Port Waratah Coal Services Ltd v Avopiling (NSW) Pty Ltd

[2016] NSWSC 1832

Supreme Court

New South Wales

Medium Neutral Citation:	Port Waratah Coal Services Ltd v Avopiling (NSW) Pty Ltd [2016] NSWSC 1832
Hearing dates:	12 December 2016
Date of orders:	12 December 2016
Decision date:	12 December 2016
Jurisdiction:	Equity - Technology and Construction List
Before:	McDougall J
Decision:	Grant leave further to amend list statement.
Catchwords:	PRACTICE AND PROCEDURE – leave to further amend commercial list statement – question of whether leave should be granted – where granting of leave would cause detriment to other parties - balancing of competing considerations
Category:	Procedural and other rulings
Parties:	Port Waratah Coal Services Ltd (Plaintiff) Avopiling (NSW) Pty Ltd (First defendant) Menard Bachy Pty Ltd (Second defendant) Downer EDI Engineering Power Pty Ltd (Third defendant) Daracon Contractors Pty Ltd (Fourth Defendant) Great Lakes Reinsurance (UK) PLC UK Company No. 02189462 (Fifth defendant) Torus Insurance (UK) Limited UK Company No. 06447250 (Sixth defendant) Zurich Insurance Public Limited Company UK Company No. FC025710 (Seventh defendant) Starr Underwriting Agents Limited UK Company No. 02973661 (Eighth defendant) Catlin Syndicate Limited UK Company No. 02968384 (Ninth defendant) Infrassure Ltd Switzerland Identification No. CHE-109.526.444 (Tenth defendant) AXA Corporate Solutions Assurance RCS Paris 399 227 354 (Eleventh defendant) XL Insurance Company SE (formerly XL Insurance UK Company Limited (Twelfth defendant) Scor UK Company Limited UK Company No. 01334736 (Thirteenth defendant) AAI Limited (formerly Vero Insurance Limited) (Fourteenth defendant) QBE Insurance (Europe) Limited UK Company No. 01761561(Fifteenth defendant) Chaucer Corporate Capital (No. 3) Limited UK Company No. 05203226 (Sixteenth defendant)
Representation:	Counsel: D Miller SC / N Simpson (Plaintiff) R Visckovich (Solicitor) (First defendant) M Ashhurst SC (Second defendant) N A Nicholls SC / J Wright (Third defendant) R Cheney SC (Fourth defendant) P Braham SC / J Clark (Fifth to sixteenth defendants)   Solicitors: Herbert Smith Freehills (Plaintiff) Dentons (First defendant) HWL Ebsworths (Second defendant) Norton Rose Fulbright (Third defendant) Keystone Lawyers (Fourth defendant) Curwoods Lawyers (Fifth to sixteenth defendants)
File Number(s):	2014/172754

Judgment   (ex tempore – revised 13 december 2016)

1. HIS HONOUR:    The issues in these proceedings are complex. They arise out of the desire of the plaintiff (PWCS) to enlarge its coal loading terminal on Kooragang Island.

2. It engaged the first defendant (Avopiling) to design and construct an aspect of the works. Avopiling subcontracted some of its responsibilities to the second defendant (Menard Bachy).

3. PWCS says that the works were defective, and that it suffered losses of the order of $37 million. It sued Avopiling and Menard Bachy to recover that sum.

4. Menard Bachy suggested that the damage (if any) was either caused by the third and fourth defendants (respectively Downer and Daracon) who, in joint venture (DDJV) carried out excavation works. In those circumstances, PWCS joined Downer and Daracon as joint defendants.

5. PWCS, or more accurately its parent company, held a contractors all risk policy from the fifth to sixteenth defendants (the insurers). It made claim upon that policy. The insurers have denied liability.

6. The factual and legal issues are extremely complex, and I shall not begin to describe them in these reasons, which after all concern only (if that is the correct word) PWCS’s application for leave further to amend its list statement.

7. The amendments that are opposed are sought against the insurers. Consideration of those amendments must be undertaken on the basis that this is the last week of term in 2016, and that the proceedings have been fixed for hearing (with eight weeks provisionally allotted) in mid February 2017.

8. As the claim was formulated against the insurer, it was limited to a sum of $11.9 million. The claim so formulated was said to reflect the fact that the costs that were recoverable under the policy were the costs of repair, replacement and mitigation. As the policy is worded, those costs were subject to various internal sub-limits of liability.

9. However, it is the case for PWCS that, as a result of various things including amendments to its list response by Menard Bachy and (I infer) matters discussed at mediation, PWCS has become aware that the claim against the insurers may be pressed on different bases and for the full sum of $37 million. Not surprisingly, that attempt to treble the amount of the claim has caused the insurers some concern.

10. I referred to an inference as to matters arising out of mediation. I do know that there was a mediation last month. I do know (because the parties are here today) that they were unable to resolve their differences at that mediation. The evidence referred to the fact of mediation and to the solicitors' reconsideration of the matter during and after the mediation but, very properly, did not say what if anything it was that happened in the mediation that prompted the reconsideration. Nonetheless, the inference to which I have referred is available.

11. The insurers oppose the amendments. They say that if leave is granted, they will need to procure their own expert evidence, and that they will not be able to do so before the commencement of the hearing. In those circumstances, they say (and taking into account that there had been one hearing date vacated already), PWCS should be held to the case that it has presently pleaded.

12. PWCS offers an explanation for the timing of the application. That explanation does tie it to the two matters to which I have referred: Menard Bachy's further amendment of its list response, and (temporally at least) the mediation. I am satisfied that it was further reconsideration prompted by those matters that caused PWCS to form the view (which has not been said to be untenable) that its claim may be properly expressed in the way that it now seeks to do. I am satisfied that PWCS has acted promptly to draw the new claims to the attention of the insurers and to seek their consent to the amendment. To put it another way, I am satisfied with the explanation for the delay in seeking the leave further to amend.

13. The amendments proposed what Mr Miller of Senior Counsel, who appeared with Ms Simpson of Counsel for PWCS, called the second claim and a third claim. (The first claim was the "interim claim" for repair, replacement, mitigation and the like in the sum of $11.9 million.)

14. Menard Bachy says that DDJV carried out excavation works. Menard Bachy asserts that those excavation works caused vibration which in turn damaged the insured works. Menard Bachy suggest that it was the vibration that induced damage that caused or contributed to the flooding that lies at the heart of PWCS's claim. The second claim seeks to bring that home to the insurers, on the basis that it is a claim for damage to the insured works and hence that it is claimable in full.

15. The third claim relates to what had been understood to be defects in the works, as a result of which water was able to enter into the work area and cause the flooding. One of the experts, a Mr Essler (retained by Menard Bachy), has formed the view that this was not a design defect. He says that it would have been possible for the water exclusion wall to function properly even if the assumed construction gaps were in fact present. Mr Essler appears to be alone in that opinion. Nonetheless, it cannot be excluded for that reason only.

16. PWCS says again that this amounts to damage to the insured property and thus that the full sum of $37 million is claimable.

17. The insurer to date has not adduced any evidence. Specifically, it has not engaged expert witnesses. As to the liability case that is presently made, the insurer in effect relies on the plaintiff's evidence to support its denial of liability. And as to quantum, the insurer has taken the view that because of the applicable sub-limits, any attempt to adduce evidence on quantum is likely to produce a benefit that is less than the amount expended in obtaining it. That step at least seems to be reasonable.

18. Mr Braham of Senior Counsel, who appeared with Mr Clarke of Counsel for the insurers, submitted that if the amendments were allowed, at least two things would happen. First, the insurers would have to become far more involved than hitherto they had been in the expert evidence on liability. And second, he submitted, the insurers would have to become far more involved than hitherto they had been in the quantum question.

19. The second point may be conceded. It does seem to me that the formulation that is sought is of such magnitude that the reasons that the insurers have taken for not investigating quantum in anything more than a reasonably cursory way are no longer valid. However, if that were the only problem, it could be dealt with perhaps by postponing the question of quantum until the other issues between the parties had been resolved.

20. Nonetheless as Mr Braham submitted, that is not the only point of concern to the insurers. There are two competing considerations. The first is that the insurers are entitled to have an adequate opportunity to consider the revised case. That I would think may very well mean that they should have the benefit of expert advice. The second question however is whether they would wish to adduce expert evidence of their own. Although Mr Braham suggested that this might be likely, I have some difficulty in seeing how further expert evidence would be likely to do anything other than confuse the question. I say that because (as one might expect) both the issues relating to vibration and the issues relating to what PWCS calls the "piping failure" (the subject of its third claim) have been done to death in numerous reports by many experts, and have been discussed in conclave by those experts leading to the production of a joint report.

21. It is I suppose possible that yet another expert might come in and reach a conclusion of such radical novelty that all the existing experts would be forced to re-evaluate their positions. Whether that is a real rather than a fanciful prospect is a different matter.

22. Nonetheless, even if the insurers decide ultimately not to adduce their own expert evidence (again leaving aside the question of quantum), nonetheless as I have said they need to take advice on the claims as they are now brought against them, with a view to formulating their own strategy and their own approach to cross-examination of the experts who, the Court has been assured, will be giving evidence.

23. If the insurers decide to adduce their own expert evidence there is a real likelihood that the trial could not proceed. On the other hand, they have not said that they wish to do so. On the contrary, their case is that they do not yet even know that they wish to do so.

24. From the Court's perspective, if the hearing were to be vacated, it is something that should be done sooner rather than later. As against that, this is as I have said the last week of term, and it is unlikely any more effective use of the eight weeks could be made now than it could be in the first week of the new term.

25. In circumstances where the parties have been gearing up for the trial, and hope for it to proceed, I would be very loathe to vacate the date unless persuaded that it was absolutely necessary. I am not yet so persuaded.

26. In circumstances where the claims the subject of the proposed amendments reflect arguments that have been mounted against PWCS by the defendants (I should have said that other defendants wish to follow Menard Bachy's lead, and plead the same matters against PWCS so as to give rise to the same issues), and where if the defendants' views are correct, PWCS may indeed have a justifiable claim for the full sum of $37 million against the insurers (and may miss out against the other defendants, having regard to one of the arguments), it would be a very serious injustice indeed to shut PWCS out of that claim. On the other hand, to permit PWCS to advance that claim (in either its second or its third version) without accommodating the position of the insurers would do them an equally serious injustice.

27. Balancing those considerations as best I can, and accepting that whatever I do is going to be unsatisfactory from the perspective of the parties or the Court (or perhaps the parties and the Court), I think that the better course is to give PWCS the leave it seeks and to stand the matter over for directions early in the new term.

28. If the insurers are able to persuade me on that date that, having regard to the amendments, they need to adduce expert evidence and cannot do so within the existing time frame for the hearing, then it is likely that the hearing will be vacated. I do however wish it to be clear that any such application would have to be based upon clear evidence as to what is required by way of expert assistance and why it cannot be obtained within the current framework for hearing. And I wish to make it clear also that in my view it would appear to be the case, as Mr Miller submitted, that the expert issues at least on liability have been done to death already by the horde of experts that is to give evidence.

29. I add, as to quantum, that there may be some benefit in deferring that issue if (for example) it appears at the conclusion of all other issues that some damages model other than that presently under consideration requires to be costed. However, since that is no more than speculation at this point, it should not be assumed that it will be a view to which I will adhere in the New Year.

30. For those reasons, the leave to amend that is sought by PWCS, by Downer, and by Daracon should be granted with appropriate orders for costs thrown away.

31. The matter should be adjourned to a date early in the new term for directions before me, with directions for affidavits in the event that some application is to be made as to the trial date.

32. The parties should submit an agreed form of orders to my Associate to give effect to those reasons.

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Decision last updated: 16 December 2016