State of Tasmania v Leighton Contractors Pty Ltd

[2004] TASSC 17

[2004] TASSC 17

CITATION:              State of Tasmania v Leighton Contractors Pty Ltd [2004] TASSC 17

PARTIES:  STATE OF TASMANIA

LEIGHTON CONTRACTORS PTY LTD

(ACN 008 893 667)

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  458/2002
DELIVERED ON:  11 March 2004
DELIVERED AT:  Hobart
HEARING DATE:  10 March 2004
JUDGMENT OF:  Cox CJ

Edited edition of reasons for judgment

CATCHWORDS:

REPRESENTATION:

Counsel:
             plaintiff:  G J Digby QC, R J Manly SC
             defendant:  P Vickery QC, G L Sealy
Solicitors:
             plaintiff:  Director of Public Prosecutions
             defendant:  Dobson Mitchell & Allport

Judgment  Number:  [2004] TASSC 17
Number of paragraphs:  19

Serial No 17/2004
File No 458/2002

STATE OF TASMANIA v
LEIGHTON CONTRACTORS PTY LTD (ACN 008 893 667)

RULING  COX CJ

11 March 2004

1. This action is listed for hearing on 19 April next.

Background

1. This proceeding arises out of a contract entered into on 24 June 1999 (called the "project deed"), between the State of Tasmania, by its department, the Department of Infrastructure Energy and Resources ("the State") and Leighton Contractors Pty Ltd ("Leightons"), pursuant to which Leightons as the contractor was to design, construct and maintain for 10 years 13.65 kilometres of new highway to comprise part of the Bass Highway comprising two sections called the Westbury By‑pass and the Hagley By‑pass.

1. The Hagley By‑pass section of the project required the realignment of the highway to bypass the town of Hagley. This section of the new highway passed through a sensitive area of cultural landscape known as the "Hagley Mill Cultural Landscape". Hagley House is also situated within the Hagley Cultural Landscape adjacent to the route of the new highway at chainage 20140. It is an historic homestead built in 1826.

1. It is the case of the State that, because of the sensitive nature of the area near Hagley House, the project deed paid particular attention to minimizing the potentially detrimental impact of the new highway which was to bisect the landscape. The environmental documents which were incorporated into the project deed (known as the Development Proposal and Environment Management Plan or the "DPEMP"), the planning permits and the provisions of the project deed itself, required the construction of the Hagley By-pass to be "in cut" below natural surface level ("NSL") opposite Hagley House.

1. Leightons however prepared design documentation and between January and May 2000 proceeded to construct the Hagley By-pass in front of Hagley House 0.856 metres above NSL in fill.

1. On 15 November 2000 the principal, by its representative, Mr Holland ("the principal's representative") directed Leightons to proceed with the final design and construction of the Hagley By-pass in front of Hagley House 1.5 metres below NSL in cut.

1. The nub of the dispute is that Leightons have claimed that the direction from the principal's representative dated 15 November 2000 to place the relevant portion of the Hagley By-pass in cut amounted to a Change under the provisions of the project deed which ought to be valued and paid for by the State in accordance with the compensation provisions of the project deed. However, the position of the State is that the direction was no more than a direction to Leightons to comply with the requirements of the project deed which specified that the highway in front of Hagley House was to be "in cut".

1. The relief sought by the State is a number of declarations to the following effect:

AA declaration that the design documentation submitted to the principal's representative by the defendant on or about 17 September 1999 which detailed the Hagley By-pass in front of Hagley House to be 1.24 metres above NSL in fill was not in accordance with the project deed;

BA declaration that the direction of the principal's representative by letters dated 13 November 2000 and 15 November 2000 did not constitute any change in design documentation pursuant to cl4.2(a) of the project deed or as defined in the project deed;

CA declaration that the defendant is not entitled to any adjustment of the contract sum in its favour pursuant to cl7 of the project deed by reason of the direction of the principal's representative, by letters dated 13 November 2000 and 15 November 2000;

DA declaration that the defendant is not entitled to any extension of time in respect of the date for construction completion of the project works by reason of the necessity for it to comply with the direction of the principal's representative, by  letters dated 13 November 2000 and 15 November 2000.

1. By way of defence, the defendant Leightons relies upon:

(a)The assertion that there was a Change to the works as defined in the project deed giving rise to compensation under the provisions of the deed;

(b)The assertion that there was negligence on the part of the State (essentially in failing to bring the requirements of the project deed to the attention of Leightons at an earlier time) giving rise to damages; and

(c)Allegations of misleading and deceptive conduct on the part of the State in breach of the Fair Trading Act 1990, s14, which is also claimed to give rise to damages.

1. Leightons also claims that it was entitled to an extension of time in respect of the construction completion of the project works by reason of the necessity for it to comply with the direction from the principal's representative of 15 November 2000.

1. The defendant, by an application foreshadowed in correspondence on 4 February 2004 and filed on 10 March, seeks an order pursuant to Supreme Court Rules 2000, r559(1)(b), that the question of the assessment of the defendant's damage (if any) be tried after the question of the plaintiff's liability is tried and judgment given. The plaintiff opposes this course.

1. Mr Digby QC for the defendant submits that the nub of the dispute identified above (and identified as such by par8 of the plaintiff's solicitor Mr Pilley's affidavit in opposition to the application) is one which can be easily delineated from issues of quantum.  The latter issues are manifold, for the defendant has pleaded several causes of action, including:

(a) breach of contract pleaded in pars61 to 67 of the amended defence and counterclaim in that the principal's representative's letter to the defendant dated 15 November 2000 constituted a Change pursuant to the project deed which entitled the defendant:

(i)to have the Change valued in accordance with cl7 of vol 1 of the project deed (par61); and

(ii)to be granted an extension of time and delay costs pursuant to the project deed (pars76 to 80);

(b)breach of contract pleaded in pars68 to 75 of the amended defence and counterclaim in that the principal's representative's letter to the defendant dated 1 June 2000 constituted a Change pursuant to the project deed which entitled the defendant:

(i)to have the Change valued in accordance with cl7 of vol 1 of the project deed (par73); and

(ii) to be granted an extension of time and delay cost pursuant to the project deed (pars76 to 80);

(c)quantum meruit pleaded in par93 of the defendant's amended defence and counterclaim;

(d)restitution pleaded in par94 of the defendant's amended defence and counterclaim;

(e)unjust enrichment pleaded in pars95 to 97 of the amended defence and counterclaim;

(f)negligence pleaded in pars98 to 101 of the amended defence and counterclaim;

(g)breach of the Fair Trading Act 1990 pleaded in pars102 to 106 of the amended defence and counterclaim; and

(h)breach of contract in the nature of the plaintiffs failure to pay a number of miscellaneous claims made by the defendant, as pleaded in pars85 to 91 of the defence and counterclaim.

Depending on which of these causes is or are made out, damages may fall to be calculated on different bases.

1. If the Court finds in favour of the defendant on the basis of a contractual right to have the direction of 15 November 2000 valued as a Change, then it is likely that damages would be calculated and assessed in favour of the defendant at the rate and in accordance with the process nominated in the project deed.  By contrast, if the Court finds in favour of the defendant on the basis of misleading and deceptive conduct, then damages are likely to be calculated and assessed in favour of the defendant not on an expectation basis, but based on compensation which will put the defendant into the position it would have been in, if not for the plaintiff's wrongful conduct, and calculated from the date that the project deed was entered into on 24 June 1999.  A further alternative is that the Court finds in favour of the defendant on the basis of negligence in that the principal's representative should have informed the defendant of the promise made to Mr Errol Minahan either:

(a)       at the date the project deed was entered into on 24 June 1999;

(b)       at the date of the Value Management Workshop on 20 July 1999; or

(c)at the date of the email from John Eckersley‑Maslin to the principal's representative on 18 January 2000.

If the Court finds in favour of the defendant on any of these bases, then damages would be assessed in accordance with ordinary principles of tort and would probably be assessed as flowing from any number of relevant dates.  The defendant also claims an entitlement to recover damages on a quantum meruit, restitution and on the basis of unjust enrichment. In the event that the Court found that the defendant was entitled to recover on one or other of these bases, the defendant's damages would probably be calculated and assessed on a different basis, namely the reasonable cost of the work, plus a margin.  It is contended that if the Court were to deliver its findings on liability prior to hearing argument on the question of quantum, it would enable both parties to save very considerable time and expense by concentrating solely on proving the relevant measure of damages, rather than several alternative measures of damage.  For example, if the Court finds in favour of the defendant on the basis of its contractual rights, then the defendant's damages may be assessed at the agreed contractual rates prescribed by the project deed.  The agreed damages for delay costs, for example, have been fixed as $7,170 per day (Pt 5 of Sch 1 of vol I of project deed).  However, if the Court finds in favour of the defendant on the basis of its claim in negligence, then the cost of delay would have to be proven according to ordinary principles, and not the contract formula. This would probably involve proving the costs incurred by the defendant by reference to numerous invoices and  considering whether these costs are reasonable.

1. It is submitted that each of the above types of damage or compensation will require extensive evidence and Court time, whereas if the liability issue is determined first in favour of the plaintiff, all of that will be obviated.  If the counterclaim succeeds, then depending on the trial judge's findings as to the basis of that success, the field of further evidence is likely to be narrowed and the prospects of settlement enhanced.  Thus it is submitted that the balance of convenience requires the making of such an order.  Mr Digby points out that it is his client who is seeking the payment of damages ¾ something in the order of $8,000,000 ¾ and stands to be held out of it by reason of such delay as a splitting of the issues will entail.  He submits that no such prejudice will flow to the plaintiff.  The parties estimate that the trial, if confined to liability, would take about five weeks and if quantum were included, a further three weeks.

1. Mr Vickery QC, on the other hand, submits that there is no clear line of demarcation between the issues of liability and damages.  He instances three examples.  The defendant claims that the delay in completion of 13 months in respect of which liquidated damages amounting to $1,800,000 were withheld by the plaintiff was caused by the alleged Change.  The liability of the plaintiff to repay such an amount depends not only on establishing the fact of delay being caused by the Change, but the extent of the delay and he submits that this is inextricably entwined in the issue of quantum.  However, as Mr Digby points out, the relevant provision relied upon in Schedule A(xv) of the defence and counterclaim provides for liquidated damages of $8,000 per day and that is a matter of simple calculation which can be left to a later time once the primary liability for the relevant delay is established. 

1. Mr Vickery then points to the fact that the cause of action in negligence requires proof of damage, while those reliant upon restitution and unjust enrichment require proof of the loss by the defendant of something to be returned or the gaining by the plaintiff of something of value.  However, to determine liability, all that need be proved is that some damage, loss or gain has been incurred or acquired and not the full quantum of it.  In my view, the evidence necessary to demonstrate those ingredients is not likely to occasion lengthy replication in a subsequent trial of the issue of quantum.

1. While the Court traditionally has been reluctant to split the trial of an action, I agree that if it is just and convenient to do so, the Court should not hesitate to make such an order (Coenan v Payne & Anor [1974] 2 All ER 1109). Generally speaking, there should be a clear line of demarcation between the issues of liability and quantum (Polskie & Ors v Electric Furnace Company Ltd [1956] 2 All ER 306 at 309). That, in my view, is the case here. I see no prejudice to the plaintiff in adopting the course sought and considerable convenience is likely to ensue from a determination of the issue of liability first with a consequent narrowing, if not elimination, of the issues of quantum. The application is granted.

1. The plaintiff seeks an order:

"That, pursuant to Rule 458 of the Supreme Court Rules 2000, the evidence in chief of any witness at the trial, except where otherwise directed by the trial Judge, be given by witness statement, such witness statements to be filed with the Court and delivered to the other party by 4 pm 2 April 2004 and any witness statements in reply be filed with the Court and delivered to the other party by 4 pm 8 April 2004, and that any objections to the contents of such witness statements be filed with the Court and delivered in writing to the other party by 4 pm 12 April 2004."

This order was sought by application dated 9 March 2004 and foreshadowed in a letter to the Registrar dated 5 March 2004.  In my view, although such a course has its merits and may well lead to a saving of hearing time (and, indeed, is a course which has already been agreed to by the parties in respect of expert witnesses), the application comes at such a late stage that it should not be imposed upon a reluctant party.  Evidence should be given orally at the trial of an action (r458) unless there is an order to the contrary or the parties agree.  It is for the applicant plaintiff to persuade me that such an order should be made.  The defendant opposes the order because it has not approached the preparation of its case with this mode of procedure in mind.  Counsel for the defendant submits that within the time sought (or any extension thereof as to which the plaintiff is prepared to be accommodating), his client could not reasonably comply with such a direction.  Furthermore, although some saving in costs might be achieved by a shortening of trial time, the cost of compliance would require the re-interview of many witnesses and the honing of proofs of evidence which would involve considerable professional time and would off-set the costs saved at trial considerably.

1. In my view, the application comes too late.  The defendant has adopted a different method of preparation for trial to that proposed by the plaintiff.  To require it to change course at this stage, four working weeks before trial, would not be reasonable.  It is to be hoped that in respect of non-controversial aspects of the evidence, the parties can agree to present much of it in a less time-consuming way than by leading it orally in chief.  The plaintiff's application is refused.