Tri Tech Refrigeration Contracting and Engineering Pty Ltd v Radevski (No 2)

[2012] VSC 403

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 10158 of 2006

TRI TECH REFRIGERATION CONTRACTING & ENGINEERING PTY LTD (ACN 099 904 668)	Plaintiff
v
PETER RADEVSKI AND OTHERS	Defendants

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JUDGE:	BELL J
WHERE HELD:	Melbourne
DATE OF HEARING:	5 September 2012
DATE OF JUDGMENT:	6 September 2012
CASE MAY BE CITED AS:	Tri Tech Refrigeration Contracting & Engineering Pty Ltd v Radevski (No 2)
MEDIUM NEUTRAL CITATION:	[2012] VSC 403

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AMENDMENT OF PLEADINGS – application for leave to amend amended counterclaim – identification of proper plaintiffs, clarification of terms of agreement in relation to refrigeration capacity and reliance on express term as well as implied term in relation to excessive noise – whether leave should be given - Court (General Civil Procedure) Rules 2005 (Vic) r 36.01.

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APPEARANCES:	Counsel	Solicitors
For the plaintiff and the defendant by counterclaim	Mr A Panna SC with Mr P Nugent	Mr A Kornhauser
For the defendants and the plaintiffs by counterclaim	Mr D Williams SC with Mr D Clough	Riordan Legal

HIS HONOUR:

1. By a summons dated 29 August 2012 the Radevskis sought leave further to amend their amended counterclaim dated 17 August 2010 in relation to:

·    the identification of the proper plaintiffs by counterclaim

·    the terms of the supply and refrigeration agreement in relation to the refrigeration load and other matters

·    the noise emitted from the system

Proper plaintiffs by counterclaim

1. The present claim of the Radevskis’ in the amended counterclaim is that they suffered loss and damage by reason of the failure of the system to meet the specifications in the representation which, as a preliminary question, I have found was made[1] and in the agreement.

   [1]Tri Tech Refrigeration Contracting and Engineering Pty Ltd v Radevski [2012] VSC 354 (21 August 2012) [102].

1. In the hearing of the evidence before the preliminary question was answered, Peter Radevski Junior deposed that there had been a change of ownership of the refrigeration equipment in 2004/2005.  The matter was clarified in his affidavit dated 29 August 2012 in support of this application.

1. From that affidavit, it appears that, in or about February 2005, B and C Radevski assigned the equipment to CBFC Limited, which leased it back to Radevski Coolstores Pty Ltd as part of a financing arrangement.  The lease was paid out in February 2012 and CBFC have disclaimed any further interest in the equipment.  The equipment has always remained and is in situ at the coolstore. 

1. The Radevskis seek to amend their amended counterclaim in anticipation of a claim which Tri Tech will almost certainly make in an amended defence.  That claim will be that the change of ownership has deprived the Radevskis of any capacity they had to sue for recovery of losses associated with the supply and operation of the system.  By the proposed amendment to the amended counterclaim, the Radevskis wish to contend that, despite the change in ownership, they are still entitled to sue for recovery of those alleged losses.

1. The parties have made written and oral submissions about why the amendment should or should not be granted.  I have formed the view that the application for amendment is premature at this stage and I refuse to grant leave on this basis.  It is best that I do not express a view as to the submissions which were made.

1. The reason why the application is premature is that the Radevskis do not seek leave to add or otherwise change the parties to the amended counterclaim.  They continue to contend that they are the proper plaintiffs.  The proposed amendment would clarify the basis on which they contend that they should be granted the relief sought despite the change in ownership of the equipment. 

1. In my view, the Radevskis are in a responsive position in relation to this issue.  When Tri Tech amends its defence to counterclaim, as it is expected to do and for which I am likely to grant leave, the Radevskis will know how Tri Tech puts its case in this regard.  The Radevskis will then be able to give informed consideration to the formulation of a reply or an amendment application.  It is appropriate for the Radevski to deal with this matter after, and not before, Tri Tech has made its position clear.  Everything which the Radevskis wish to put can be put at that stage and it will not be prejudiced by having to do so then and not now.  

1. Further, there has not yet been complete discovery in relation to this issue.  Understandably, Tri Tech does not wish to formulate its position until it has obtained discovery of and considered all of the relevant documents.  Is not appropriate for the pleading issues which may arise from the change of ownership of the equipment to be considered until that has happened.

1. I will dismiss the application for leave in relation to the specification of the proper plaintiffs by counterclaim.  I do not criticise the Radevskis for making the application in this respect.  It has been a vehicle through which important issues have been addressed and which will probably have to be determined at a later stage.

Refrigeration load

1. The Radevskis seek leave to amend their amended counterclaim to clarify their claim as to the terms of the agreement in relation the refrigeration capacity of the system and certain other matters.

1. As we saw in the judgment on the preliminary question,[2] the agreement describes the scope of the works by reference (among other things) to the quotation dated 8 July 2004.  In material parts, that quotation stated:

   [2]Ibid [49] and ]70].

We thank you for your valued enquiry and have much pleasure in submitting the following pricing and specifications for the above project.

1.0 PLANT DESIGN

We have based our plant design on the following information provided by the supplied documents and discussions we have had with your personnel.

Description	Size	Temp.	Motor	Product Load	Product Storage	Room No.	Duty per Room
Room 1-5 Room 14-16	20x10x8 Meters	00C	12 Kw	75 Tonne 32 to 20C in 32 Hr	900 Bins	8	140 Kw
Room 6-7	11x9x8 Meters	00C	10 Kw	75 Tonne 35 to 20C in 32 Hr	600 Bins	2	132 Kw
Room 8-13	14x10x8 Meters	00C	10 Kw	75 Tonne 35 to 20C in 32 Hr	750 Bins	6	I34 Kw

TOTAL PLANT DUTY        1300 Kw

The above table is based on the following general information.

·     Chiller panel thickness assumed to be polystyrene 150 mm

·     Motor load is taken to be actual heat load

·     Lighting load calculated on 10 W/m²

·     Design ambient 40⁰C DB/23 ⁰C WB

·     Total plant duty is based on the expected plant pull down of 900 bins over 32 Hr.

1. During the evidence, an issue emerged as to whether the specification of the total plant duty and the matters referred to as ‘general information’ were part of the agreement as contractual terms.  On the Radevskis’ side it was contended that all parts of the quotation were promissory and contractual.  On the Tri Tech side it was contended (among other things) that the specification of 1300 kW as the total plant duty and the reference to the ‘expected plant pull down of 900 bins over 32 Hr[s]’ was not promissory and contractual. 

1. In my view, leave for this amendment should be granted.  It is consistent with the existing terms of the amended counterclaim and helpfully clarifies matters in the light of the evidence.  Paragraphs 10(a) and 16(a) presently rely on the scope of the works specified in the agreement and the quotation without going into particulars as to what was promissory and contractual.  It is now appropriate for that to be made clear, which the amendment will do.

1. I do not accept Tri Tech’s submissions that leave to amend should be refused because the Radevskis’ contention is not sufficiently arguable and the amendment will put it to the burden of having to call further expert evidence at significant extra expense.  On this question, the position of both parties is arguable.  The amendment for which I will grant leave clarifies issues which arose out of the existing pleadings and the evidence.  It is for Tri Tech to decide whether it should present additional expert evidence in consequence of leave being granted.  There is presently a natural break in the hearing of the proceeding and it will be able to give consideration to doing so without any or much further cost or inconvenience.

Noise

1. At present, the amended counterclaim generally alleges that Tri Tech was bound by an implied term of the agreement to ensure that the system complied with laws and regulations (par 10(h) and (j)), that it breached this implied term (par 12(t)) and that the Radevskis suffered loss and damage as a result (par 19(c), (d) and (e)).

1. The Radevskis now seek leave to add a claim that Tri Tech were bound by the express terms of cl 14 of the agreement to ensure that the system complied (among other things) with noise and other regulations. 

1. Clause 14.1 is the main provision which is in issue, and provides:

Tri Tech shall comply with the requirements of all Act and Ordinances of Parliament of both the Commonwealth and the State of Victoria and with the requirements of all Ordinances, regulations, by-laws, orders and proclamations made or issued under any such Act or Ordinance and with the lawful requirements of public and other authorities in any way affecting or applicable to the Works or the execution of the Works under the agreement.

1. Clause 13.1(c) deems that Tri Tech has examined the site.  On the evidence, that would have revealed the presence of dwellings near the boundary on the plant room side of the cool store.  Clause 14.3 requires Tri Tech to notify the Radevskis of conflicts between legislation and the agreement as soon as it discovers the conflict so that the ‘Radevskis and Tri Tech will use their best endeavours to vary the agreement in the most practical and cost efficient manner so that’ it is no longer in conflict.

1. There is undisputed evidence that the system as installed emitted noise exceeding the legal limits and attenuation measures had to be adopted.  Those measures were various but included substantial alterations to the design of the plant room.  The amended counterclaim pleads that Tri Tech is responsible for the costs of doing so by reason of having breached an implied term of the agreement. The Radevskis now wish to plead express reliance on cl 14.1.

1. The Radevskis submit that the proposed amendment does not alter the basis on which they claim damages against Tri Tech for the alleged breach.  I reject that submission.  The proposed claim on the express term is different, and raises different issues, to the existing claim on the implied term.

1. Tri Tech submits that the interpretation of cl 14.1 on which the Radevskis propose to rely is not arguable.  I accept that submission. 

1. The Radevskis do not submit that, under the express terms of the agreement, Tri Tech was required to build or alter the plant room in a way which prevented noise from being emitted into the surrounding area.  The cool store and its plant room were not being built by Tri Tech.  The Radevskis submit that the agreement required Tri Tech to design, construct and install a refrigeration system which did not emit excessive noise.  But the subject system was a large industrial refrigeration system which appears to be high-noise emitting in nature.  It is improbable in the extreme that an agreement for the design, construction and installation of such a system would impose any such obligation on Tri Tech.  There is nothing in the evidence or in the Radevskis submissions to suggest that a system of this nature could possibly have been so designed, constructed and installed. 

1. In my view, cl 14.1 imposed on Tri Tech the obligation to comply with laws and regulations applying to the design, construction and installation of the system, especially the applicable Australian standards.  It did not impose on Tri Tech obligations applying to the normal and expected use of the system, such as noise regulations.  The normal and expected use of the system is within the control of the operator.  Whether the system, operated in that manner, would emit excessive noise into the surrounding area was within the Radevskis’ control, not Tri Tech’s control, and was chiefly a function of plant room design.  Tri Tech was not responsible for plant room design.

1. Further, I accept Tri Tech’s submissions that the application for leave to amend should be refused on discretionary grounds.  There was no adequate explanation for making the application for leave to amend at this late stage.  If leave to amend were to be granted, a new area of factual controversy would be opened up, namely, whether it was possible for a system using large industrial refrigeration machinery to be designed, constructed and installed is such a way that, when operated in the Radevskis plant room as originally designed, it would not emit excessive noise into the surrounding area.  To open that issue up at this stage would involve unjustified inconvenience and expense, even given the natural break in the hearing of the proceeding which has occurred.

1. There will be an order giving leave to the Radevskis to amend the amended counterclaim as set out in paragraphs 10(ab)(i) and (ii), 16(aaa)(i) and (ii) and 17 of the draft in exhibit PRJ-8 of Mr Radevski’s affidavit and otherwise refusing the application.

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