CPC Energy Pty Limited v Bellevarde Construction Pty Limited & Ors

JURISDICTION : Equity Division Technology and Construction List

DECISION : Parties to bring in short minutes of order.

CATCHWORDS : Practice and Procedure - Separate question orders - References out

LEGISLATION CITED : Trade Practices Act 1974 (Cth)

Australian National Industries Ltd v Spedley Securities Ltd (In Liquidation) (1992) 26 NSWLR 411 Century Medical v THLD Ltd [2000] NSWSC 5 Idoport Pty Limited v National Australia Bank Ltd [2000] NSWSC 1215 CASES CITED : Perre v Apand Pty Limited (1999) 198 CLR 180 Pioneer Park Pty Ltd v ANZ Banking Group Ltd [2005] NSWSC 832 Pobjie Agencies Pty Ltd v Vinidex Tube Makers Pty Ltd [2000] NSWCA 105 Story of Sydney Pty Ltd v Ling (unreported, Supreme Court of New South Wales, Rolfe J, 14 November 1994) Tallglen v Pay TV Holdings (1996) 22 ACSR 130

CPC Energy Pty Limited (Plaintiff) PARTIES : Bellevarde Construction Pty Limited (First Defendant) John Francis Field (Second Defendant)

COUNSEL : Mr RA Parsons (Plaintiff) Mr R Marshall (Defendants)

SOLICITORS : Summit Law (Plaintiff) Dibbs Abbott Stillman (Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST

55062/05 CPC Energy Pty Ltd v Bellevarde Construction Pty Ltd & Anor JUDGMENT The notice of motion 1 There is before the court a notice of motion filed by the defendants seeking orders for the decision of certain questions separately and before any other questions to be tried in proceedings. 2 The proceedings arise out of a cost plus contract for building works entered into between the plaintiff as proprietor and the first defendant as builder dated 2 February 2003 for the construction of a number of townhouse apartments at Cammeray. 3 It is unnecessary to repeat the record save to observe that the issues include:

i. questions as to whether or not as the plaintiff claims, in accordance with the term of the contract the first defendant should have brought the works to a state of practical completion on or before 30 August 2004 but did not, or, as the first defendant claims, it was entitled to extend the date for practical completion by a number of days [despite as the plaintiff claims, not having provided details of those days to it in accordance with clause 24 of the contract];

ii. claims by the plaintiff for liquidated damages;

iii. claims by the plaintiff that the first defendant was disentitled to charge it for labour for the works [other than in accordance with the provisions of clause 5 (a), 14 (a) and the appendix to the contract];

iv. claims by the plaintiff that the first defendant: a) procured the employment of labour from a related entity of the first defendant;

b) procured that the related entity issue invoices to the first defendant for such labour at rates higher than the rates actually paid by the related entity;

c) then invoiced the plaintiff for such labour at rates in excess of the amount the first defendant was entitled to charge for labour in accordance with the terms of the contract.

v. other issues concerning an allegation by the first defendant that the plaintiff is precluded from distributing progress claims 1 to 20; an allegation by the plaintiff that throughout the course of the works the first defendant often undertook work on behalf of third parties and charged those works to the plaintiff; a claim by the plaintiff that in the progress claims issued by it, the first defendant has charged the plaintiff for many items of equipment for which it was not entitled to charge under the contract and issues concerning responsibility of the first defendant to make good any defective or incorrect work and whether there was or was not any defective work to be rectified. 4 The precise issues identified by the amended summons are as follows:

"1. The date on which the works should have been completed by the first defendant having regard to clauses 23, 24 and 26 of the contract.

Whether the plaintiff is entitled to liquidated damages pursuant to the contract and in particular clause 28 of the contract.

If so, what is the quantum of such liquidated damages?

Whether a clerk of works was appointed in accordance with the provisions of clause 27 of the contract.

What is the true construction and effect of clauses 4, 5(a), 5(b), 11, 12, 14, 15, 16, 22, 23, 24, 26, 28, 29, 30 and 33 of the contract and the contract generally.

Whether the first defendant's conduct in submitting progress claims in which it claimed more than its entitlement for labour employed by it in performance of the works in the circumstances constitutes misleading or deceptive conduct under s52 and/or unconscionable conduct under s51AC.

Whether the second defendant's conduct in causing the first defendant to implement the Cutcross labour scheme constitutes fraud and or misleading or deceptive conduct or unconscionable conduct under section 52 and/or section 51AC of the TPA.

Whether the first defendant and second defendant were under an obligation to carry out the works cost effectively and either within the amount of the estimation of the cost ("Budget") of the works as provided by the first defendant to the plaintiff or at an amount which did not exceed that Budget by more than 1-2% and/or their failure to do so constitutes misleading and deceptive conduct within the meaning of section 52 of the TPA.

Whether the first defendant and second defendant were under an obligation pursuant to the terms of the contract, or the Trade Practices Act or otherwise to perform the terms of the contract in good faith and complete the works to the benefit of the plaintiff and not to their own purposes in securing a further benefit to themselves which was not disclosed to the plaintiff in the contract or otherwise." 5 Paragraph's 50A, 50B and 50C are in the following terms:

"The first defendant, to the knowledge of or at the direction of the second defendant charged the plaintiff in progress claims for the costs of labour supplied by personnel employed by the first defendant at rates in excess of the rate which the first defendant was entitled to charge the plaintiff, for the cost of labour, in accordance with the provisions of the contract.

In engaging in the conduct set out in paragraphs 35, 38, 39, 40, 41, 42, 44, 49, and 50 and 50A hereof, in the circumstances set out in paragraphs 2, 3, 4, 5, 6, 25, 28, 48 hereof, engaged in misleading or deceptive and/or unconscionable conduct in contravention of section 52 and /or section 51AC of the Trade Practices Act and the second defendant has been a person involved in such contraventions.

The conduct of the first and second defendants' pleaded in paragraph 50B hereof in the circumstances pleaded in the said paragraph, constituted fraud and in particular fraud within the meaning of clauses 16(c) and 16(e) of the contract." The terms of the notice of motion 6 The notice of motion is somewhat confused as it includes two schedules, one being schedule A and the second being schedule B [whereas Schedule B is not otherwise mentioned in the notice of motion at all]. The questions formulated in schedule A are apparently directed at formulating a simple question of construction of the contract in order to ascertain whether, by reference only to the words in the contract, the plaintiff is precluded from claiming liquidated damages under the contract for delay in completion of the works the subject of the contract. 7 The problem inheres in the fact that the questions sought to be posed by schedule A extend to questions of fact, such as whether the plaintiff has, of itself, caused some delay to completion. 8 During the hearing of the motion the defendant sought to make clear that the purpose of schedule B was by reference to particular answers to be given to the questions posed in schedule A, to propound orders for particular matters to be referred to the referee. 9 The plaintiff sought to formulate its own suggested set of separate questions which were in the following terms:

i. On its true construction, does the contract between the plaintiff and the first defendant dated 2 February 2003 for the construction of "the Canopy" development ("the contract") provide that liquidated damages be paid by the first defendant/builder to the plaintiff/proprietor in the event that the Works as defined in the contract did not reach practical completion by the target date extended by the time during which normal working conditions were disrupted due to:- Rain delays as defined in clause 24 CPC delays as defined in clause 24 Other delays as defined in clause 24.

ii. On its true construction, does the contract provide that in order to obtain an extension of the target date the first defendant/builder was obliged to notify the plaintiff/ proprietor in writing of such disruptions within the week that such disruptions occurred or otherwise, and if otherwise, in what manner. 10 The plaintiff's proposition is that if question i in its schedule A be answered in the affirmative, there should be referred out to a referee the question of what is the proper quantum of liquidated damages to which the plaintiff is entitled pursuant to the terms of the contract properly construed. Matters of general concern 11 Mr Marshall appearing for the plaintiff and Mr Parsons appearing for the defendant both made plain that when they had approached the list judge for a hearing date with respect to all matters to be determined in the proceedings, apart from liquidated damages, the list judge made clear that the Court was not prepared to set the matter down until it had determined whether liquidated damages should be determined as a separate issue [the reason being that it was common ground that the liquidated damages issue would involve a great deal of time and evidence as to what actually had occurred on the site]. There were to be something in the order of 20 topics covered on the liquidated damages issue as to what had happened on the site on a particular day and whether someone had delivered materials and whether they had been ordered by the plaintiff and similar factual issues of a wide spread. 12 Mr Parsons informed the court that the list judge had stated:

"that the court would not be trawling through what happened on the site to determine liquidated damages." [transcript 16] which the parties took to mean that the nuts and bolts of the liquidated damages claim was likely to be referred out. 13 In the result the motion presently before the court came forward, the parties endeavouring to ascertain a sensible way to allow the reference of the liquidated damages through the portal of a decision about the liquidated damages clause. The principles 14 The principles which inform when the court will and will not exercise its discretion to order the separate determination of issues are reasonably well known. They were summarised in Pioneer Park Pty Ltd v ANZ Banking Group [2005] NSWSC 832 at [6] with extracts from a number of authorities including the High Court of Australia. As there pointed out Callinan J in Perre v Apand Pty Limited (1999) 198 CLR 180 at [436] had observed:

"Care does need to be taken in deciding whether to conduct separate trials of different issues. It sometimes happens that they may turn out to be productive of the disadvantages of delay, extra expense, appeals and uncertainty of outcome which they are intended to avoid. In tort cases in which damage is the gist of the action, it will generally be undesirable to accede to requests for them, or to order them, unless all parties accept that compensable damage has been sustained by the plaintiffs or applicants as the case may be." 15 The Pioneer Park judgment [where a separate question regime was rejected] also included the following:

"The principles applicable to the separate determination of issues are summarised in Idoport Pty Limited v National Australia Bank Ltd [2000] NSWSC 1215 (15 December 2000). The various features identified in that judgment as tending to render separate determination inappropriate, are all present in this case. In particular:

• there are intertwined issues of fact or law between the separated question and the other questions such that the determination of the separate question will not have any substantial effect upon the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation; - where there is a commonality of witnesses and issues of credit as between the separate issue and other issues in the case which will or may necessitate a ruling on the credit of one or more of the common witnesses, thus possibly precluding the same judicial officer from again dealing with the matters going to the credit of the common witness in accordance with the decision of the Court of Appeal in Australian National Industries Ltd v Spedley Securities Ltd (In Liquidation) (1992) 26 NSWLR 411; Story of Sydney Pty Ltd v Ling (unreported, Supreme Court of NSW 14 November 1994 per Rolfe J); Century Medical v THLD [2000] NSWSC 5; - there is a possibility that the resolution of the separate issue will not finally determine the issue but will merely result in an appeal from that decision in relation to that separate issue, creating a multiplicity of the proceedings interruption to the court and undesirable fragmentation of the proceedings.

Further, as Giles CJ in Comm.D (as his Honour then was) explained in Tallglen v Pay TV Holdings (1996) 22 ACSR 130 at 142: "It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties dispute."" The separating out questions to be determined by the Court and followed by a reference out 16 It seems to me to be extraordinarily difficult and likely impossible for the Court to be asked to case manage a particular set of proceedings by making orders that it will, under one or more separate question regimes, hear and determine a fraud case in advance of ordering a reference out of remaining issues. 17 The reason for this is that where the determination of a fraud case will involve questions of credit concerning witnesses to be called who will later be required to give evidence before the referee on the many factual issues to be determined by the referee, by definition the referee is almost certainly likely to be inhibited by the earlier findings of the Court [to the extent that the referee would not be in the usually necessary position of being able to freely assess the credit of the witnesses to be called before the referee]. 18 That, as pointed out by Justice Giles CJ Comm Div (as his Honour then was) in Tallglen when observing that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order, because related facts, and renewed issues of credit will or may arise at a later stage in the proceedings. 19 By the conclusion of the hearing of the notice of motion, both Mr Parsons as well as Mr Marshall, having considered issues of this type, appeared to accept that there was really no way forward otherwise than that a hearing likely of all issues, be either the subject of a reference or the subject of a Court determination [both Mr Parsons and Mr Marshall contending that because of the fraud count, the principled exercise of the discretion was for the Court to retain determination of the whole of the proceedings] 20 I have refrained presently from returning to the more confined question raised by Mr Parsons' approach to the proposed separation order which, would raise questions of the proper construction of the contract. If and only if those questions are accepted as not raising any issue of the credit of any witness but are to be determined by the Court merely having the written terms of the contract placed before it, then it is possibly appropriate for those questions to be the subject of a separate question regime. It does appear that such an approach may save at least some time on a later trial. 21 Subject therefore to an acceptance by the parties of the manner in which the separate questions raised by Mr Parsons version will not include any questions of credit of any witness or any matters likely impact upon the later substantive hearing, [whether by a referee or by the Court], in my view those separate questions can go forward. 22 On the question of whether the hearing of the balance of the issues to be determined on trial should be referred out or determined by the Court, this is in truth a matter for the List Judge in case managing the proceedings. Having said that it must be acknowledged that as a general matter, there are particularly strong reasons why the Court would not refer out questions of fraud except in exceptional circumstances. However albeit rarely, the Court has exercised the discretion by referring even proceedings raising questions of fraud to a referee, as for example occurred in Pobjie Agencies Pty Ltd v Vinidex Tube Makers Pty Ltd Com Div No. 50249 of 1996 and on appeal, [2000] NSWCA 105. 23 At first instance those proceedings by the further amended summons, clearly included claims for fraudulent misrepresentation in a case concerning an agreement by the plaintiff to manufacture certain goods for the first defendant in accordance with particular specifications. Notwithstanding that circumstance Giles CJ Com Div saw it as appropriate, to permit the matter to be determined in its entirety by a referee. In an interlocutory judgment his Honour observed:

"A referee must be found who has the confidence of the parties and the ability to enquire without formality but fairly, by inspecting records with the assistance of the officers of the parties familiar with the records, by looking at houses to the extent thought necessary, and by hearing the officers or employees of the parties, and others." [at page 6] 24 A document to be found in the Court file in that matter entitled "Brief facts for which the plaintiff contends and plaintiff's submissions to be referred on the further amended summons" includes detail of inter alia the fraud claims including the allegation of systematic dishonesty. Decision 25 The parties are to bring in short minutes of order to give effect to these reasons. The plaintiff's separate questions will be allowed if and only if the parties agree that no questions of credit will arise on the hearing of the separate question and that no facts will be in issue at that hearing. **********

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