claim against the third parties is for damages suffered by it as a result of negligence or breach of contract of the third parties as a result of which there was supplied to Watkins by Pioneer concrete was of quality below the standard required for its use in that same project.

The Court was referred to various authorites in which the scope of the equivalent of O.20 r.7(1)(b) was dealt with, namely for instance, In Re Burford; (supra) Chatsworth Investments Ltd. v. Amoco (U.K.) Ltd. & Ors. (1968) 1 Ch. 665; Myers v. N. & J. Sherick Ltd. (1974) 1 W.L.R. 31; Standen v. G. H. Varley Pty. Ltd. (1956) 56 S.R. (N.S.W.) 346; Standard Securities Ltd. v. Hubbard & Anor (1967) 1 Ch. 1056; Edwards v. Edwards (1913) V.L.R. 30. In In re Burford (supra) Lawrence C.J. at p.140 carefully guarded himself against laying down any general rule. However, with respect to the circumstances of this case, to hold that the quality of what might be called substantial sameness of the claim of Watkins against Pioneer and that of Pioneer against the third parties mentioned above is seen, in my opinion, to satisfy O.20 r.7(1)(b) and to be appropriate and consistent with authority. The liberal construction of O.20 r.7(1)(b) which has emerged is supported no doubt by the purposes of the third party procedure as stated by Scrutton L.J. in Barcklays Bank v. Tom (1923) 1 K.B. 221. He said at pp.223 and 224:-
"Now I think it is important to keep clearly in mind what the third party procedure is. A plaintiff has a claim against a defendant. The defendant thinks if he is liable he has a claim over against a third party. With that matter between the defendant and the third party the plaintiff has obviously nothing to do. He is not concerned with the question whether the defendant has a remedy against somebody else. His remedy is against the defendant. But the defendant is much interested in getting the third party bound by the result of the trial between the plaintiff and himself, for otherwise he might be at a great disadvantage if, having fought the case against the plaintiff and lost, he had then to fight the case against the third party possibly on different materials, with the risk that a different result might be arrived at. The object of the third party procedure is then in the first place to get the third party bound by the decision between the plaintiff and the defendant. In the next place it is directed to getting the question between the defendant and the third party decided as soon as possible after the decision between the plaintiff and the defendant, so that the defendant may not be in the position of having to wait a considerable time before he establishes his right of indemnity against the third party while all the time the plaintiff is enforcing his judgment against the defendant. And thirdly, it is directed to saving the extra expense which would be involved by two independent actions. With these objects in view the third party order usually provides that the third party may appear at the trial between the plaintiff and the defendant. When the third party has so appeared as party to the proceedings, various questions arise as to what he can do. Can he counterclaim against the plaintiff? The answer is no, for such a counterclaim would have nothing to do with the issue in action to which he is admitted as a party : Eden v. Weardale Iron and Coal Co. 28 Ch. D. 333, 338 Can he iinterrogate the plaintiff? The answer is yes, if the object of the interrogatories is to show that the plaintiff's claim against the defendant cannot be supported : Eden v. Weardale Iron and Coal Co. (1887) 35 Ch.D. 287."

It was said by Mr. Drummond, in particular, that the learned Judge decided to dismiss the summons for directions under O.20 r.7 simply in the exercise of his discretion. There is some basis in the reasons for judgment for this view but I do not regard it as sound. After noting the terms of O.20 r.7 his Honour passed to the question which arises under O.20 r.(1)(a), namely, whether the notice disclosed any ground on which it could be said that the applicant had a claim for contribution or indemnity. He decided that it did not. He then passed to O.20 r.1(1)(b) as to which he said:
"If that be so then, I think it forces me to consider whether a prima facie case has been made out under paragraph (b). That is; am I satisfied that the second defendant is entitled to some relief or remedy relating to or connected with the original subject matter of the action and substantially the same as some relief or remedy claimed by the plaintiff. I am not at all satisfied that there is any such question or issue raised in any of the third party notices. Indeed, in some of them, I do not think any issue at all has been raised."
As indicated above there were two such questions, namely whether the concrete delivered by Pioneer to Watkins was below the standard specified in the contract between Watkins and Pioneer, and if so, the extent of damage recoverable by Watkins against Pioneer in respect thereof. Both of those questions were relevant to the claim made by Pioneer against the third parties.

It was merely to the existence of these or other such questions that his Honour was required to be satisfied that there was a prima facie case. He was not required to be so satisfied that the applicant was entitled to any relief or remedy dependant upon those questions. By his stated lack of satisfaction that there was any question or issue raised in the third party notices within the category of possible third party claims specified in O.20 r.1(1)(c) or claiming the kind of relief or remedy specified in O.20 r.7(1)(b), his Honour effectively disposed of Pioneer's application for directions. His Honour then made further observations referring to circumstances which were relevant to the exercise of his discretion to give or refrain from giving directions. After stating the object of the rules relating to the third party procedure his Honour said that:

"The point really is whether there is such a question in the present case which can advantageously be tried and decided not only as between the plaintiff and the defendants, but as between the defendants and the third parties.

As I have said, in my view there is no such question in any of these third party notices."
His Honour then referred to the observations of Cotton L.J. in Carshaw v. North-Eastern Railway Company (1885) 29 Ch.D. 344 at p.346, to the effect that it was the duty of the Judge to see that nothing was done to cause additional expense or difficulty to the plaintiff and stated that he thought the plaintiff in this case would be unduly embarrassed and put to additional expense and difficulty by the joinder of the third parties. In conclusion his Honour said "For those reasons, then, I dismiss the application for third party directions".

It would seem that the decision to refuse directions rested upon all the reasons theretofore expressed. I think therefore that his view that:

(a) there was no relief or remedy relating to or connected with the original subject matter of the action and substantially the same as some relief or remedy claimed by the plaintiff;

(b) that there was no question or issue proper to be tried as between the plaintiff and the appellant and the appellant and the third parties or any or either of them as to the liability of the third parties to Pioneer;

(c) that it was required by O.20 r.7 that he be satisfied that there be a prima facie case of entitlement to the relief claimed,

were reasons which all formed part of the material by reference to which his discretion was exercised. For reasons indicated there was, in my opinion, an error involved in each of these. In my opinion, on the proper construction of his reasons, his Honour does not say "If I took the view that the requirements of O.20 rr.1 and 7 were satisfied I would nevertheless dismiss this summons in the exercise of my discretion." However, if I be wrong in this, it is nevertheless apparent that his Honour's view that there was no question or issue proper to be tried as between the plaintiff and the appellant and the appellant and the third parties, inevitably meant that in exercising his discretion he excluded a factor of considerable weight. Had he accepted the view that the questions going to the allegedly defective condition of the concrete and the quantum of loss and damage suffered thereby, were questions proper to be tried as between relevant parties, that factor would have been of significance generally in relation to the exercise of the discretion and in assessing the weight to be accorded to the delay and expense to the plaintiff of a trial of those issues in association with the trial of the action.

It is to be noted also that in dismissing the summons in the exercise of his discretion the learned Judge had regard to his view that the claim in negligence was exotic and the alleged duty upon which it depended possibly not sustainable. His Honour expressed the opinion that the existence of the duty should be determined in separate proceedings. But if there be advantages in having the questions relating to the quality of the concrete delivered by Pioneer to Watkins and the quantum of loss and damage decided once and for all between the parties a direction that the determination of the issue as to the existence and extent of the alleged duty of the third parties may be dealt with in a hearing at which the plaintiff and the first and third defendant were not in attendance. Counsel for Watkins conceded that the exercise of a discretion adversely to Pioneer merely by reference to the allegedly exotic nature of the claim in negligence could not be supported, and no counsel for other respondents contended to the contrary. Except in a case where a claim in negligence was to be regarded as frivolous the hearing of an application under O.20 r.7 was not the occasion for a decision of decisive nature based on the so called exotic aspects of the claim.

Accordingly, there being questions and issues proper, in the relevant sense, to be tried as between the relevant parties within the meaning of O.20 r.7 namely, those concerning the alleged defects in the concrete supplied by Pioneer and used by Watkins and the extent of loss and damage flowing therefrom, it remained for the learned Judge to exercise his discretion. As is pointed out by my brother St. John the provisions of O.20 r.8 point the way for the management of the litigation in the manner most convenient in all the circumstances.

In this connection the nature of the questions and issues to be tried, their place in the total litigation, the desirability, as a matter of proportion, of having those questions and issues decided as between the parties at one hearing even at the cost of delay and inconvenience to the plaintiff, would have to be considered. As was said by Cotton L.J., a plaintiff is not to be embarrassed by the desire of the defendant to have the whole question of liability decided at once. His Lordship added, however, that that objection is to be met by the Judge when application is made for direction as to the proceedings. The ability of the trial Judge "to manage the litigation which is before him" would be a significant consideration. See the decision of the Full Court of the Federal Court in Faustman Bros. Pty. Ltd. v. Hans Traut N.T. G.7 of 1983, 12 April 1983 (unreported). Fairness to the defendant and other parties is also relevant. In this case the plaintiff entered upon litigation involving, amongst other matters the questions of the quality of the concrete supplied to it and the consequences thereof, of Ranger's responsibility for testing the concrete by itself or its contractors and advising the plaintiff of material deficiencies in the quality thereof. For its own convenience it joined Pioneer, merely in the alternative, as a defendant against whom relief in respect of the quality of the concrete is sought. The sheer volume of the evidence to be called on the relevant common issues adds to the importance of performing the task of elucidating the issues of breach, damages and other common issues once, and once only, if possible. No doubt directions for the trial of questions or issues "in such a manner" as to the Court or a Judge may consider proper, would comprehend directions for separate hearings of particular issues, where that was convenient. It would be beneficial that directions pursuant to O.20 rr.7 and 8 should provide for a fairly close management by the Court of the progress of the trial.

Accordingly the appeal must be allowed and the summons for directions remitted to the Supreme Court of the Northern Territory for further hearing.

The Court should therefore order that:

1. The appeal be upheld and that orders 1 and 2 of 29 October 1982, namely that the appellant's application for third party directions be dismissed and the appellant pay the costs of and incidental to the application for third party directions, be set aside.

2. The summons for directions be remitted to the Supreme Court of the Northern Territory for hearing in accordance with the principles adverted to by this Court.

3. Each respondent pay one eighth of the appellant's costs of the appeal.

4. The question of costs of the summons for directions before the Supreme Court of the Northern Territory be determined by that Court.

JUDGE2

I have had the benefit of reading the draft judgments of Smithers and St. John JJ. in this matter. I have come to the same conclusions as their Honours have reached.

In a matter of this nature I do not think that it would be beneficial for me to do more than express general agreement with the reasons of their Honours in their draft judgments, and mention what I regard as the essential factors.

I respectfully agree with Smithers J. that the proper way to apply order 20 rule 7(1)(b) is to read that rule as if the words "relating to or connected with the original subject matter and being substantially the same as some relief or remedy claimed by the plaintiff against the defendant" appeared after the words "relief or remedy" and the words "relating to or connected with the said subject matter and being substantially the same as some question or issue arising between the plaintiff and the defendant" appeared after the word "notice" where secondly appearing.

I agree that the learned trial Judge made the errors referred to in the judgment of Smithers J. and therefore, although the judgment was one involving exercise of the Judge's discretion as to a matter of practice or procedure, it is appropriate for this Court to express its own view. In my opinion the questions concerning the standard of the cement and of the concrete and whether any required tests had been properly carried out are of central importance. I consider, however, that in this complicated matter the Court should not endeavour to itself formulate any directions but should simply remit the matter to the Supreme Court of the Northern Territory for further consideration. I agree with the importance placed by St. John J. upon order 20 rule 8 which gives the trial Judge very wide discretion in determing the course of proceedings.

I would allow the appeal, set aside orders 1 and 2 of 29 October 1982 and remit the summons for directions to the Supreme Court of the Northern Territory for further consideration in accordance with the principles adverted to by this Court. I would order that each respondent pay one-eighth of the appellant's costs of the appeal and leave the question of the costs of the summons for directions to the trial Judge.

JUDGE3

I have had the advantage of reading the reasons for judgment of Smithers, J. and I generally agree with the reasoning therein, and I reach the same conclusion. However, as I differ in my approach to some of the issues raised in this appeal, I add some comments of my own.

The issues raised in the pleadings, the history and the rules referred to by the learned trial judge, whose order is the subject of this appeal, are set out in those reasons, and need not be reproduced here. I need to add to the relevant rules Order 20 rule 3, which is in the following terms:-
"The third party shall, as from the time of the service upon him of the notice, be a party to the action with the same rights in respect of his defence against any claim made against him and otherwise as if he had been duly sued in the ordinary way by the defendant."

I am also of the opinion that Order 20 rule 8 is significant in considering the issues raised by this appeal. That rule is in the following terms:-
"The Court or a Judge, upon the hearing of the application for directions, may, if it appears desirable to do so, give the third party liberty to defend the action, either alone or jointly with the original defendant, upon such terms as are just, or to appear at the trial and take such part therein as is just and generally may order such proceedings to be taken, pleadings or documents to be delivered, or amendments to be made, and give such directions as to the Court or the Judge appear proper for having the question and the rights and liabilities of the parties most conveniently determined and enforced and as to the mode and extent in or to which the third party shall be bound or made liable by the decision or judgment in the action."

The decision of the learned trial judge is attacked on a number of bases. First, it is said that, in his consideration of the relevance of Order 20 rule 1, he was in error and that he should have been guided only by the criteria laid down in Order 20 rule 7. Secondly, when his Honour laid emphasis on the strict legal meaning of "contribution and indemnity", he was ignoring the words in Order 20 rule 7(1)(b) ". . . or as to any other relief or remedy claimed in the notice by the defendant . . ." which are a significant addition to the third party rules as originally framed last century.

As to the first argument, I am not clear from reading his Honour's reasons what emphasis he gave the criteria set out in Order 20 rule 1, but it is my view that Order 20 should read as a whole and, if this was his Honour's purpose in referring to that rule, I see no error in it. If, however, his Honour was saying in his judgment that the third party notice, expanded by the draft statements of claim in relation to each of them which were before him, that such statements of claim did not bring the claim within Order 20 rule 1(1)(c), I am of the opinion that he fell in error because, in my view, the question or issue does relate to the same subject matter, for reasons which I will later give.

The relationship between Order 20 rule 1 and Order 20 rule 7 is that the former sets out the criteria for the issue of the third party notice and Order 20 rule 7 sets out the criteria to be applied when the judge dealing with the directions hearing is faced with the problem of deciding whether joint trials of questions or issues are, in the circumstances, in accordance with order 20 rule 8, to be conveniently determined.

The effect of Order 20 rule 3 is simply that there are now in the court, separate actions which, by the operation of subsequent rules, may be tried together in whole or in part, but if they are not, they proceed in the same way as an action commenced by a plaintiff against a defendant. The words "proper to be tried" in Order 20 rule 7(1)(b) emphasise a discretion in the court hearing the application for directions, but that discretion is one to be exercised having regard to the objects of the rules which have been judicially decided with impressive unanimity over the course of more than a century and are adequately and accurately summarised in Williams Supreme Court Practice Victoria, Volume 1, 2nd Edition at p. 1257 where this appears:-
"The object of the third party procedure is three-fold. First, to prevent the same question from being tried twice with possibly different results. Secondly, to prevent multiplicity of actions and to enable the Court to settle disputes between all the parties to them in one action. Thirdly, to saving the extra expense which would be involved by two independent actions."

The word "conveniently" in Order 20 rule 8 does not, in my view, refer to the convenience of the plaintiff, the defendant, or third parties, or lack of convenience to any of them. The convenience is that of the disposal of the questions or issues in the administration of justice, having regard to the resolution of those questions in accordance with the objects quoted above. However, embarrassment, delay or prejudice to the plaintiff may justify dismissal of the summons for directions; but the extent of that embarrassment, delay or prejudice has to be balanced against achievement of the objects of the rules quoted above.

I am of the opinion that the learned trial judge should have approached the problem in the following manner. It is clear that there is one question, the answer to which is of interest to and affects the rights and liabilities of all parties to the appeal and that question is -- was the concrete defective? If that question is answered in the affirmative, then the fourth respondent, against whom negligence and breach of contract based on the supply of defective cement for the making of the concrete is alleged, has an interest in the cause of the concrete being defective. That respondent also has an interest in showing that, if damages resulted from the supply of defective cement, such damages were increased by the alleged negligence of the second, fifth, sixth, seventh and eighth respondents in failing to test the concrete and alert or warn the appellant of the results of the test. It is in the interests of these respondents to show that, if damages are payable as a result of defective concrete being supplied, it was not their negligence which was responsible for the damages or part of them.

Against the eighth respondent, the appellant claims damages for negligence in failing to properly test the concrete and failing to promptly warn that the test showed the concrete was defective. Against the second respondent, who was also a defendant to the appellant's action, the appellant alleged breach of an implied term in a contract to the effect that that respondent would promptly and efficiently alert the appellant if tests on the concrete showed it to be defective and for negligence in not ensuring prompt and efficient testing and reporting of results showing defective concrete. Against the seventh respondent, a similar allegation of negligence to those referred to above was made by the appellant. Once the issue of damages is reached, all respondents have an interest in avoiding liability, and failing that, shedding all or part of their liability for damages.

Before proceeding to the judgment appealed from, it seems to me that, having regard to the common interest of all the parties in the question of whether the concrete was defective, and if so, what was the cause of it being defective, it is clear that the learned trial judge could easily have come to the conclusion that those questions were proper to be tried at a trial at which all parties appeared.

Consider the position if no question or issue is jointly tried, and the possible results of separate trials. If the appellant is held liable for the supply of defective concrete, it then has to produce evidence of defective concrete and the cause of the supply of defective concrete and the damages resulting on seven other occasions against each of the respondents, excluding the second. The appellant has to call the same witnesses as to all those issues in each action. Witnesses as to quantum, for example, who had impressed at one trial, may not be so regarded at the next. The respondent first proceeded against after liability was established in the appellant, would be in the position of being restricted in proving that the damage was not solely its responsibility and those corporations which it is suggested were also responsible, would not be represented or a party to the proceedings. With great restrictions on one's imagination, chaos can be envisaged. So too, can the utter defeat of the objects of the rules.

It was apparently argued before the learned trial judge that the claims of the appellant based on negligence were such that the pleading failed to allege a duty situation between the parties known to that branch of the law, and his Honour expressed the view that no cause of action was disclosed. The statements of claim before him had not been filed. No motion to strike out was possible until they had been, and then the principles enunciated by Barwick, C.J. in General Steel Inc. v. Commissioner for Railways (N.S.W.) and Others (1964-65) 112 C.L.R. 125 would have to be applied. Their stringency against striking out is well known.

His Honour's decision on this issue was premature and, if he regarded it as significant in the consideration of the application, he should have asked those who raised the argument, to proceed by way of motion to strike out after the statements of claim had been filed. On such a motion, various results are possible. But such a motion would determine whether or not the particular third party bringing the motion remained possibly liable for the claim brought against it. If the claim, or claims, were clearly frivolous, his Honour could have refused to make directions in respect to it, or them, but they do not have that character.

The relief claimed against the appellant was damages. The relief claimed against all respondents was damages. Those damages were, in each case, alleged to have flowed from the supply of defective concrete or failure to take steps in relation to the supply of defective concrete or the testing or reporting of such testing of defective concrete. The allegations made as to the cause of defective concrete being supplied or not being detected could result in all or some or none of the respondents being held liable for the full amount of damages of some part thereof. All liability or lack of it, hinges around one central issue. Although further pleadings, particulars and interrogatories may change the detail of this broad picture, it appears to me that it was a classic case for the "rights and liabilities of the parties most conveniently" being determined by a trial of those questions at which all parties appeared. However, in an appellate court, where discretion is vested in the court appealed from, what should be done is merely to express the guiding principles and remit the matter for further consideration by the trial judge. After the matter is remitted, as I propose it should be, it would appear to me that directions pursuant to Order 20 rule 7 would be more conveniently made after pleadings were closed, and an opportunity to test whether a cause of action existed against certain respondents could be decided. There may be questions raised, the resolution of which interests only some of the parties, and which would be more conveniently decided with those parties only appearing at the trial of them. It could well be that the duty situation relied upon to support the negligence claims, could possibly be separately decided, but other respondents wishing to shed some of their possible liability as to damages, may be interested in assisting the appellant to establish the duty situation necessary for it to succeed.

When the learned trial judge relied upon the strict legal meaning of "contribution and indemnity", as I have already referred to, his Honour omitted the expansion by the addition to the rule referred to above. Again I quote Williams, op. cit. at p. 1261, where the learned author points out that this addition "renders many of the reported cases decided on the meaning of 'contribution and indemnity' obsolete". If it was his Honour's intention to confine the third party notice because those words "contribution and indemnity" were used in the notice itself, in my view, he should have had regard to the draft statements of claim to determine whether the rules were satisfied and not simply relied upon the precise wording of the notice without regard to the substance of the third party claim.

For these reasons, I would propose that the matter be remitted to the Supreme Court to be determined in accordance with the principles adverted to herein. The appeal, therefore, should be upheld.

On the question of costs, I would order that each of the respondents pay one-eighth of the appellant's costs of this appeal. The costs of the directions hearing in the Supreme Court of the Supreme Court of the Northern Territory should be decided by that court, as what orders are made for such costs will be greatly influenced by the ultimate result of the directions hearing.