Rock JV Pty Ltd v Thiess Pty Ltd
[2020] WASC 324
•9 SEPTEMBER 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: ROCK JV PTY LTD -v- THIESS PTY LTD [2020] WASC 324
CORAM: HILL J
HEARD: 27 AUGUST 2020
DELIVERED : 9 SEPTEMBER 2020
FILE NO/S: CIV 1439 of 2015
BETWEEN: ROCK JV PTY LTD
Plaintiff
AND
THIESS PTY LTD
Defendant
(BY ORIGINAL ACTION)
THIESS PTY LTD
Plaintiff by counterclaim
AND
ROCK JV PTY LTD
First Defendant by counterclaim
DARRYL CARLO FERRARA
Second Defendant by counterclaim
(BY COUNTERCLAIM)
Catchwords:
Practice and procedure - Security for costs - Previous consent orders for security for costs - Whether defendant entitled to security for costs of experts which were within contemplation of the parties at the time of previous orders but where no allowance made - Appropriate security for costs for matters not within contemplation of the parties at time of previous orders - Apportionment of costs between related proceedings and counterclaim
Legislation:
Corporations Act 2001 (Cth), s 1335
Rules of the Supreme Court 1971 (WA), O 25 r 1
Result:
Further security for costs of $440,000 ordered
Category: B
Representation:
Original Action
Counsel:
| Plaintiff | : | Mr M D Howard SC & Ms P A Honey |
| Defendant | : | Mr M N Solomon SC & Mr M J Sims |
Solicitors:
| Plaintiff | : | Hopgoodganim Lawyers (Perth) |
| Defendant | : | Corrs Chambers Westgarth |
Counterclaim
Counsel:
| Plaintiff by counterclaim | : | Mr M N Solomon SC & Mr M J Sims |
| First Defendant by counterclaim | : | Mr M D Howard SC & Ms P A Honey |
| Second Defendant by counterclaim | : | Mr M D Howard SC & Ms P A Honey |
Solicitors:
| Plaintiff by counterclaim | : | Corrs Chambers Westparth |
| First Defendant by counterclaim | : | Hopgoodganim Lawyers (Perth) |
| Second Defendant by counterclaim | : | Hopgoodganim Lawyers (Perth) |
Case(s) referred to in decision(s):
Brundza v Robbie (No 3) (1952) 88 CLR 171
Construction Industries Australia Ltd (in liq) v WFI Insurance Ltd [2016] WASC 404
EWC Payments Pty Ltd v Commonwealth Bank of Australia [2015] VSC 53
Flujo Holdings Pty Ltd v Merisant Company [2019] FCA 594
Go Exports Pty Ltd v Livestock Shipping Services Pty Ltd [2004] WASC 182
Grace Christian Chapel v Canaan Holding Pty Ltd (Security for Costs) [2019] VSC 5
Jebb v Superior Lawns Australia Pty Ltd [2019] WASC 121
Norilya Minerals Pty Ltd v Easterday [2009] WASC 191
Oztech Pty Ltd v Public Trustee of Queensland (No 3) [2016] FCA 253
HILL J:
Introduction
On 1 July 2020, the defendant filed an application seeking further security for its costs of the proceedings in the sum of $1.25 million. Following receipt of the plaintiff's submissions in opposition to the application, the defendant filed supplementary submissions which significantly revised the amount sought. The defendant now seeks $740,000 as further security for costs. The security is sought in relation to three matters: first, the consideration of further discovery provided by the plaintiff this year; second, additional legal costs associated with the preparation of expert evidence; and third, the disbursement costs of its experts, both the costs incurred to date and anticipated future costs.
In support of its application, the defendant relies upon three affidavits of Spencer Edward Flay, a partner of the defendant's solicitors, filed 7 May 2019, 8 August 2019 and 1 July 2020.
The application is opposed by the plaintiff on two primary grounds. First, particularly in respect of the past disbursement costs of the experts, these costs were within the contemplation of the parties at the time the previous order for security for costs was made in August 2019 and the defendant cannot now seek to 're‑open' that agreement. Second, there is overlap between the amount of costs for preparation of expert evidence allowed previously and the amount sought by this application. The plaintiff contends that sufficient security has already been provided for these costs. The plaintiff concedes that it is appropriate that some further security be provided for future disbursement costs of the experts and for discovery, but does not accept that the amounts claimed are appropriate. The plaintiff did not file any affidavits in opposition to the application.
The parties agreed that the issues to be determined were whether the amounts now sought by the defendant were for work that was contemplated in August 2019 and therefore should be considered to be the subject of the previous orders for security for costs and, if not, what further security should be ordered.
For the reasons that follow, I consider that the amounts sought are not covered by the court's previous orders and that the plaintiff should provide further security for costs in the sum of $440,000.
Background to proceedings
These proceedings were commenced by the plaintiff in March 2015.
These proceedings arise out of a contract entered into between the parties pursuant to which the plaintiff agreed to supply materials it had quarried to the defendant for use in works being carried out at the Wheatstone project, a very large natural gas plant that was, at the time, being constructed at Onslow in the north‑west of Western Australia.
It is not in issue between the parties that materials were delivered under the contract at a later time than originally specified. The plaintiff seeks costs arising from this delay which it says are recoverable under the contract. In addition, the plaintiff contends that certain directions given or emails issued by the defendant constituted variations to the contract. In the alternative, the plaintiff contends that the defendant's conduct was a breach of contract and seeks damages.
The defendant denies that it is liable to the plaintiff in any amount. The defendant contends that it was entitled under the terms of the contract to defer the date and quantities of delivery of materials. In addition, the defendant says that any increased costs were, at least in part, attributable to a lack of stockpiling capacity at the plaintiff's quarry and is not a cost for which it is liable.
The defendant has also filed a counterclaim which asserts that prior to entry into the contract, the plaintiff made certain representations as to its stockpiling capacity at the quarry and the approvals it had in place. The defendant alleges that these representations were misleading or deceptive contrary to s 18 of the Australian Consumer Law. The damages sought by the defendant are, in effect, any amount it is ordered to pay the plaintiff.
On 31 July 2019, Justice Vaughan and I convened a strategic conference in relation to both this matter and its related proceeding CIV 2511 of 2016, which I summarise below at [15] ‑ [18]. On that date, orders were made listing both matters before me for a 20 day trial commencing 3 June 2020.
In December 2019, following an unsuccessful mediation, I made orders requiring the plaintiff to file any further or supplementary expert reports (from its technical expert and delay or quantity surveyor expert) and an amended substituted statement of claim by 31 January 2020 and 7 February 2020 respectively. This did not occur.
As a consequence of the COVID‑19 pandemic, I made orders on 14 April 2020 vacating the trial and provisionally relisting it to commence on 19 April 2021. On the same date, I made orders for the plaintiff to file and serve any application for leave to rely on further expert evidence and to amend its statement of claim by 15 May 2020.
On 18 May 2020, the plaintiff filed these applications. Supporting affidavits were filed between 18 May and 28 May 2020. The applications were listed for hearing on 22 and 23 June 2020. On 19 June 2020, I made orders vacating the hearing and granting the plaintiff leave to file an amended statement of claim and to file and serve expert reports of its technical expert and its delay and quantity surveyor expert.
CIV 2511 of 2016
In September 2016, the plaintiff commenced separate proceedings against N.V. Besix S.A. and the defendant, trading as Best Joint Venture (Best JV). Those proceedings concern a separate contract entered into between the parties pursuant to which the plaintiff agreed to supply to the Best JV materials quarried by the plaintiff for use in the construction of a breakwater and material offloading facility at the Wheatstone project.
It is not in issue between the parties that materials under this contract were also delivered at a later time than originally specified. The plaintiff seeks costs which it says are recoverable under the contract for this delay. In the alternative, the plaintiff contends that the defendants' conduct is a breach of contract and seeks damages. The statement of claim also seeks damages in respect of the recourse by the Best JV to a bank guarantee, which the plaintiff says it was not entitled to convert.
The defendants deny that they are liable to the plaintiff in any amount. The defendants contend that they were entitled under the terms of the contract to defer the date and quantities of delivery of materials and say that any increased costs were, at least in part, attributable to a lack of stockpiling capacity at the plaintiff's quarry.
Each of the defendants have filed a counterclaim concerning certain representations the plaintiff is said to have made prior to entry into the contract. These representations are said to be misleading or deceptive contrary to s 18 of the Australian Consumer Law. As is the case in these proceedings, the damages sought are, in effect, any amount they are ordered to pay the plaintiff.
Previous orders for security for costs
On 11 February 2016, Registrar Whitby made a number of orders by consent. Relevantly, order 4 of these orders provided that:
The plaintiff provide security for the defendant's costs of defending the plaintiff's claim against it until the listing of this matter for trial, by depositing the sum of $500,000 into a controlled monies account controlled by the plaintiff's solicitor.
It is clear from the evidence before me that this order was made following a significant exchange of correspondence between the parties.[1]
[1] Affidavit of Spencer Edward Flay filed 7 May 2019 [10] – [11], 'SEF5' – 'SEF20'.
On 22 August 2019, following the defendant filing an application seeking additional security for costs in the amount of $500,000, an affidavit in support of the application and submissions, I made orders by consent that the plaintiff provide 'additional security (additional to the security the subject of orders of the court on 11 February 2016) in the further sum of $350,000'.
There is no evidence before me as to the basis upon which these orders were agreed. I note that in the table of costs in the affidavit filed in support of the application, there is no reference to the disbursement costs of the defendant's experts, although the estimated legal costs associated with the preparation of responsive expert evidence is included.[2] The submissions specifically noted that the estimates set out in the affidavit concerned the legal costs and that no allowance had been made for the disbursement costs of the experts.[3]
[2] Affidavit of Spencer Edward Flay filed 8 August 2019 [16].
[3] Defendant's submissions filed 8 August 2019 [23].
On 19 June 2020, I ordered that the plaintiff provide security for costs of $100,000 on account of the defendant's costs thrown away by reason of amendments made by the plaintiff to its statement of claim and the further expert evidence that had been filed by the plaintiff at that time. This amount was ordered to be held separately to the other amounts.
That is, prior to this application being brought, the plaintiff has paid $850,000 into an account as security for the defendant's costs of defending the claim and $100,000 as security for the defendant's costs thrown away.
Legal principles governing application
The defendant relies on s 1335(1) of the Corporations Act 2001 (Cth) and in the alternative O 25 r 1 of the Rules of the Supreme Court 1971 (WA) in support of its application.
The legal principles governing the application were not in dispute between the parties.
Relevantly, in respect of an application for additional security for costs, it was agreed that this does not provide an opportunity for a defendant to 'start again' in relation to its assessment of costs.
In determining any quantum of security, the order is not intended to be a complete indemnity for the costs likely to be incurred by the defendant.[4] The Court does not undertake a precise mathematical calculation of the costs but undertakes a broad brush assessment having regard to the information before it.[5] The court's task is to consider what a reasonable estimate of the defendant's likely taxable costs might be.[6]
[4] Brundza v Robbie (No 3) (1952) 88 CLR 171, 175; Grace Christian Chapel v Canaan Holding Pty Ltd (Security for Costs) [2019] VSC 5 [38]; Go Exports Pty Ltd v Livestock Shipping Services Pty Ltd [2004] WASC 182 [39].
[5] Flujo Holdings Pty Ltd v Merisant Company [2019] FCA 594 [22] and the authorities there cited by O'Bryan J.
[6] Construction Industries Australia Ltd (in liq) v WFI Insurance Ltd [2016] WASC 404 [45]; Jebb v Superior Lawns Australia Pty Ltd [2019] WASC 121 [219].
In Norilya Minerals Pty Ltd v Easterday,[7] Le Miere J discussed the circumstances in which the court will consider a variation to consent orders. First, it is necessary to consider whether the consent order evidences a contract between the parties or the formulation of an order which can be made without argument.[8] Second, if the court accepts that it can vary the order, the defendant must show there is good reason to do so.[9] Le Miere J stated:[10]
It is in the public interest that the court should discourage parties from resiling from agreements by varying consent orders except in circumstances which render it unjust to hold the parties to the agreement. It is not in the public interest to enable a defendant to secure a plaintiff's agreement to an amount of security for costs and having got that to then come back to the court to try and vary it to increase the amount, unless the circumstances demonstrate that there are changed circumstances or other good reason why it would be unjust not to vary the order.
[7] Norilya Minerals Pty Ltd v Easterday [2009] WASC 191.
[8] Norilya Minerals Pty Ltd v Easterday [75].
[9] Norilya Minerals Pty Ltd v Easterday [76].
[10] Norilya Minerals Pty Ltd v Easterday [78].
As was noted by Cameron J in EWC Payments Pty Ltd v Commonwealth Bank of Australia, estimating the costs to be incurred in defending proceedings is an inexact science and frequently, estimates of costs prepared by experienced practitioners ultimately turn out to be inadequate.[11] However, it is not in the interests of a 'just, efficient, timely and cost-effective resolution' of issues for courts to revisit orders for security for costs that have previously been made.[12] Her Honour went on to state:[13]
Those orders were made by this court on responsible estimates by experienced practitioners and based on the best available information at the time (necessarily with the limitations of trying to predict the future). This is not to say that there may conceivably be instances where it is appropriate to revisit previous orders for security for costs in the absence of an appeal of such orders. Ordinarily the court would not allow a party to revisit past orders for costs (absent an appeal), and I do not see any sound reason for departing from that approach in this case.
[11] EWC Payments Pty Ltd v Commonwealth Bank of Australia [2015] VSC 53 [72].
[12] EWC Payments Pty Ltd v Commonwealth Bank of Australia [75]; See also Oztech Pty Ltd v Public Trustee of Queensland (No 3) [2016] FCA 253 [41] - [46].
[13] EWC Payments Pty Ltd v Commonwealth Bank of Australia [75].
Parties' submissions
Defendant's submissions
Senior counsel for the defendant submitted that, in considering this application, the court should consider which of the following four categories applies to the work for which security is sought:[14]
Category One - work expressly covered by the estimates and included in the calculation of the quantum of security sought in August 2019;
Category Two - work not expressly covered by the estimates underpinning the orders of August 2019 but that the defendant knew or must have known would be required, and which was expressly excluded from the quantum of security sought;
Category Three - costs thrown away by reason of the amendments to the statement of claim and further expert evidence filed;
Category Four - new work that was not in the contemplation of the defendant in August 2019.
[14] ts 241 – 242.
The defendant submitted that its present application for additional security was for work within categories two and four. That is, the defendant was not attempting to re‑visit or top‑up the security for costs that had previously been ordered by the court (categories one and three).
Senior counsel for the defendant submitted that the disbursement costs of the experts incurred to date were in category two. He emphasised that it was clear from the affidavit and submissions filed before consent orders were made in August 2019 that the application did not include the disbursement costs of the experts. The evidence of Mr Flay filed in support of the present application was that, at that time, he was unable to estimate the costs. In these circumstances, senior counsel submitted that I should exercise my discretion to grant security for these costs.
In respect of the security sought for future disbursement costs of the expert and in relation to the further discovery that has been provided, he contended that these costs were in category four as these costs could not have been anticipated in August 2019. For this reason, he submitted that security should now be provided in respect of these matters.
The defendant acknowledged that there was overlap between these proceedings and CIV 2511 of 2016 and that the defendant had applied a discount of 30% to its estimated costs to reflect the overlap. The defendant also acknowledged that it would be appropriate to discount the fees by 20% for the counterclaim in these proceedings and by a further 40% (in respect of legal costs) to reflect the recoverability of the costs.
Plaintiff's submissions
The plaintiff did not dispute that the defendant was entitled to security for its costs of the proceedings. This was reflected by the plaintiff's previous agreements to provide security of $850,000 for the proceedings and $100,000 for costs thrown away. However, senior counsel for the plaintiff contended that the defendant could not now revisit the amount of security that was the subject of the previous consent orders. He submitted that as at August 2019, the defendant knew that it would incur disbursement costs for its experts and that, accordingly, this amount should be considered to be within the amount ordered. The plaintiff emphasised that the defendant had not sought to reserve its position and contended that the defendant was attempting to revisit costs which formed part of the second tranche of security ordered on 22 August 2019.
Senior counsel for the plaintiffs submitted that the only additional matters for which security should be provided, adopting the categories in [31] above, were matters falling within category four. In this regard, the plaintiff accepted that additional security should be provided for the discovery of additional documents, the future disbursement costs of the experts, and some additional legal costs for the supplementary expert reports filed by their experts this year. However, the plaintiff contended the quantum sought was excessive.
In respect of the overlap between these proceedings and CIV 2511 of 2016, the plaintiff submitted that an apportionment of 40 to 50% of costs for these proceedings was more appropriate[15] and that a further discount of 20 to 25% for the counterclaim should be applied.[16]
[15] Plaintiff's submissions [32].
[16] Plaintiff's submissions [35].
Disposition
Effect of consent orders
It is clear from the consent orders of Registrar Whitby that the parties agreed that security for costs of $500,000 was to cover the costs of the defendant until entry for trial.
The position in respect of the August 2019 consent orders is less clear. It is clear that the defendant sought a higher amount of security and that the parties ultimately agreed that a lower amount be provided. For this reason, I accept that these orders evidence a contract between the parties. The question for my determination is the proper construction of this contract and, in particular, its subject matter. This question falls to be determined by the objective theory of contract; that is, what a reasonable person would understand the terms of the contract to mean.
In considering the proper construction of the consent orders, I have taken into account the background and context in which the orders are to be construed. This context includes the following:
(a)orders had been made for the defendant to file responsive expert evidence in four disciplines and it was likely that substantial disbursement costs would be incurred for the expert reports;
(b)at that time, the plaintiff had not filed all of its expert evidence;
(c)the affidavit filed by the defendant in support of its application for security for costs did not include any allowance for the disbursement costs of its experts;
(d)the submissions filed by the defendant specifically noted that the security sought was for its legal costs;
(e)the length of the trial had increased from 5 days to 20 days.
In my view, the consent orders made in August 2019 should be construed in accordance with the position contended by the defendant. I consider that a reasonable solicitor would have understand the terms of the August 2019 orders to mean the security was provided for the legal costs of the defendant until the end of trial which did not include the disbursement costs of the experts. A reasonable solicitor would have consented to these orders to prevent an interlocutory argument as to what security for costs should be provided for a 20 day (as opposed to a five day) trial.
For this reason, I do not accept that the present application of the defendant is an attempt to revisit, re‑open or vary these orders; the disbursement costs of the defendant's experts were not the subject of the application. While the consent orders did not expressly reserve the defendant's position to seek further security, in the circumstances of this case while that would have been preferable, I do not consider that this was required. This is because it is clear from the affidavit evidence and submissions filed on behalf of the defendant, prior to the consent orders being made, that these costs did not form part of the agreement.
In the circumstances of this case, given the number of experts that are required to file responsive reports and the likely costs to be incurred, I consider it would be unjust for the plaintiff not to have to provide security for the disbursement costs of the defendant's experts.
Overlap between proceedings
Both parties accepted that the estimated costs of the plaintiff should be discounted to take account of CIV 2511 of 2016 as well as the defendant's counterclaim. The only disagreement was the extent of the discount.
I consider that while similar issues are raised in both proceedings, these proceedings raise further issues for consideration, namely the alleged variations of contract. For this reason, I consider that an apportionment between the proceedings of 60% (for these proceedings) to 40% (for CIV 2511 of 2016) is appropriate.
In respect of the counterclaim, the plaintiff accepts that a discount of 20% should be applied, which I accept.
I now turn to consider the reasonable amount of the likely taxable costs of the matters the subject of this application.
Additional discovery
The evidence before me is that since 10 February 2020, the plaintiff has provided significant additional discovery (approximately 18,888 documents across four tranches).[17] On 18 June 2020, the plaintiff filed a further affidavit of discovery which produced for inspection an additional 12,248 documents.
[17] Affidavit of Spencer Edward Flay filed 1 July 2020 [52].
The plaintiff conceded it was appropriate that further security be provided for this discovery but contended that the amount sought of $31,000 was excessive. In my view, the concession was appropriate.
The defendant estimates that its costs of considering these additional documents will be approximately $95,000. These costs should be discounted by 40% (to take account of the related proceedings) and then by 20% (for the counterclaim). The discounted figure is $45,600. The plaintiff accepts that this should be further discounted (by 40%) for recoverability.
Adopting a broad brush approach and considering what might be a reasonable estimate of the likely taxable costs of the inspection of these documents, I consider that it is appropriate that security be provided in the amount of $25,000 for the additional discovery.
Responsive expert evidence
In relation to the disbursement costs of the experts, I note that the defendant proposes to call four experts: a technical expert, a delay expert, a quantity surveyor expert and a quantum expert. The orders of the court require the experts to participate in an expert conclave and prepare a joint expert report. It is likely that each of the experts will attend and give evidence at trial.
The evidence before me is that the estimated costs of the experts (both past and future but excluding the costs thrown away by reason of the plaintiff's amendments to its claim) are approximately $860,000.[18]
[18] Affidavit of Spencer Edward Flay filed 1 July 2020 [64] – [66].
This amount should be discounted by 40% (to take account of the related proceedings) and then by 20% (for the counterclaim). This discounted figure is $412,800. Adopting a broad brush approach and considering what might be a reasonable estimate of the likely taxable costs of the experts, I consider that it is appropriate for security to be provided in the sum of $375,000 for the disbursement costs of the expert reports (both past and future costs).
In relation to the costs of the defendant's solicitors and counsel in considering the additional reports, the second affidavit of Mr Flay sworn 8 August 2019 contemplated that there would be solicitors' costs in the preparation and finalisation of the defendant's expert evidence. While I accept that some further security should be provided to take account of the additional or supplementary expert reports that have been filed by the plaintiff, I do not consider that the amount sought of $104,000 is appropriate. It is not clear on the evidence before me whether any of this amount duplicates the costs sought by the plaintiff on the previous occasion.
In my view, adopting a broad brush approach, it is appropriate that the plaintiff provide to the defendant security of $40,000 for the additional work arising from the filing of these expert reports.
Conclusion
In all of the circumstances, I consider that it is appropriate that the plaintiff provide further security to the defendant in the amount of $440,000. This will provide the defendant with security of approximately $1.29 million for its costs of these proceedings, excluding both the related claim and the counterclaim. While I accept that it is likely that the defendant's costs will be significantly more than this, I consider this is a reasonable estimate of the defendant's likely taxed costs and disbursements of these proceedings, excluding the counterclaim.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MG
Research Orderly to the Honourable Justice Hill9 SEPTEMBER 2020
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