Supreme Court of WA|2007-08-14|Before: Mr J, Templeman J

BARRICK GOLD OF AUSTRALIA LTD & ORS -v- F L SMIDTH INC & ORS [2007] WASC 186 (14 August 2007)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : BARRICK GOLD OF AUSTRALIA LTD & ORS -v- F L SMIDTH INC & ORS [2007] WASC 186

BETWEEN : BARRICK GOLD OF AUSTRALIA LTD (ACN 008 143 137)

NEWMONT GRPL PTY LTD (formerly GOLD RESOURCES PTY LTD) (ACN 008 976 958)

KALGOORLIE CONSOLIDATED GOLD MINES PTY LTD (ACN 009 377 619)

NEWMONT POWER PTY LTD (formerly NORMANDY POWER PTY LTD) (ACN 065 116 841)

Procedure - Defendant's application for summary judgment - Whether adequate explanation for delay - Plaintiff alleges facts disputing defendant's construction of agreement - Whether defendant's construction complete answer to plaintiff's action - Whether court can assume facts proved

1 TEMPLEMAN J: This is an application by the sixth defendant for the summary dismissal of the plaintiffs' claim, on the ground that, as a matter of law, the claim cannot succeed.

2 The plaintiffs are engaged in a joint venture which involves the mining and processing of gold ore. The processing plant includes an electrically driven semi-autogenous grinding mill ("the Mill"), used for crushing ore.

3 In about October 1996, some of the plaintiffs, as buyers, entered into a written agreement with the sixth defendant ("the defendant") as seller for "the continuous supply of electricity" pursuant to the terms of the Agreement ("the Electricity Supply Agreement", or "ESA").

4 It is common ground between the relevant plaintiffs and the defendant that in October and December 1996 there were five "power excursions": that is, failures of the power supplied under the ESA. It is alleged by the plaintiffs that as a consequence of these power excursions, the Mill suffered substantial mechanical damage. The plaintiffs contend that each of the power excursions constitutes a breach of the ESA, for which the defendant is liable in damages. The plaintiffs have therefore brought an action against the defendant for damages to compensate them for the cost of repairing the Mill, for the additional operating costs incurred while the damaged Mill was out of service or operating at a reduced capacity, and the consequential loss of profit.

5 The defendant contends that on the proper construction of the ESA, the power excursions were not breaches of the ESA and that, in any event, the ESA excludes the defendant's liability for common law damages. The defendant has therefore brought an application under O 16 of the Rules of the Supreme Court 1971 (WA), for summary dismissal of the plaintiffs' claim, and for leave to bring the application, well out of the 21-day period prescribed by O 16 r 1(1).

6 The plaintiffs oppose both elements of the application. It is therefore necessary to consider the history of the summary judgment application in order to determine whether the defendant should have leave to pursue it.

7 The plaintiffs' claim against the defendant was originally the subject of action CIV 2358 of 2002, which has since been consolidated with actions brought by the plaintiffs against various other defendants. In essence, those defendants were involved in the design, construction, installation and commissioning of the Mill.

8 The amended writ in action CIV 2358 of 2002 was served on the defendant on 7 October 2003. The defendant entered an appearance on the following day. However, the statement of claim was not served until 16 January 2004, following an application by the defendant for a springing order to dismiss the action for want of prosecution.

9 Order 16 r 1(1) provides that the defendant to an action may apply for summary judgment "within 21 days after appearance or at any later time by leave of the Court".

10 The policy of that rule is said to be that summary judgment applications "must be brought at an early stage of the proceedings and before unnecessary expense has been incurred": Seaman on Civil Procedure [16.1.1].

11 In the present case, the defendant did not apply for summary judgment until 28 February 2006. That application was dismissed on 20 March 2006 because there had been no conferral, as required by O 59 r 9. However, the defendant did not initiate any conferral until 22 May 2006, which it did by letter of that date.

12 The conferral process continued until August 2006, but the parties were unable to resolve the dispute. In those circumstances, the defendant renewed its application, by chamber summons filed on 6 September 2006. However, the defendant's evidence in support of the application was not complete until 28 June 2007.

13 Although, strictly, time started running against the defendant as from 8 October 2003, I do not understand the plaintiffs to rely on any delay before 16 January 2004, when the statement of claim was filed which set out the plaintiffs' case in detail. That being so, the plaintiffs contend that the relevant delay involves periods amounting to some 36 months in total.

14 This period includes some 25 months from 16 January 2004 until the defendant's first application on 28 February 2006. Then there is a delay of two months following the dismissal of that application and the start of the conferral process. There is then a period of some 10 months between 8 September 2006, and May 2007, when the defendant proposed programming orders for the hearing of its application and provided the dates on which its counsel would be unavailable.

15 The plaintiffs say that while the defendant has delayed, they have incurred substantial costs in progressing the matter. This is the subject of evidence from Robert Alexander Corboy, the plaintiffs' solicitor, who deposes to the following.

(1) There has been an inspection of approximately 2000 documents discovered by the defendant. This has required the assistance of a witness to be called by the plaintiffs and the cost of obtaining some copy documents.

(2) On about 14 March 2007, the plaintiffs prepared for and hosted a settlement meeting with the defendant and the other defendants to the consolidated action.

16 Clearly, a delay of this length calls for an explanation: and an explanation is proffered by David George Lyne, the defendant's Manager - Energy Services, who is familiar with the proceedings and their history.

17 Mr Lyne says it was apparent to the defendant, immediately it received the statement of claim in the original action, that other parties would become involved in the proceedings. The defendant was aware of various related actions, but was not "fully aware of the particular allegations" made against the other defendants. Although the defendant filed a defence and counterclaim in the original action, on 6 October 2004, this was done, Mr Lyne says, in order to comply with an order of the Court: the defendant was aware that consolidation of the various proceedings was "extremely likely".

18 I have reviewed the defence in action 2358 of 2002. While it may have been filed to comply with an order of the Court, it is in no sense a holding defence. It sets out the defendant's position in appropriate detail, disclosing the very defence on which the defendant relies in this application in relation to the construction of the ESA. In other words, the defendant and its legal advisers must have formed the view, as long ago as October 2004, that the plaintiffs' case was untenable.

19 In those circumstances, I do not think the defendant can justify its delay in applying for summary judgment by reference to the likelihood of consolidation. The respective positions of the other defendants has no bearing on the defence of this defendant.

20 Mr Lyne then says that "throughout late 2004 into 2005", there were several interlocutory applications:

"primarily relating to confidentiality concerns held by [the defendant] regarding the risk of third parties gaining access to highly commercially sensitive information contained in certain key documents in the possession of [the defendant] and the plaintiffs including the [ESA] ..."

21 I do not know the subject of the interlocutory applications to which Mr Lyne refers. However, I note that the ESA as exhibited to his affidavit for the purposes of this application, has had only one number deleted for reasons of confidentiality. That number has been supplied to me by the provision of an unedited version of the ESA. I do not need to refer to that number in these reasons: and I shall return the document to the defendant's counsel when I give judgment.

22 In these circumstances, I do not think it can be said that the need to preserve the defendant's confidentiality can justify the delay in bringing this application.

23 I accept that the defendant was inconvenienced by the appointment of its Senior Counsel as a Judge of the Federal Court. However, this was in December 2006, well after the current application was filed.

24 Although the need to instruct new counsel in a complex action may well involve a legitimate delay, in this case, it provides only a partial explanation.

25 In my view, therefore, the defendant has not provided an adequate explanation for much of its delay: and in the meantime, the plaintiffs have expended time and effort in their conduct of the action.

26 The defendant submits that the plaintiffs have not pointed to any prejudice which could not be compensated by an award of costs. Although counsel for the plaintiffs accepted this to be so, it was on the basis of my then view that there had been no delay in the progress of the action towards trial (TS 93 - 94). However, in making that concession, I think counsel may have overlooked Mr Corboy's evidence, in his affidavit of 31 July 2007, par 27, where he expressed the belief that the plaintiffs have been unable to progress the matter against the other defendants while the application remains outstanding.

27 On reflection, I think that view is justified and does reflect considerable prejudice.

28 Counsel for the defendant relies on Practice Direction No 4 of 2006, relating to the Commercial and Managed Cases List. In particular, counsel relies on the statement of the objective of that list which is:

"to bring cases to the point where they can be resolved by mediation or tried in the quickest, most cost effective way, consistently with the need to provide a just outcome."

In essence, the submission is that because the defendant has an unassailable defence to the plaintiffs' claim, the quickest and most cost effective way of dealing with the claim is by means of this application.

29 Both counsel accept that it is necessary to have some regard for the merits of the defendant's position in determining this application. I therefore turn to consider that matter.

30 Although the defendant filed voluminous affidavit evidence in support of this application, in the end, it relied only on the terms of the ESA. In other words, the defendant contends that, as a matter of construction, the ESA provides a complete answer to the plaintiffs' claim.

31 Against that, the plaintiffs submit that the proper construction of the ESA depends upon the determination of factual matters known to the parties at the time of contracting, or which are notorious.

32 This is particularly relevant to the provision of the ESA to which I have referred above, that the defendant would sell and deliver, and the plaintiffs would purchase and take "a continuous supply of electricity for use in the Premises, on Contract Terms, throughout the Supply Period" (emphasis supplied).

33 The plaintiffs rely on the well-known passage in the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 352:

"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed."

34 For many years, there has been judicial debate over the extent to which extrinsic evidence might be used as an aid to the interpretation of a contract which, absent such evidence, might be thought to be unambiguous. It is not necessary to add to that debate for present purposes. That is because there is a factual issue which, in my view, bars the defendant's access to O 16 r 1. The issue arises from par 77 and par 78 of the statement of claim in the consolidated action, which are in the following terms (references to Normandy Power are to the defendant):

"77. At all material times since on or about 1 October 1996, the usual operation of the SAG Mill and its associated drive system, for the purpose of grinding the Fimiston/Paringa Joint Venture ore and the KMA ore, depended upon electricity being delivered by Normandy Power from the Parkeston Power Station to Location Number 2 on Fimiston Feeder B pursuant to the ESA.

Normandy Power's Knowledge of the Fimiston Operations

(a) Normandy Power knew the facts pleaded in paragraph 77 herein;

(b) alternatively, Normandy Power knew, as was the fact, that the electricity delivered by it pursuant to the ESA would be used for the processing of the First Plaintiffs' ore.

Such knowledge is to be inferred from the following, considered as a whole:

(1) the description of the Buyers under the ESA as participants in the 'Fimiston/Paringa Joint Venture' and the 'Mt Percy Joint Venture', and the definitions of those terms in the ESA;

(2) the description of the Points of Supply and the diagrams contained in Attachment A to the ESA;

(3) the terms of a letter from Normandy Power to KCGM dated 4 October 1994;

(4) the terms of a memorandum dated 15 July 1994 and authored by Mr B Smith, concerning power supply options for the Plaintiffs' mining operations at Fimiston, which was circulated to Mr R Hill, who was an officer of Normandy Power;

(5) at all material times David Hillier was a director of Normandy Power, North Kalgurli, KLV, Macapa, Norkal, Gold Resources and Gold Mines of Kalgoorlie Ltd;

(6) at all material times Michael Issakov was a director of Normandy Power, KCGM, Norkal, North Kalgurli, KLV, Macapa and Gold Resources;

(7) at all material times Geoffrey Loftus-Hills was a director of Normandy Power, Norkal, KLV, Macapa and Gold Resources, and further was a director of both Normandy Power and North Kalgurli between 20 February 1995 and 16 May 1995

(8) between 18 August 1994 and 20 February 1995 Anthony Palmer was a director of both Normandy Power and KCGM;

(9) between 18 August 1994 and 13 January 1995 Graeme Walker was a director of Normandy Power, Norkal, North Kalgurli, Macapa and Gold Resources;

The defendant does not admit any of the matters pleaded in these paragraphs: amended defence, par 19 and par 20.

35 The position is, therefore, that the plaintiffs wish to have the construction of the ESA determined against the factual background pleaded in par 77 and par 78 of their statement of claim. Whether or not those facts are proved, or if proved are relevant, remains to be determined. However, it is not appropriate to construe the ESA until those issues are resolved.

36 During the course of argument, it occurred to me that it might assist the parties if I was to construe the ESA on the basis that the plaintiffs proved the matters alleged in par 77 and par 78 of the statement of claim.

37 On reflection, I do not think it would be appropriate to do so. That is because any such conclusions must necessarily be tentative and would, in any event, be in the nature of an impermissible advisory opinion. In Carlin v Hamersley Iron Pty Ltd [2003] WASCA 270, McLure J, with whom Miller J agreed, at [46] adopted the observations made by Olney J in an earlier decision, in which his Honour said, in relation to a construction summons under O 58 r 10:

"The procedure contemplated by the rule is one appropriate to cases where there is no disputed question of fact and where the Court has before it an instrument the construction of which is capable of determination by reference to the instrument itself. In my view, the authority of the Court is to make a declaration of right and not to declare the construction of the instrument. If it were otherwise, the Court's order would be in the nature of an advisory opinion. The rule contemplates that the Court will determine the construction of the instrument as a preliminary to it declaring the rights of the parties."

38 In my view, that approach, based as it is on O 58 r 10, is a fortiori in relation to O 16 r 1. It would be impermissible to determine the construction of the ESA on the basis that facts might be found as alleged by the plaintiffs, when the defendant has denied the existence of those facts.

39 For these reasons, when weighing the strength of the defence in the balance, I can regard it only as being arguable.

40 The policy behind the Commercial and Managed Cases List is to discourage interlocutory disputes: Practice Direction No 4 of 2006, par 13. Although this is not an application for interlocutory relief, and although the policy cannot in any event abrogate the discretion to extend the time within which an application for summary judgment may be made, in my view, it does bear on the way in which the discretion should be exercised.

41 Where, as here, there is a long delay on the part of the defendant in bringing its application, an inadequate explanation for the delay, resultant prejudice to the plaintiffs and a construction argument set against a disputed factual background, I consider it inappropriate to entertain the application.

42 The plaintiffs were supported in their opposition to the application by the third defendant to the consolidated action. There may be an issue as to the standing of the third defendant (TS 71). However, on the view I take, it is not necessary to consider that matter.

BARRICK GOLD OF AUSTRALIA LTD & ORS -v- F L SMIDTH INC & ORS [2007] WASC 186 (14 August 2007)

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Judgment (71 paragraphs)

BARRICK GOLD OF AUSTRALIA LTD & ORS -v- F L SMIDTH INC & ORS [2007] WASC 186 (14 August 2007)

Cases Cited (1)