Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited

Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited - [2006] NSWSC 583 - NSWSC 2006 case summary — Zoe

[6]

A and N Holding NSW Pty Limited v Andell Pty Limited [2006] NSWSC 5 Australian Development Corporation v White Constructions (ACT) Pty Ltd & Anor (unreported, Supreme Court of New South Wales, Einstein J, 8 February 1999, BC9900223) Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 100 ALR 568 Berkeley Administration Inc v McClelland [1990] FSR 565 Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225, (1993) 118 ALR 248 Credit Lyonnais Australia Limited v Darling (1991) 5 ACSR 703 Darryl Cullen v ZLB Behring LLC [2006] NSWSC 359 DSE (Holdings) Pty Limited v InterTan Inc [2004] FCA 1251 Fowdh v Fowdh & Anor (unreported, Supreme Court of New South Wales Court of Appeal, Kirby ACJ Mahoney AP and Meagher JA, 4 November 1993, BC 9302200) Furber v Stacey & Anor [2005] NSWCA 242 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Gray v Gray [2005] NSWCA 129 Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) & Ors [1998] 1429 FCA Hurstville Municipal Council v Connor (1991) 24 NSWLR 724 InterTan Inc. v DSE (Holdings) Pty Limited [2005] FCAFC 54 Jackamarra v Krakouer (1998) 195 CLR 516 Jones v Bradley (No. 2) [2003] NSWCA 258 Lahoud v Lahoud [2006] NSWSC 126 Leichhardt Municipal Council v Green [2004] NSWCA 341 LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd (No 2) [2002] NSWSC 72 CASES CITED : Lyell, In re [1941] VLR 207 Marks, Kinross, McCullagh & Williamson v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128 MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 Ng v Chong [2005] NSWSC 385 Oshlack v Richmond River Council (1998) 193 CLR 72 Rickard Constructions Pty Limited v Rickard Hails Moretti Pty Limited [2005] NSWSC 481 BC 200503634 Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Co Pty Ltd (2001) 53 NSWLR 626 Rosniak v Government Insurance Office (1997) 41 NSWLR 608 Rosser v Maritime Services Board of New South Wales (No 3) (unreported, Supreme Court of New South Wales, Young J, 25 November 1997, BC9706221) South Eastern Sydney Area Health Service v King [2006] NSWCA 2 Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Smith Re; ex parte Rundell (No. 2) (1991) 6 WAR 299 South Eastern Sydney Area Health Service v King [2006] NSWCA 2 Statham v Shephard (No 2) (1974) 23 FLR 244 Stockland (Constructors) Pty Limited v Darryl I Coombs Pty Limited [2005] NSWSC 252 Tripple Take Pty Limited v Clark Rubber Franchising Pty Limited [2005] NSWSC 1169 Van Doore by his tutor the Protective Commissioner v Mendez (No 2) (unreported, Supreme Court of New South Wales, Dunford J, 30 June 1997, BC9702746) Wakeford v Ellis (unreported, Supreme Court of New South Wales, McLaughlin M, 7 May 1998, BC9804384) Waters v PC Henderson (Australia) Pty Ltd (unreported, Supreme Court of New South Wales, Court of Appeal, Kirby P, Mahoney JA and Priestley JA, 6 July 1994, BC 9404952) White v Overland [2001] FCA 1333

[14]

v. as other issues of an instant specific nature to the present proceedings require to be addressed. The principles 3 Notwithstanding the general consensus as to the principles it is convenient to outline the main areas treated with by the authorities and generally taken as a given as informing the reasons which follow. A deal of that reference to principle is taken from the submissions of one or other of the parties and adopted as correct. The issue is presently one of application of those principles to a set of proceedings which occupied years of preparation by the parties prior to the hearing, months of court time and extraordinary features [cf judgment at [63]-[69] under the heading: "An unusual case"]. The Civil Procedure Act 2005 4 It is convenient to commence with a reference to the Civil Procedure Act, 2005 ["the Act"]. 5 Section 56 (1) obliges the parties to conduct proceedings in a way which would facilitate the just, quick and cheap resolution of the real issues in the proceedings. 6 The significance of s 56 to conduct in the commercial list was explained by Bergin J in A and N Holdings NSW Pty Limited v Andell Pty Limited [2006] NSWSC 55 (para 24) where her Honour described the Commercial List as a "fast track for litigation". 7 Section 56 is a statutory enactment of the principles which have long applied to the conduct of commercial litigation (such as this case) in this State: Tripple Take Pty Limited v Clark Rubber Franchising Pty Limited [2005] NSWSC 1169. 8 Section 56 gives effect to Mahoney P's observation that litigation is not a game. The section requires litigants at the risk of costs orders to concentrate on the real issues. A party may no longer put another to the proof of a fact which the first knows is true without a costs penalty where the party put to proof establishes the fact. The "fast track" of which Bergin J spoke should not stop once a plaintiff succeeds in having the hearing begin. General approach The usual order 9 The usual order is that costs follow the event (although there is no absolute rule to that effect): Oshlack v Richmond River Council (1998) 193 CLR 72, per McHugh J at [63]-[67]. The position will be otherwise if " it appears to the Court that some other order ought be made as to the whole or any part of the costs": Credit Lyonnais Australia Limited v Darling (1991) 5 ACSR 703 at 710 per Kirby P. Apportionment 10 The effect of UCPR Part 42 r 42.1 is that an unsuccessful party may be ordered to pay the entirety of the costs of a successful party, even though the successful party did not succeed on all issues. Special circumstances are generally required to justify some other order being made 11 Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those in which it failed: Waters v PC Henderson (Aust) Pty Ltd (unreported, Supreme Court of New South Wales Court of Appeal, Kirby P, Mahoney JA, Priestley JA, 6 July 1994, BC 9404952). 12 Whilst the general principle is that an ultimately successful party ought not be put at risk as to costs merely by having relied upon additional issues upon which it did not succeed (on the basis that the ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case8), a successful party may only get a proportion of its costs if the unsuccessful party is able to identify clearly dominant or separable issues lost by the successful party Multiple parties 13 The Court will not normally allow more than one set of costs to successful litigants where there was no possible conflict of interest between them in the presentation of their cases: Statham v Shephard (No 2) (1974) 23 FLR 244. The matter was put as follows at 246, per Woodward J:

[17]

Thirdly, even if defendants are acting reasonably in maintaining separate representation for some time or for some purposes, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time. Indemnity costs 14 The Court has power to award indemnity costs under s 98(1)(c) of the Act. 15 The principles on which an indemnity costs order will be made, are well settled. The principles established by Sheppard J in Colgate Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225, 233 are generally accepted. 16 Recent applications of those principles in this Court are Lahoud v Lahoud [2006] NSWSC 126, Campbell J; Stockland (Constructors) Pty Limited v Darryl I Coombs Pty Limited [2005] NSWSC 252, and by the Court of Appeal in Gray v Gray [2005] NSWCA 129 para 18. In Gray, Colgate (supra) was referred to as "the leading judgment". 17 The High Court in Oshlack at 89, 90 (Gaudron and Gummow JJ) recorded that indemnity costs were appropriate where the case involved "some relevant delinquency on the part of the unsuccessful party": See the observations quoted by those Justices from the judgment of Malcolm CJ's in Smith, Re; ex parte Rundell (No. 2) (1991) 6 WAR 299. 18 The following factors include those listed by Sheppard J in Colgate Palmolive v Cussons (1993) 118 ALR 248, as accepted by the Court of Appeal in Leichhardt Municipal Council v Green [2004] NSWCA 341 at [48], as of relevance to the present application: · "Evidence of particular misconduct that causes loss of time to the court and the other parties … · The fact that the proceedings were commenced in wilful disregard of known facts …; · The making of allegations that ought never to have been made or the undue prolongation of a case by groundless contentions; [It is to be noted that CGU has submitted, that for the purposes of Sheppard J's para (a), an allegation of bad faith may have a similar effect to an allegation of fraud]. 19 Section 56(5) of the Act expands the circumstances in which an indemnity costs order may be made. 20 In order to establish a basis for an indemnity costs order, it is necessary to establish by evidence relevant delinquency, abuse of process, ulterior purpose or unreasonableness on the part of BHE. 21 Evidence of unreasonable conduct on the part of the party ordered to pay costs is usually required: Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616 per Mason P. 22 The difficulty or otherwise of the litigation cannot itself be the basis for the award of costs on a special basis, as the courts are constantly engaged in complex litigation, and the fact that a particular piece of litigation raises difficult questions of law necessitating elaborate preparation is not a novelty: cf, Marks, Kinross, McCullagh &Williamson v GIO Australia Holdings Ltd (No 2) (1996) 66 FCR 128 at 141. 23 The mere fact that a party fights the proceedings fiercely and that no stone is left unturned is not a ground for a special costs order: cf, Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 100 ALR 568 at 570; Berkeley Administration Inc v McClelland [1990] FSR 565 at 569-570. 24 The mere fact that a case has been found to lack merit cannot be a basis for a special costs order, for in most litigation that comes to a concluded hearing, the claim of one of the parties will have been found lacking in merit: cf, Hurstville Municipal Council v Connor (1991) 24 NSWLR 724 at 735. [See the practical application of the above principles by Allsop J in DSE (Holdings) Pty Limited v InterTan Inc [2004] FCA 1251 and on appeal InterTan Inc. v DSE (Holdings) Pty Limited [2005] FCAFC 54] Prolonging a trial 25 Prolonging a trial by litigating issues which are known to the unsuccessful party not to be real issues, in breach of s 56 of the Act, is capable of constituting relevant delinquency. Section 56(5) would in an appropriate case permit this form of delinquency to be taken into account in the Court's exercise of its discretion to award costs. Depending always upon the precise circumstances, the Court has power to order indemnity costs against an unsuccessful party whose conduct has breached s 56: and this in furtherance of the statutory object which the section embodies. Interest 26 The Court may order the payment of interest on the costs so awarded, such interest to be payable as from the date or dates on which the costs in question were paid [s 101(5)(a) of the Act]. The principles are set out by Campbell J in Lahoud at para 78 ff. There is no requirement that the Court be satisfied before making such an order that the case was out of the ordinary. The governing consideration is to compensate a party which is out of pocket by having to pay costs. A word of warning 27 Gordian contended as follows:

[19]

ii. Parties who choose not to litigate the real issues should do so at their own cost. 28 These submissions may be accepted subject to an important rider, namely the need to accept that in any particular set of proceedings the parties are of course entitled to, in good faith, determine to litigate issues reasonably believed at the time to bear upon the real issues. The pendulum dictated by the Act should not be seen as a mechanism to deny parties their entitlement to litigate issues believed on proper grounds to be genuine issues even if, with the benefit of hindsight, the course of the evidence ultimately shows that the litigation of some of those issues may have been an incorrect call. Prescience is a rare commodity, particularly where very complex litigation is in play. 29 All of this simply serves to point up the instant specific nature of the principled exercise of the discretion. There are cases and there are cases. The trial judge will usually be in the best position to determine how the discretion should be exercised: cf Furber v Stacey & Anor [2005] NSWCA 242 at [126], [133]. Calderbank offers 30 The principles which the Court should apply to decide whether an award of indemnity costs should be made in favour of a defendant who has made a Calderbank offer which is rejected by the plaintiff are as set out in Leichhardt Municipal Council v Green [2004] NSWCA 341 and Rickard Constructions Pty Limited v Rickard Hails Moretti Pty Limited [2005] NSWSC 481 per McDougall J. 31 An award of indemnity costs may be appropriate where a party has unreasonably failed to accept an offer of settlement of the proceedings. The relevant question of whether the failure of the party to accept a settlement offer was unreasonable is to be assessed in all of the circumstances: Jones v Bradley (No. 2) [2003] NSWCA 258 at [5] - [8]. 32 Merely refusing a Calderbank offer does not automatically lead to an order for indemnity costs [Ng v Chong [2005] NSWSC 385 at [13] and see also the authorities conveniently identified at Ritchie's [42.13.25]]. 33 A Calderbank letter raises no prima facie presumption in favour of indemnity costs [SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]; Jones v Bradley (No 2) [2003] NSWCA 258 at [8]; Ng v Chong [2005] NSWSC 385 at [13]]. 34 A court may also refuse indemnity costs where a party succeeds at trial on a case that significantly changed after the offer was made (Wakeford v Ellis (unreported, Supreme Court of New South Wales, McLaughlin M, 7 May 1998, BC9804384); Fowdh v Fowdh (unreported, Supreme Court of New South Wales Court of Appeal, Full Court, 4 November 1993, BC 9302200) at [6] per Mahoney JA:

[21]

"The discretion to award indemnity costs following a Calderbank letter must be considered having regard to all of the circumstances of the case, including the relevant strengths and weaknesses of each party's case as they may have been apparent to the parties at the time the offer was made."] 35 This must be evaluated in the context of the circumstances when the offer was rejected, including the relevant strengths and weaknesses of each party's case as they may have been apparent to the parties at the time the offer was made: Darryl Cullen v ZLB Behring LLC [2006] NSWSC 359 at [15] citing Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Co Pty Ltd (2001) 53 NSWLR 626 at [95]-[99]; South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [90]. 36 The fact that the offer proves to have been more favourable than the ultimate judgment does not, of itself, prove unreasonable conduct in rejecting the offer. 37 A difficult and complex case, hard-fought by large commercial parties may lead to the conclusion that it was reasonable to reject a Calderbank offer: LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd (No 2) [2002] NSWSC 72 at [53]-[55]. 38 Discretionary factors include the complexity of the issues (MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236; Ng v Chong [2005] NSWSC 385 at [14]) and the period allowed for acceptance (Ng v Chong [2005] NSWSC 385 at [14]). 39 A further relevant factor is the form of the Calderbank letter, and the manner in which the offer treats with costs. 40 It has been held that a Calderbank letter which is expressed to be "inclusive of costs", is insufficiently precise to qualify as a Calderbank offer, for the reason that the offeree is placed in a position of not being able to determine the appropriate amount to attribute to the substantive claim and the costs incurred in advancing it: Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 at 102; Hanave Pty Ltd v LFOT Pty Ltd (formerly Jagar Pty Ltd) [1998] 1429 FCA 11, BC9805993 (Smallacombe Pty Ltd v Lockyer Investments Co Pty Ltd was referred to by Young J in Rosser v Maritime Services Board of New South Wales (No 3) (unreported, Supreme Court of New South Wales, 25 November 1997, Young J, BC9706221). 41 These authorities recognise the importance of isolating the costs component in such a way which is clear and capable of proper assessment independently of the principal claim, as part of a Calderbank letter. Dealing with the costs issues Separate representation of Gordian and CGU 42 There is no substance in the propositions that:

[63]

vii. The following is material to the state of BHE's knowledge at relevant times: August 1997 T1616.35-48, Judgment [168] and [339] (a) Mr Moore's notes of a meeting on 4 August 1997 accurately recorded that Mr Shirley had informed him that there were difficulties on site with the method of compaction and that Mr Shirley was concerned that the 80% density index had not been achieved. The minutes of the meeting record that initially there were difficulties with compaction during construction. MFI D1(ad) tab 27, Judgment [174] October 1997 (b) Mr Moore stated in a facsimile to Clayton Utz that a construction defect, if it exists, may also relate to the adequacy of the compaction of the backfill… Report PX036.001, Dr Adler's report of 26 October 1997 gave a strong indication that a possible explanation for the loose sand was inadequate compaction. T446.17-27 (ref to Prof Ingold), Judgment [341-345] December 1997 MFI D1(ad), tab 31A, Judgment [354-355] (c) In December 1997 Mr Peck produced a report in which he had been asked to assume that the cause of sand loss was due to construction defects arising from various matters including inadequate compaction of the back fill. Report MFI D1(o), October 1998 Judgment [337] (d) The Shirley report of 14 October 1998 stated that creases and wrinkles could have arisen due to the way in which the geotextile was placed (i.e. faulty workmanship by BHE) or was the inevitable result of the compaction process. It was "crystal clear" to Mr Price from October 1998 that if HIH could establish that the cause of BHE's liability to SACL was due to defective construction, there would be no claim under the HIH policy. T1202-1203 (Price), Judgment [334-335] MFI D1(o) tab 7, December 1998 Judgment [347] (e) Mr Price attended a meeting with a BHE representative on 2 December 1998, the minutes of which recorded that BHE recognised that it could not conclusively prove that a construction defect was not a cause of sand loss. In December 1998 WRL published the results of the model testing which it had undertaken for BHE. Had the tests been conducted as originally proposed, they may well have assisted in better understanding the cause of sand loss. Ultimately, the Court concluded that the tests were "simply too unsafe a platform upon which to base a reliable conclusion" and the Court was left to speculate about why BHE did not require WRL to conduct thorough tests as proposed. Judgment [688 -697], esp [692] and [697] 1999 T1250, (f) During 1999 Mr Price undertook factual investigations including analysis of documents. He understood that RE had suggested, based on its own testing, that compaction levels at the time of testing did not accord with the design. He accepted that compaction was an important issue. His evidence was that he was looking at the records to consider the issue of compaction that had been raised by RE. Judgment [363-366] Judgment [383]

[66]

T1260 July - August 2000 (and beyond) Judgment [367] (h) Mr Price During the course of briefing Prof Ingold, Mr Price became aware that there had been no compaction testing done close to the back of the wall. T1262 BHE (Wilson and Muirhead) accepted that there had been no testing close to the back of the wall. Judgment [367] Mr Price understood that Prof Ingold had been told that there was no testing and that test records did not exist. Mr Price's knowledge of the lack of compaction records did not change prior to the commencement of proceedings. T1262 Mr Price accepted in cross-examination that RE's contention that testing hadn't been done in the zone during construction was correct. Judgment [367] Professor Ingold Mr Price's evidence is to be contrasted with Professor Ingold's evidence. Despite apparently being told that there were no records Professor Ingold nonetheless reported that construction quality assurance records were "impeccable" and that there was no fault with construction. Professor Ingold told Mr Price that the records which did exist tended to suggest that proper compaction had been achieved everywhere. He abandoned this contention in cross-examination. Professor Ingold accepted in cross-examination that he knew the quality assurance records did not adequately deal with compaction in the zone. He also knew that RE's contentions depended on the degree of compaction in the zone. He knew it was more difficult to compact within the zone but was content to base his conclusions on testing beyond the zone. The Court was critical of Professor Ingold's approach in these issues.

[82]

Litigation is not a game. It is a costly and stressful, though necessary, evil. To paraphrase Roscoe Pound from "The Causes of Popular Dissatisfaction with the Administration of Justice" (1906) 29 ABA Rep 395, 404-406, the "sporting theory of justice" and any behavioural manifestation of it should be seen as a survival, or better, a relic, of the days when a lawsuit was a fight between two clans: cf Jackamara v Krakouer (1998) 195 CLR 516 at 526-527 per Gummow and Hayne JJ. Representatives do not owe duties to the other side's client. They owe duties to their own client. But no one's interests are advanced by litigation proceeding on assumptions which are seen or suspected to be false 61 There is the following difficult question which concerns what should be inferred would have been the otherwise course of events in the litigation had BHE given an informed and balanced set of assumptions and provided all the appropriate material to Professor Ingold. The matter requires a degree of speculation but it is clear that material issues would have taken less time in terms of the litigation. 62 In other areas of the law there is room for application of the maxim 'nullus commodum capere potest de injuria sua propria' - 'no man can take advantage of his own wrong': cf Australian Development Corporation v White Constructions (ACT) Pty Ltd & Anor (unreported, Supreme Court of New South Wales, 8 February 1999, Einstein J) at [89] et seq. There is a long line of authority to this effect [cf. Broom's Legal Maxims, 10th edition, Pakistan Law House, 1989 at 191 et seq., noting that this maxim, being 'based on elementary principles, is fully recognised in Courts of law and equity, and indeed, admits of illustration from every branch of legal procedure'. I see no reason why the Court should not lean/err in favour of the defendants, where the estimate of the amount of time wasted by the above described delinquent conduct has a degree of uncertainty. 63 In my view this form of delinquency should be visited with an order that BHE pay 20% of the whole of the costs of Gordian and CGU on an indemnity basis: the proportion is assessed by reference to the whole spectrum of the evidence considered against the compaction issues litigated. The corrosion issues litigated are dealt with separately in what follows. The remaining attacks upon BHE's conduct fail 64 Reference has earlier been made to caution in seeking with the benefit of hindsight, to discern what was and was not reasonable behaviour of a litigant engaged in complex litigation. 65 Many of the otherwise attacks upon the manner in which BHE conducted the litigation [and the consequential other suggested bases for obtaining indemnity costs] are simply misconceived. The fact that a party does not succeed in major litigation does not per se justify orders for indemnity costs. As the authorities cited above make clear something 'special' must be shown. 66 The problems anterior to the litigation which faced all of the parties were explained in the judgment (at [63]). 67 When examining the actual approach by each of the parties to the litigation, it has to be borne in mind that the difficult circumstances continued with the parties not unnaturally endeavouring to put their respective clients cases in as persuasive a fashion as was reasonably available on all of the evidence which they anticipated to be adduced through a lengthy trial. It is only in the area of the assumptions put to Professor Ingold and the failure to provide him with an informed and balanced proper overview of that which was known, that the relevant delinquency has been established. The timeline 68 BHE has submitted that the timeline [in terms of the occasion when inadequate compaction became the subject of evidence], has a significance for present purposes. Whilst its submissions as to that timeline are not exceptional, they do not excuse the above-described delinquency. 69 Nor does the fact that BHE was in a position to call the evidence which it did from Messrs Caretti and Scott, alter the position with respect to the above-described delinquency. It is simply crucial for a party to properly instruct its experts and equally crucial to avoid the waste of time which a failure to so instruct can cause. Other matters Corrosion 70 Indemnity costs are also appropriate in so far as the issues raised in the corrosion case are concerned. The short reasons for this are as follows:

[103]

ii. alternatively, for costs of the proceedings on an indemnity basis from 31 August 2005 and on the ordinary basis before that date. [on the ground of BHE's suggested unreasonable failure to accept an offer to settle the proceedings contained in a letter from AMPG's solicitors dated 31 August 2005]. 77 In my view and for the reasons put forward in AMPG's submissions which are adopted in what follows, BHE's claim against AMPG had no real prospect of success hence justifying an indemnity costs order against BHE. 78 The hypothesis on which BHE's claim against AMPG proceeded (a hypothesis which BHE did not primarily advance) was that SACL had made two claims against AMPG in respect of the reinforced earth walls; one in respect of sand loss from behind the walls (the sand loss claim) and one in respect of accelerated corrosion of the metal components forming part of the walls (the corrosion claim). 79 On the basis of that hypothesis BHE claimed an entitlement to be indemnified by AMPG for a further $20 million (an amount in excess of the cumulative indemnities sought from Gordian and CGU) in respect of the corrosion claim. BHE's claim against AMPG in these proceedings was over and above the $20 million indemnity already granted by AMPG in respect of the sand loss claim which was the subject of the AMPG Settlement Deed. 80 BHE's primary contention was that there was but one claim (which encompassed circumstances relating to both sand loss and corrosion). Undoubtedly BHE and AMPG were ad idem on the proposition that there was but one claim. However, it did not follow that if the Court accepted that there were two claims, that the AMPG Contract responded to the second claim. 81 At [7] of the AMPG judgment the Court noted that "[t]here has been substantial movement by BHE in its presentation of its case insofar as the status of its corrosion case and its approach to obtaining relief against AMPG is concerned". 82 At [8] - [13] the Court extracted certain oral submissions made by senior counsel for BHE as to the continuing significance of corrosion. Those submissions included the following:

[110]

(b) the claim for the cross claim costs fell precisely within the exclusion in clause 3.4(b) of the AMPG Settlement Deed (see [22] and [24]); and (c) the AMPG Contract did not, in any event, respond to the cross claim costs because "those costs are not costs incurred in the investigation defence or settlement of any claim within the meaning of that phrase in clause 2 of the AMPG Contract" (see [22]). 86 As to the design and construction costs, at [25] of the AMPG judgment the Court found that such costs incurred by BHE under the Settlement Agreements with SACL were costs for which BHE would have been liable in any event in the absence of the corrosion claim. The Court also concluded at [25] that there was no evidence that the design and construction costs were occasioned by the corrosion claim. 87 At [26] - [27] of the AMPG judgment the Court concluded that "no triable issue within General Steel principles" had "been established by BHE" in relation to either the cross claim costs or the design and construction costs. 88 This had the result that BHE could not identify any loss suffered as a result of the corrosion claim to which the AMPG Contract arguably responded. 89 At [28] of the AMPG judgment the Court identified, as an additional matter entitling AMPG to verdict and judgment, that "BHE has not put forward any contentions that there was negligence in relation to corrosion". 90 As AMPG has submitted, the claim against it did not have any real prospects of success. For the reasons which appear below, this follows inexorably from the basis on which the Court gave verdict and judgment for AMPG in the AMPG judgment. 91 The belated concession by BHE to the effect that it would not become legally liable to pay any sum in respect of the corrosion claim "qua the rectification solution" (see [26] of the AMPG judgment) was an inevitable consequence of the effect of the evidence adduced and relied upon by it in the proceedings. It was an overwhelming conclusion to be drawn from the rectification solution about which expert witnesses called by BHE gave evidence. 92 Indeed prior to the joinder of AMPG, it was BHE's position that it had not suffered any additional liability or costs or expenses by reason of the corrosion claim. 93 The concession cannot be fairly characterized as having arisen from any development of the evidence (see [9] of the AMPG judgment) or any new circumstances which developed during the course of the hearing.

[118]

(h) At [44] - [50] of its opening written Outline of Submissions dated 25 October 2005, AMPG identified as one of the five defences on which it relied, the proposition that (assuming there were two claims) BHE had suffered no loss as a result of the corrosion claim. 95 Far from being a concession which arose from any development of the evidence or any new circumstances, BHE's concession to the effect that it will not become legally liable to pay any sum in respect of the corrosion claim "qua the rectification solution" (see at [26] of the AMPG judgment), was a concession that was inevitable on the evidence BHE relied on in the proceedings. 96 Neither could the concession have come as any surprise to BHE. 97 Indeed, it was a concession BHE had, in fact, made prior to it commencing proceedings against AMPG. 98 Neither BHE's position upon the question of what loss was caused by the corrosion claim or its evidence on this issue changed at any stage of the proceedings. 99 AMPG for its part, had, prior to the commencement of the hearing, identified and pleaded as a defence, the fact that BHE had suffered no loss as a result of the corrosion claim. 100 In relation to BHE's claim against AMPG for the cross claim costs and the design and construction costs, those claims were only latterly raised in BHE's amended reply filed in Court on 24 November 2005. As the Court concluded at [22] of the AMPG judgment, those claims never found their way into BHE's claim for relief in its summons. 101 In any event, the Court concluded in the AMPG judgment that those claims raised "no triable issue within the General Steel principles" (see [26]). The Court's finding was in effect that BHE's claim against AMPG for the cross claim costs and the design and construction costs was "so obviously untenable that it could not possibly succeed". 102 As the Court noted at [28] of the AMPG judgment, BHE did not put forward any contentions that there was negligence in relation to corrosion. Despite the voluminous material contained in its "further submissions" dated 8 February 2006 and its reply submissions dated 19 February 2006, no attempt was made by BHE to support any claim of negligence in relation to corrosion. No oral submissions were directed to the issue. Yet, to the last, BHE prevaricated on whether or not the issue remained alive: see [1229] - [1233] of the main judgment. 103 For those reasons it is unnecessary to deal with the other grounds in respect of which an indemnity costs order was pursued by AMPG namely:

At a glance

Court

Decision date

Before

Source

Judgment (128 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (33)

Cited By (22)