BETWEEN : DM DRAINAGE & CONSTRUCTIONS PTY LTD as Trustee for DM UNIT TRUST t/as DM CIVIL

Practice and procedure - Pleadings - Strike out application - Building and construction contracts - Global claims - Total cost claims - Whether arguable claim - Whether pleaded claim would embarrass, prejudice or delay the fair trial of the action

1 The plaintiff (DM Civil) and the defendant (Karara) entered into a contract for DM Civil to construct a 135 km water pipeline. In very broad summary, in this action DM Civil claims that Karara resequenced and redesigned the project through various directions and variation orders, and claims sums said to be due under the contract, or damages.

2 Karara has applied to strike out DM Civil's statement of claim.

3 Contemporary litigation practice discourages strike out applications. Nevertheless, in the context of this litigation, for the reasons that follow, I am satisfied that parts of the statement of claim should be struck out with leave to replead, and that doing so is conducive to the just and efficient ongoing management and resolution of this action.

4 It is convenient to begin by outlining what is pleaded in the statement of claim.

5 On 6 July 2010 DM Civil and Karara entered into a contract (the Contract) for the installation by DM Civil of an operations water package comprising pipelines, bore field, pump stations, tanks and electrical for the Karara Iron Ore Project on terms set out in a number of contract documents.[1]

6 Under the Contract, DM Civil was to construct a 135 km water pipeline for Karara from the Yandanooka bore field to Karara's mine site, for the Contract sum.[2]

7 The Contract sum originally comprised a total of $26,663,663, apportioned between seven sections in the way set out in the statement of claim.[3] Just one half of that sum was apportioned to section four, the Transfer Pressure Main section of the work.

8 The Contract provided that the pipeline was to be constructed sequentially from the western bore field to the mine site to the east, installing the pipeline at a nominal depth of 600 mm below cleared ground level, apart from creeks and road crossings where additional cover would be required.[4] The agreed methodology for performance is contained in Schedule five of the Contract and is referred to as the Contractor's Methodology.[5]

(a) that Karara agreed to give DM Civil drawings, instructions and sufficient possession of the site to carry out the Works and work under the Contract, and would obtain the approvals required for the execution of work under the Contract;[6]

(b) by cl 30, Karara retained a right to direct DM Civil as to the order and time of the various stages or portions of the work, and DM Civil was required to comply with such a direction, but if compliance caused DM Civil additional cost, the additional costs were to be added to the Contract sum;[7]

(c) that Karara retained a right to direct DM Civil to vary the Works by changing the character or the levels or lines of the Works or work under the Contract;[8] and

(d) that variations were to be priced as Dayworks at the Daywork Rates referred to in [9] of sch one to the Contract, where the schedule of rates or unit rates in the contract did not apply or a lump sum price had not been agreed; and, where there was no applicable rates in the pricing schedule, then reasonable rates or prices, including a reasonable amount for profit and overhead would apply (cl 34.4).[9]

10 The Works reached practical completion by 29 September 2011.[10]

11 DM Civil has been paid the sum of $53,841,001.[11]

12 Karara abandoned the original pipeline design, directing that DM Civil was to build the pipeline in accordance with new construction sketches to be issued by a consultant on behalf of Karara.[12]

13 Paragraphs 14.1 to 14.3 plead DM Civil's resequencing case. Those paragraphs plead that Karara:

(a) failed to provide DM Civil with reasonable possession of the site and/or with Approvals and/or Information so as to allow DM Civil to carry out the Works in accordance with the Contractor's Methodology and in a sequential and timely manner;

(b) Instead, provided DM Civil with possession of the site on the latest of the dates and for the locations set out in sch A, and with Approvals and Information set out in sch A, such that DM Civil was not able to carry out the Works in any given chainage of the pipeline until the latest of the GDP release dates, land access dates and IFC drawing dates in sch A applying to that particular chainage; and

(c) gave directions to DM Civil as to the order, timing and sequence of the various stages and portions of the Works, as particularised in sch B.

14 DM Civil's redesign case is pleaded in [14.4]. That paragraph pleads that by the construction sketches set out in sch F of the statement of claim (the IFC drawings), Karara caused the design of the Works, with limited exceptions, to change from installation of the pipeline with an average constant cover of 600 mm below ground level to installation with continually varying depths of cover, in excess of 600 mm, so as to satisfy the redesigned grades and levels shown in the IFC drawings.

15 In consequence of the resequencing complaints in [14.1], [14.2] and [14.3]:

(a) DM Civil commenced pipe stringing and laying at chainage 66,934 rather than at chainage 0;

(b) DM Civil could not commence pipe stringing until 1 October 2010;

(c) DM Civil was not able to construct the pipeline in a sequential manner from West to East, and instead constructed it in the sequence set out in sch G of the statement of claim;

(d) DM Civil was not able to hydrostatically test the pipeline progressively;

(e) DM Civil was not able to have separate crews identify and remove rock well in advance of construction crews;

(f) from time to time DM Civil had to stand down and relocate labour and plant that otherwise had no work to do;

(g) pipe jointing was slower in those sections where pipe was being laid in the reverse direction east to west, being 'socket into spigot, rather than spigot into socket';

(h) DM Civil was not able to implement the Contractor's Methodology, which represented the best and most efficient means of undertaking the Works; and

(i) there was a significant reduction in pipe laying efficiency and productivity.[13]

16 Specific consequences of Karara's redesign, as complained of in [14.4], were that:

(a) there was a greater proportion of deep trenches that had to be excavated;

(b) DM Civil had to carry out additional work caused by the increased depth of pipeline, namely additional volumes of excavation and backfill; and

(c) there was a significant reduction in excavation and pipe laying efficiency and productivity for a number of reasons set out.[14]

17 Paragraph 18 sets out six matters that are said to have occurred by reason of the resequencing in [14.1] [14.3], further and in the alternative by reason of the redesign complaint in [14.4]. These are that:

(a) the Works were disrupted as set out in [16] and [17], and were more complex and difficult to manage compared to the Contractor's Methodology ([18.1]);

(b) the Works in each case took longer to complete than would have been the case had the Contractor's Methodology been able to be implemented, asserting that, but for the matters in [14.1] [14.3], or further alternatively [14.4], DM Civil would have achieved practical completion four months earlier than was achieved ([18.2]);

(c) DM Civil had to engage additional labour to properly manage and carry out the redesigned and resequenced Works over a prolonged duration ([18.3]);

(d) DM Civil mobilised additional equipment and altered the way in which other equipment was used ([18.4]);

(e) the prolongation of the Works meant that DM Civil was exposed to wet weather events adding to disruption and delay ([18.5]);

(f) the prolongation of the Works meant that DM Civil incurred additional time related costs ([18.6]).

18 Paragraph 19 pleads additional costs incurred by DM Civil. This paragraph is of central significance to DM Civil's claims. DM Civil claims to have incurred the additional costs set out in sch C and the particulars to sch C.[15] It says that it has incurred those additional costs by reason of:

(a) the matters set out in [14.1] [14.3] and [16] ([19.1]);

(b) further, in the alternative, the matters set out in [14.4] and [17] ([19.2]); and

(c) further, the matters set out in [18] ([19.3]).

19 DM Civil claims[16] that it incurred additional costs in respect of all aspects of the Works under the Contract except for works relating to sections two, five, six and seven of the Contract sum break down, two other identified categories, and 'varied work not affected by the redesign and resequencing issues referred to in [14]. This work is defined as the Affected Works.

20 To date DM Civil has been paid a total of $37,787,560 in respect of the Affected Works.[17]

21 DM Civil's actual cost of completed the Affected Works was $47,846,924, instead of the costs DM Civil would have incurred in completing the original scope of Affected Works, being a sum of costs at not more than $21,196,079.[18]

22 The parties advanced differing understandings of the substance and character of what is pleaded in [19]. I will return to that point later in these reasons.

23 Seven claims are made. It is not necessary to detail the first claim made in [20] [21]. Secondly, [23] [27] plead, in broad summary, that the resequenced and redesigned work constituted variations to the work under the Contract under cl 34.1 for which DM Civil is entitled to be paid at the Daywork rates or at reasonable rates. In more detail, DM Civil pleads that:

(a) Karara's provision of drawings and possession of the site in the manner set out in [14.2] and sch A constituted a variation under cl 34;[19]

(b) Karara's directions referred to in [14.3] and sch B constituted a variation under cl 34;[20]

(c) Karara's provision of the IFC drawings as set out in [14.4] and sch F constituted a variation under cl 34;[21] and

(d) the Contract did not contain rates applicable to those variations.[22]

24 Consequently, DM Civil is entitled to be paid for those works at the Daywork Rates, alternatively the reasonable rates, each as set out in sch C.

25 DM Civil has been paid a total of $37,787,560. At the Daywork rates DM Civil is entitled to $69,410,969. At the reasonable rates DM Civil is entitled to $52,631,664, as shown in sch C.[23]

26 Thirdly, [28] [31] plead a breach of contract claim founded on Karara conduct pleaded in [23], [24] and [25]. To the extent that Karara failed to provide a written variation order pursuant to cl 34.1 in respect of its conduct concerning resequencing and redesigning, Karara breached an implied term that it was obliged to issue a written variation order pursuant to cl 34.1.[24] By Karara's failure to issue such written variation order, DM Civil has suffered loss and damage in the amount it would have been entitled to claim under cl 34.1 namely the Daywork Rates, alternatively reasonable rates as set out in sch C.[25]

27 Paragraphs 33 and 34 plead, in the alternative to the preceding claims, a claim of contractual entitlement for additional costs for directions relating to the resequencing and redesigning of the Works. DM Civil claims that by Karara's conduct in resequencing and redesigning the Works (as pleaded in [14.2] [14.4]), Karara directed DM Civil as to the order and time, the various stages or portions of the Works were to be carried out and that consequently, DM Civil is entitled pursuant to cl 30 to claim the additional costs that were incurred by DM Civil by reason of the resequenced and redesigned works as pleaded in [19] and sch C.

28 The three remaining claims in the statement of claim are not the subject of the strike out application and need not be detailed. Briefly, [35] [38] plead contractual entitlements for varied Works based on specific particularised directions in sch D. Paragraphs 39 40 claim for variations as set out in sch E. Paragraphs 41 43 related to specific contractual entitlements said to be due because of Chamber of Commerce and Industry wage adjustments.

29 Karara applies to strike out [14] [34] of the statement of claim on the ground that those paragraphs of the statement of claim fail to disclose a reasonable cause of action.[26] Alternatively Karara applies to strike out because if permitted to proceed to trial [14] [34] would impose an unreasonable and unfair burden on Karara and would prejudice, embarrass or delay the fair trial of the action. [27]

30 In a passage that has been applied many times,[28] in Barclay Mowlem Construction Ltd v Dampier Port Authority [29] Martin CJ said as follows:

It is, I think, important when approaching an issue of that kind to bring to mind the contemporary purposes of pleadings. The purposes of pleadings are, I think, well known and include the definition of the issues to be determined in the case and enabling assessment of whether they give rise to an arguable cause of action or defence as the case may be, and apprising the other parties to the proceedings of the case that they have to meet.

In my view, the contemporary role of pleadings has to be viewed in the context of contemporary case management techniques and pre-trial directions. In this Court, those pre-trial directions will almost invariably include; first, a direction for the preparation of a trial bundle identifying the documents that are to be adduced in evidence in the course of the trial; second, the exchange well prior to trial of non-expert witness statements so that non-expert witnesses will customarily give their evidence-in-chief only by the adoption of that written statement; third, the exchange of expert reports well in advance of trial and a direction that those experts confer prior to trial; fourth, the exchange of chronologies; and fifth the exchange of written submissions.

Those processes leave very little opportunity for surprise or ambush at trial and, it is my view, that pleadings today can be approached in that context and therefore in a rather more robust manner, than was historically the case; confident in the knowledge that other systems of pre-trial case management will exist and be implemented to aid in defining the issues and apprising the parties to the proceedings of the case that has to be met.

In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met, the Court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the Court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment.

31 It will be seen from this passage that it remains an essential requirement for a pleading to fulfil its basic functions of identifying the issues, disclosing an arguable cause of action and apprising the parties of the case that has to be met.[30]

32 A statement of claim must not plead allegations at too high a level of generality. A pleading must be sufficiently particular to conform with one of the primary objects of pleadings, to inform the opposing party of the case that it must meet.[31] Whether it is sufficient to plead simply that one thing caused another, or whether further facts must be pleaded to establish a causal link, will depend on the pleaded facts and circumstances.[32]

33 The caution with which a pleading will be struck out on the ground that it does not disclose a reasonable cause of action is well known.[33]

34 Pleadings may be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the action 'because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question with reasonable particularity, or they raise a case in terms which are simply too general'.[34]

35 The primary thrust of Karara's submissions on the application was that DM Civil's claim was both a global claim, and a total costs claim or modified total costs claim, and that DM Civil's claim did not satisfy essential requirements of such claims. In response, DM Civil denies that its claims are of the character asserted by Karara. Consequently, it is convenient to begin by analysing the character of the claims made by DM Civil.

36 A global claim is one in which a plaintiff claiming under a construction contract contends that there were multiple interacting events for which the defendant is responsible and, rather than attempting to identify (if it were possible) the precise loss from each event, the plaintiff pursues a claim for the global loss which the plaintiff says was caused by all the events for which the defendant is responsible.[35]

37 A total costs claim is where a contractor alleges against a principal a number of breaches of contract and quantifies its global loss as the actual cost of the work less the contractually expected cost.[36]

38 A modified total costs claim is where the contractor divides up its additional costs, and claims that the whole of one or more parts of those costs is the result of events for which the principal is contractually responsible.[37]

39 DM Civil's claims in [23] [27], [28] [31], and [33] [34], all claim an entitlement to payment at Daywork Rates, reasonable rates, or by reference to additional costs, as set out [19] and sch C. Consequently, in identifying the nature of the claims made by DM Civil the subject of complaint by Karara in this application, attention can be directed primarily to [19] in sch C.

40 For the reasons that follow, I am satisfied that DM Civil's claims are global claims, and modified total costs claims.

41 The claims are global in nature because nothing in the statement of claim or schedules attempts to draw any causal link between any particular items in sch A (the giving of access or approval), sch B (the sequencing directions), or sch F (the issue of IFC drawings) and any particular consequence in relation to any particular part of the work identified in sch C, or to the incurring of any particular cost referred to sch C. That proposition was not seriously contested by DM Civil. Rather, DM Civil contended that Karara's complaint in this respect failed to appreciate the nature of the case being put by DM Civil. [38]

42 DM Civil denies that its claims are in the nature of a total costs claim or a modified total costs claim. Counsel submits that DM does not claim all of the costs of the Affected Works, but only those additional costs of the Affected Works that were caused by the redesign, or the resequencing, or the combined effect of those two matters.[39]

43 For the reasons that follow, I do not accept DM Civil's submission as to the effect of its pleaded case.

44 Paragraph 19.5 of the statement of claim defines the Affected Works to mean 'all aspects of the Work under the contract save for' items of work relating to the specific exceptions set out in [19.5.1] [19.5.4]. Those exceptions include, in [19.5.4], varied work not affected by the redesign and resequencing issues pleaded in [14]. However, that does not exclude any part of the original scope of work that is not within the specific exceptions set out in [19.5.1] [19.5.3]. For example, the entirety of the original scope of works of the Transfer Pressure Main section of the work is included within the Affected Works.

45 After some equivocation, counsel for DM Civil ultimately accepted that the Affected Works means all aspects of work under the contract with the specified exceptions in [19.5.1] to [19.5.4].[40]

(a) to date it has been paid a total of $37,787,560 in respect of the Affected Works;

(b) DM Civil's actual cost of completing the Affected Works was $47,846,924; and

(c) DM Civil's costs incurred for the Affected Works and not paid for by Karara is calculated as the difference between the two preceding sums, namely $10,059,353.

47 Thus DM Civil's claim relates to the whole of the Affected Works; and its claim for additional costs is calculated as the difference between what it has been paid for the Affected Works and its actual costs.

48 That this is so is reinforced by consideration of the summary of sch C attached to the amended substituted statement of claim of 11 November 2013. For example, one relevant column of that schedule refers to 'total value of works costs'. It is also reinforced by [9] of the explanatory notes to the substituted sch C of 4 November 2013, which states that 'Schedule C reflects the value of Affected Works (as defined in paragraph 19.5 of the SOC) being works adversely affected by the conduct [pleaded in par 14]'.

49 For these reasons I am satisfied that DM Civil's pleaded claims are in the nature of modified total costs claims. If DM Civil wishes to advance a different claim of the nature articulated in oral submissions,[41]it should plead its claim to that effect clearly.

50 It is noteworthy that, at the hearing of this application, the parties advanced significantly different constructions of the statement of claim. Depending which construction were adopted, DM Civil's claim would be of a fundamentally different character. On DM Civil's submission, its claims relate to a subset of the Affected Works, namely those works in respect of which there were additional costs caused by the redesign, resequencing or the combined effect of those two matters. On that view, different questions would arise as to the need to plead or particularise facts and circumstances relied on to assert that the redesign, resequencing or the combined effect of those things caused the incurring of the additional costs in respect of that subset of the Affected Works.

51 By contrast, as I have said, on Karara's construction of the statement of claim, which I have adopted, the claim is a modified total costs claim. The fundamentally different views of the pleading advanced at the hearing, and consequent uncertainty as to DM Civil's claims, seem to me to indicate the need or desirability of ensuring, in determining this application, greater clarity as to the character of DM Civil's claims.

52 I turn to consider the merits of the strike out application.

Must a plaintiff in a total cost claim exclude alternative causes?

53 In submissions, the parties disagree as to the relevant legal principles respecting total costs claims. In particular, whether it is necessary for a plaintiff in a total cost claim to exclude alternative causes was in dispute.

54 The following passages in John Holland Pty Ltd v Kvaerner[42] were adopted and approved in John Doyle v Laing[43] and in McGrath Corporation v Global Construction:[44]

... [A global] claim has been held to be permissible in the case where it is impractical to disentangle that part of the loss which is attributable to each head of claim, and this situation has not been brought about by delay or other conduct of the claimant.

Further, this global claim is in fact a total cost claim. In its simplest manifestation a contractor, as the maker of such claim, alleges against a proprietor a number of breaches of contract and quantifies its global loss as the actual cost of the work less the expected cost. The logic of such a claim is this:

(a) the contractor might reasonably have expected to perform the work for a particular sum, usually the contract price;

(b) the proprietor committed breaches of contract;

(c) the actual reasonable cost of the work was a sum greater than the expected cost.

The logical consequence implicit in this is that the proprietor's breaches caused that extra cost or cost overrun. This implication is valid only so long as, and to the extent that, the three propositions are proved and a further unstated one is accepted: the proprietor's breaches represent the only causally significant factor responsible for the difference between the expected cost and the actual cost. In such a case the causal nexus is inferred rather than demonstrated. The unstated assumption underlying the inference may be further analysed. What is involved here is two things: first, the breaches of contract caused some extra cost; secondly, the proprietor's cost overrun is this extra cost. The first aspect will often cause little difficulty but it should not, for this reason, be ignored. The likelihood and nature of some extra cost flowing from the breaches of contract may be readily apparent from the nature of each of the breaches and a general understanding of its impact on the building project. It may also be apparent in what precise way this breach led to the extra cost. In most, if not all, cases, however, there is an intervening step relating the extra cost to the breach. For example, it may be that a breach means that work has to be redone, or that work takes longer to perform, or that its labour or material cost increases, or perhaps that there was extra cost due to disruption or loss of productivity. Again, in the given case this may be readily apparent but difficulties will arise for the parties and the tribunal of fact where the global nature of the claim involves the interaction of two or more of these intervening steps, particularly where they and their role are not, in terms, identified and explained. It is the second aspect of the unstated assumption, however, which is likely to cause the more obvious problem because it involves an allegation that the breaches of contract were the material cause of all of the contractor's cost overrun. This involves an assertion that, given that the breaches of contract caused some extra cost, they must have caused the whole of the extra cost because no other relevant cause was responsible for any part of it.

55 The following passage from the speech of Lord MacLean in John Doyle v Laing[45] was adopted and approved in McGrath Corporation v Global Construction:[46]

For a loss and expense claim under a construction contract to succeed, the contractor must aver and prove three matters: first, the existence of one or more events for which the employer is responsible; secondly, the existence of loss and expense suffered by the contractor; and, thirdly, a causal link between the event or events and the loss and expense. (The present case involves a works contract concluded between a management contractor and a works contractor; in such a case the management contractor is obviously in the position of the employer and the works contractor in the position of the contractor.) Normally individual causal links must be demonstrated between each of the events for which the employer is responsible and particular items of loss and expense. Frequently, however, the loss and expense results from delay and disruption caused by a number of different events, in such a way that it is impossible to separate out the consequences of each of those events. In that event, the events for which the employer is responsible may interact with one another in such a way as to produce a cumulative effect. If, however, the contractor is able to demonstrate that all of the events on which he relies are in law the responsibility of the employer, it is not necessary for him to demonstrate causal links between individual events and particular heads of loss. In such a case, because all of the causative events are matters for which the employer is responsible, any loss and expense that is caused by those events and no others must necessarily be the responsibility of the employer. That is in essence the nature of a global claim. A common example occurs when a contractor contends that delay and disruption have resulted from a combination of the late provision of drawings and information and design changes instructed on the employer's behalf; in such a case all of the matters relied on are the legal responsibility of the employer. Where, however, it appears that a significant cause of the delay and disruption has been a matter for which the employer is not responsible, a claim presented in this manner must necessarily fail. If, for example, the loss and expense has been caused in part by bad weather, for which neither party is responsible, or by inefficient working on the part of the contractor, which is his responsibility, such a claim must fail. In each case, of course, if the claim is to fail, the matter for which the employer is not responsible in law must play a significant part in the causation of the loss and expense. In some case it may be possible to separate out the effects of matters for which the employer is not responsible.

56 These passages include the following propositions:

1. A global claim is permissible where it is impractical to disentangle that part of the loss which is attributable to each head of claim, and where that situation has not been brought about by delay or other conduct of the claimant;[47]
2. A total cost claim involves four propositions:

(a) the contractor might reasonably have been expected to perform the work for a particular sum, usually the contract price;

(c) the actual reasonable cost of the work was a sum greater than the expected cost;

(d) the proprietor's breaches are the only cause of any significance for the difference between the expected cost and the actual cost.

57 In John Doyle v Laing[48] Lord MacLean adopted the statement of Byrne J in John Holland Pty Ltd v Kvaerner that in a total cost claim it is necessary for the claimant to eliminate any causes of inadequacy in the tender price other than matters for which the employer was responsible, and to eliminate any causes of overrun in the construction cost other than matters for which the employer was responsible.

58 In John Doyle v Laing[49] Lord MacLean said, in a passage adopted in McGrath Corporation v Global Construction[50] that it was clear that if a global claim was to succeed, whether a total costs claim or not, the contractor must eliminate from the causes of his loss and expense all matters that are not the responsibility of the employer.

59 These authorities firmly establish that, in order for a total costs claim to succeed, the contractor must establish that there were no operative causes of its loss and expense apart from matters that were the responsibility of the principal. Further, I agree, with respect, with Byrne J that this proposition is necessary, as a matter of logic, in order for the contractor to sustain an inference that the difference between the expected cost and actual cost was caused by the principal's breaches, variations or other relevant conduct. Without demonstrating that alternative causes are excluded, the inference of causation cannot be drawn. The same is true, in my opinion, in respect of a modified total costs claim, within the sphere(s) in which the contractor claims the whole of its actual costs less what it has been paid.

60 DM Civil challenged this approach, submitting that it is contrary to the law respecting causation in Australia. DM Civil relies on the following general principles, which I accept:

(a) Causation will be established if the evidence justifies a finding or inference of a probable causal connection between the breach of contract and the harm suffered.[51]

(b) As in tort cases, the but for test is a generally useful but not definitive test of causation.[52]

(c) As I said in Nouvelle Homes Pty Ltd v G & M Smargiassi:[53]

It is not necessary, in order to establish causation, to find that the breach was the dominant, effective or real cause of the loss: March v E & M H Stramare Pty Ltd (512 514); Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310, 315, 352 358. Rather, it is enough if the breach materially contributed to the loss or damage. See also Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1, 6 7; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 [61], [106]. Further, the existence of another concurrent cause does not prevent the breach from having caused the damage. It will be enough if the breach is a cause of the damage. See the cases already referred to, and Simonius Vischer v Holt [1979] 2 NSWLR 322, 346.

61 These general principles were not overlooked by Byrne J.[54] In my opinion, these general principles do not detract from the requirement, in the specific context of a total cost claim, for the contractor to prove the absence of any alternative cause for its increased costs or delay. As I have explained, that requirement seems to me to flow from the essential nature and logic of a total costs claim. Unless alternative causes are excluded, the inference of causation of the total loss cannot be drawn.

62 DM Civil also relies on cases that refer to the claimant's total loss being apportioned between an alternative cause (or causes) and the principal's conduct.[55] These cases recognise that, if the evidence is sufficiently clear to enable it to be done, in an appropriate case a court could, after trial, apportion the claimant's total loss between the principal's conduct and the alternative cause(s). In my view that does not detract from the need for the claimant, as an essential element of its case that the principal is liable for whole of its total loss, to prove that there were no alternative causes of the total loss.

Should the statement of claim be struck out on this ground?

63 For the reasons I have given, I am satisfied that the requirement for a contractor making a total cost claim to prove that there were no alternative causes for its increased costs is sufficiently clear to sustain an exercise of the power to strike out a pleading.

64 There is a further question, engaging case management considerations, whether the absence of a plea to this effect should call for the striking out of the statement of claim. In some cases, there would be room for the view that the absence of such a plea might not require the striking out of a pleading, because the defendant could plead the existence of alternative causes. However, in this case I am satisfied that the power to strike out should be exercised. The claim is of a very large magnitude. Its character in fundamental respects was still uncertain at the time of the hearing of the application, given the competing constructions of the pleading to which I have referred. In my view the proper elucidation of the character and necessary elements of DM Civil's claim is conducive to the efficient and just management and resolution of the action. Further, for reasons to be explained, I consider that [23] [27] should be struck out on other grounds. That reinforces the conclusion that the power to strike out should be exercised on the ground now under consideration.

65 For these reasons I would strike out [19] and sch C, and [20] [34], all of which are founded on [19] and sch C.

66 Another necessary element of a total costs claim is that the additional costs incurred by the contractor were incurred reasonably.[56] If the actual costs were not reasonable, the inference that those costs to the extent they exceed the contractually expected costs, were caused by the principal's conduct could not be drawn. That element is not pleaded in the DM Civil's claim. On its own, the absence of pleading of that element would not have caused me to exercise the power to strike out. However, for the reasons I have given, reasonableness is an element of DM Civil's claim as framed. On a repleading, the element of reasonableness should be pleaded.

67 As I have said, there are a number of authorities stating that a global claim will be permitted only where it is impracticable for the contractor to disentangle the individual parts of the loss attributable to each head of claim.[57]

68 DM Civil did not appear to challenge that general proposition. In correspondence during conferral, DM Civil's solicitors asserted, in effect, that disentanglement was impracticable.[58] Counsel for DM Civil made oral submissions to similar effect.[59]

69 Karara submits that sch D of the statement of claim demonstrates that it is not impractical to segregate the parts of the loss attributable to each head of claim. Schedule D segregates the consequences of particular resequencing or redesign variations, and attributes identified costs to each of them. In that light, Karara submits, DM Civil should not be permitted to maintain a global claim.

70 I am not prepared to strike out DM Civil's claim on this basis. DM Civil's claims founded on [19] and sch C are, as it submits, in the alternative to its claims founded on sch D. By their nature, claims in the alternative can be inconsistent.

71 Nevertheless, the presence of sch D, as an alternative limb of DM Civil's case, is to be borne in mind in the ongoing management of the action, and in determining what pleadings and particulars are appropriately required in support of DM Civil's primary claims founded on [19] and sch C.

72 At the hearing, Karara relied heavily on the following passages from the judgment of Justice Byrne in John Holland Pty Ltd v Kvaerner:[60]

The question whether in a given case a pleading based on a global claim, or even a total cost claim or some variant of this, is likely to or may prejudice, embarrass or delay the fair trial of a proceeding, must depend upon an examination of the pleading itself and the claim which it makes. The fundamental concern of the court is that the dispute between the parties should be determined expeditiously and economically and, above all, fairly. Where the proceeding is being managed in a specialist list, the judge, whose task it is to steer the case through its interlocutory stages, might, and perhaps should, explore the claim to determine whether the form it takes is driven by its nature and complexity, or by a desire to conceal its bogus nature by presenting it in a snowstorm of unrelated and insufficiently particularised allegations, or by a desire to disadvantage the defendant in some way. Relevant to this is an acknowledgment that a total cost claim puts a burden on the defendant. This burden may involve the defendant in extensive discovery of documents relating to the performance of the project; it may mean that at trial the defendant must cross-examine the plaintiff's witnesses to expose the flaws in a claim which assumes that the defendant is, itself, responsible for every item of the plaintiff's cost overrun; it may mean that the defendant must lead evidence to explain what, in fact, was the impact of each of the acts complained of on the project, as was done in McAlpine Humberoak Ltd v McDermott International Inc (No 1). Litigation inevitably imposes burdens on the parties; the court must exercise its powers to ensure that, as far as possible, these burdens are not unreasonable and are not unnecessarily imposed.

In my opinion, the court should approach a total cost claim with a great deal of caution, even distrust. I would not, however, elevate this suspicion to the level of concluding that such a claim should be treated as prima facie bad. Nevertheless, the point of logical weakness inherent in such claims, the causal nexus between the wrongful acts or omissions of the defendant and the loss of the plaintiff, must be addressed. I put to one side the straightforward case where each aspect of the nexus is apparent from the nature of the breach and loss as alleged. In such a case the objectives of the pleading may be achieved by a short statement of the facts giving rise to the causal nexus. If it is necessary for the given case for this to be supported by particulars, this should be done. But, in other cases, each aspect of the nexus must be fully set out in the pleading unless its probable existence is demonstrated by evidence or argument and further, it is demonstrated that it is impossible or impractical for it to be spelt out further in the pleading. Moreover, the court should be assiduous in pressing the plaintiff to set out this nexus with sufficient particularity to enable the defendant to know exactly what is the case it is required to meet and to enable the defendant to direct its discovery and its attention generally to that case. And it should not be overlooked that an important means of achieving the result that, once it starts, the trial should be conducted without undue prejudice, embarrassment and delay, is by ensuring that, when it begins, the issues between the parties including this nexus are defined with sufficient particularity to enable the trial judge to address the issues, to rule on relevance and generally to contain the parties to those issues. An order to this effect in a global claim was made by the Official Referee in Imperial Chemical Industries Plc v Bovis Construction Ltd, and by Moynihan J in Ralph M Lee Pty Ltd v Gardiner & Naylor Industries Pty Ltd. And if, in such a case, the plaintiff fails to demonstrate this causal nexus in sufficient detail because it is unable or unwilling to do so, then this may provide the occasion for the court to relieve the defendant of the unreasonable burden which the plaintiff would impose on it.

73 In my respectful view, those observations are of assistance in determining the proper approach to management of a global claim and total costs claim. Of course, they should not be treated as if they have controlling effect.

74 In John Doyle v Laing[61] Lord MacLean stated that a plea that it is not possible to identify causative links between each cause of the delay and disruption and its consequences is normally essential in order to enable a global cost claim to be brought. With respect, I would not put the position in quite that way. Rather, in my view whether such a plea is necessary will depend upon all the circumstances of the case, including the content of the pleadings.

75 In my view, in the circumstances of this case, especially given the presence of the alternative claim in sch D, it is appropriate to require DM Civil to plead that it is impossible or impracticable to identify that part of the loss which is attributable to each head of claim or conduct on the part of the principal. If thought appropriate, particulars of that plea may be sought. The court can require a claimant to give particulars of the nexus between particular breaches and particular loss, or to give particulars of matters relied upon for the assertion that it is not practicable to plead a nexus between particular breaches and particular loss.[62]

76 Karara complains that [16] and [17] show that redesign and resequencing were separate events that had some identifiable different causal consequences. Further, it submits that the overlapping consequences pleaded in [18] are, on proper analysis, limited. In those circumstances, Karara submits that it is clear that some consequences, and additional costs, are attributable to either redesign or resequencing, and yet nothing in sch C identifies which costs are attributable to redesign, and which to resequencing.

(a) [16] attributes particular consequences to resequencing;

(b) [17] attributes particular consequences to redesign;

(c) [18] pleads consequences said to flow from either or both of resequencing (and its specific consequences) and redesign (and its specific consequences); and

(d) on a proper analysis, the overlapping consequences of the two complaints are, in substance, limited to what is pleaded in [18.3] [18.6].

78 I also accept, as Karara submits, that much of what is pleaded in [18.3] [18.6], is quantified in sch D. However, the significance of that must be considered in the light that sch D is in the alternative to sch C.

79 The effect of [19.1] [19.3] of the statement of claim is that DM Civil's case is that the additional costs referred to in [19] in sch C are said to have been incurred as a result of:

(a) resequencing and its specific consequences in [16], and the overlapping consequences in [18]; or

(b) redesign and its specific consequences in [17], and the overlapping consequences in [18]; or

(c) resequencing and its specific consequences, redesign and its specific consequences, and the overlapping consequences.

80 I am not satisfied that these matters give rise to a ground to strike out DM Civil's claim. As I have said, in sch C there is no identification of which costs are attributable to redesign, and which to resequencing. Given what I have said about the effect of [19.1] [19.3], there is no necessary logical inconsistency between that fact, and the plea of specific consequences for resequencing, in [16] and redesign in [17]. While, in the circumstances outlined above, it may be surprising that, on DM Civil's case, none of the numerous items of additional costs in sch C can be attributed specifically to either redesign or resequencing, that is the case that DM Civil makes. In my view, to accept Karara's submission in this respect, and strike out the pleading on this ground would involve the court adopting a view on the factual merits of DM Civil's case as to the respective consequences of resequencing and redesign, and the connection between the respective consequences, in circumstances where the court is not in any position to do so.

81 Nevertheless, to avoid any doubt, DM Civil should, if requested by Karara, identify which work and additional costs in sch C is said, on its case, to be caused by resequencing and its specific consequences, which by redesign and its specific consequences, and which by the cumulative consequences pleaded in [18].

82 Karara further submits that sch D demonstrates that there were different additional reasons for the incurring of the costs and doing of work the value of which is sought to be recovered by DM Civil through sch C. For example, sch D identifies as the reason for some of the variation claims a direction by Karara to accelerate the works to reach an earlier date for practical completion. The asserted existence of those different reasons is, Karara submits, inconsistent with the character of a total costs claim, and one of its necessary elements.

83 If the claims in sch D were not in the alternative to the claims founded on sch C, there would be merit in these contentions of Karara. However, the claims are pleaded in the alternative and, consequently, may be, to an extent, inconsistent. The significance and resolution of any inconsistency will be a matter for trial. I would not strike out DM Civil's pleading on this ground.

84 Karara makes specific complaint about [23] [27] of the statement of claim.

85 Paragraphs 23 25 plead that Karara's provision of drawings and possession of the site in the manner set out in [14.2] and sch A, its directions referred to in [14.3] and sch B, and its provision of the IFC drawings in [14.4] all constituted variations under cl 34. Paragraph 26 asserts that by reason of what is pleaded in those paragraphs, the contract did not contain rates applicable to the Affected Works.

86 Karara submits, correctly, that the contract is for a lump sum with a schedule of rates, not a cost plus contract. Karara complains that the effect of these paragraphs is to claim that DM Civil is entitled to reprice or recoup all of its costs of the whole of the Affected Works, including costs which were within the original scope. Karara submits that there is no tenable basis for such a claim.

87 In response, DM Civil submits that the effect of the variations effected through the conduct in [14.2], [14.3] and [14.4] was that the rates stipulated in the contract did not apply, because the work was so different. Thus all of the Affected Works were done as varied work.[63]

88 I accept Karara's submission[64] that if that is DM Civil's case, it has not been sufficiently pleaded. DM Civil claims that, calculated on a Daywork's Rates basis, it is entitled to $69.4 million, less the $37.7 million it has already received, for completing the Affected Works. Thus this head of claim is one for an amount exceeding $30 million. In effect it claims an entitlement to reprice the whole of the Affected Works. In my view, to advance this case, DM Civil must expressly plead that the combined effect of the variations was that none of the work done thereafter in respect of the Affected Works was within the scope of works to which the stipulated contractual sums and rates applied, so that all work done thereafter was done as varied work. That assertion would need to be supported by material facts and particulars. In my view, that assertion is a fundamental and necessary step in the logic of this part of DM Civil's case.

89 I would strike out [23] [27] on this additional ground.

90 Karara further submits that DM Civil's total costs claim is not tenable for claims of contractual entitlements under cl 30 or cl 34.

[Karara's] representatives may direct in what order and at what time the various stages or portions of [work under the contract] should be carried out. If [DM Civil] can reasonably comply with direction, [it] [DM Civil] shall do so. If [DM Civil] cannot reasonably comply, [it] shall give [Karara's] representative written notice of the reasons ...

If compliance with any such directions under this clause, except those pursuant to [DM Civil's] default, causes [DM Civil] to incur more or less costs than otherwise would have been incurred had it not been given the direction, the difference shall be assessed by [Karara's] representative and added to or deducted from the contract sum.

92 Karara submits that directions under cl 30 must relate to the resequencing complaint, and not to the redesign complaint. For the purposes of a strike out application, I am not persuaded of that proposition. It is part of DM Civil's case that the effect of the provision of some of the redesign drawings was to require it to change the sequence of the work, and that amounted to a direction under cl 30. I am not satisfied that that contention is so unarguable it should be struck out.

93 That conclusion removes the first step of this submission on the part of Karara. For the sake of completeness however, I will deal with the balance of this submission. On Karara's submission, because cl 30 directions relate only to resequencing, a claim based on cl 30 cannot encapsulate anything in [17] or any costs caused by the consequences pleaded in [17]. The essence of a total costs claim is that the consequences of different heads of damages cannot be distinguished. DM Civil asserts that the consequences of the resequencing and redirections cannot be distinguished. In those circumstances, Karara submits, DM Civil cannot claim global costs when there is a contractual entitlement to only one of those heads of damages.[65] In my view, for the purposes of a strike out application, that submission of Karara overlooks the alternative limbs of DM Civil's case. One alternative limb is that the resequencing and its consequences, together with the overlapping consequences pleaded in [18], led to all of the additional costs in [19].

94 Karara further submits that the provisions in cl 30 of the contract are inconsistent with a global claim. Karara submits that the effect of cl 30 is to require the court, sitting in place of Karara's representative, to make a comparison between the costs of the works with and without the giving of each alleged resequencing direction, and to add (or reduce) any additional cost to the contract sum. In other words, Karara submits that cl 30 requires a direction by direction approach to assessment of the additional costs of the direction.

95 There is, as has been recognised,[66] a difference between a relaxation of the need to prove specific causal nexus for a damages claim, and the requirements of a claim for contractual entitlement. A contractual provision may exclude or be inconsistent with a total costs claim.[67] In my view whether these contractual provisions are consistent with a modified total costs claim is a matter for trial. I am not persuaded that the position is so clear that I should prevent DM Civil from advancing its claims under cl 30 and cl 34.

96 As DM Civil submits, Karara's contention is premised on a particular construction of cl 30 as requiring individual assessment of each resequencing direction. I am not satisfied, for the purposes of a strike out application, that no other construction is reasonably arguable. I would not reject as unarguable a construction that if multiple directions are given and operate concurrently and cumulatively, the additional costs payable under cl 30 may be assessed by reference to the cumulative effect on the costs incurred by DM Civil.

97 Karara makes a like submission in respect of cl 34. Clause 34.4 provides that Karara's representative shall, as soon as possible, price each variation using various rates in a stipulated order of precedence. Karara's submissions emphasise the word 'each' in that paragraph. Karara submits that each variation must be priced individually.

98 For reasons corresponding to those given in relation to this argument regarding cl 30, I would not strike out the statement of claim on this ground. In my view, for the purposes of a strike out application, it cannot be said to be clear beyond reasonable doubt that cl 34 requires pricing of every variation individually,

(1) the claims made by DM Civil founded on [19] and sch C are in the nature of global claims and modified total cost claims;

(2) the statement of claim fails to plead necessary elements of a modified total costs claim, namely that:

(a) there was no alternative cause, for which Karara was not contractually responsible, for the costs incurred by DM Civil in performing the Affected Works; and

(b) the costs incurred by DM Civil in completing the Affected Works were reasonable;

(3) DM Civil should plead that it is impossible or impracticable to identify what part of its loss is attributable to each head of its claim or relevant conduct on the part of Karara;

(4) [19] [34] should be struck out on these grounds;

(5) further, [23] [27] should be struck out on the grounds identified in [85] [88] of these reasons; and

(6) the remainder of the grounds advanced by Karara for striking out the statement of claim should be rejected.

100 Karara requires an extension of time to bring this application to strike out. Karara's delay in applying to strike out is adequately explained in Ms Morrow's affidavit. Appropriately, the parties engaged in conferral in an attempt to avoid the need for a strike out application, or to narrow its scope. In my view, the striking out of the statement of claim, and repleading by DM Civil, is conducive to the efficient and just management, progression and resolution of the action. An extension of time to apply to strike out should be granted, and [19] [34] of the statement of claim should be struck out, with leave to replead.

101 I will hear from the parties as to the precise terms of the orders, and as to costs.

[6] [10.1], [10.2], [10.3], [10.4].

[26] Rules of the Supreme Court 1971 (WA) O 20 r 19(1a).

[27] Rules of the Supreme Court 1971 (WA) O 20 r 19(1)(c).

[28] See, for example, the cases referred to by Edelman J in Rayney v The State of Western Australia [No 5] [2014] WASC 147 [15].

[29] Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 [4] [7].

[30] See also MacMahon Contractors Pty Ltd v Woodside Energy Ltd [2008] WASC 271; Lonsdale Investments Pty Ltd v OM (Manganese) Ltd [2009] WASC 188 [3].

[31] Charlie Carter Pty Ltd v The Shop Distributive & Allied Employees Association of Western Australia (1987) 13 FCR 413, 417; Lonsdale Investments v OM (Manganese) Ltd [5].

[32] Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd [1987] FCA 84; (1987) 14 FCR 215, 221 222; Lonsdale Investments v OM (Maganese) Ltd [33].

[33] See Kimberley Downs Pty Ltd v The State of Western Australia (Unreported, WASC, Library No 6414) 6-7, applied in numerous cases, as to which see Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162 [44].

[34] Hart-Roach v Public Trustee (Unreported, WASC, Library No 980044, 11 February 1998); Kidd v Mitchell Frederick Artus trading as Downings Legal [2013] WASC 264 [26].

[35] John Holland Pty Ltd v Kvaerner R J Brown Pty Ltd (1996) 8 VR 681 [14]; John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2004] SC 713 [11], [12]; McGrath Corporation Pty Ltd v Global Construction Management (Qld) Pty Ltd [2011] QSC 178 [127].

[36] John Holland Pty Ltd v Kvaerner [15]; John Doyle v Laing [11]; McGrath Corporation v Global Construction [130].

[42] John Holland Pty Ltd v Kvaerner [14] [15].

[44] McGrath Corporation v Global Construction [129].

[46] McGrath Corporation v Global Construction [129].

[47] See also Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [No 3] [2012] VSC 99 [613].

[50] McGrath Corporation v Global Construction [131].

[51] BGC Residential Pty Ltd v Fairwater Pty Ltd [2012] WASCA 268 [41].

[52] Alexander v Cambridge Credit Corporation (1987) 9 NSWLR 310; BGC Residential Pty Ltd v Fairwater Pty Ltd [42] - [43]; Nouvelle Homes Pty Ltd v G & M Smargiassi [2008] WASC 127 [86]; Australian Goldfields NL v North Australian Diamonds NL [2009] WASCA 98; (2009) 40 WAR 191, 271 [282].

[53] Nouvelle Homes Pty Ltd G & M Smargiassi [87].

[54] See John Holland Pty Ltd v Kvaerner [13].

[55] John Doyle v Laing [16] [18]; Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 [486].

[58] Letter of 10 December 2013 [3]; letter of 15 January 2014 [9].

[60] John Holland Pty Ltd v Kvaerner [22] [23].

[62] Nauru Phosphate Royalties Trust v Mathew Hall Mechanical & Electrical Engineering [1994] VicRp 67; (1994) 2 VR 386, 406 407; John Holland Pty Ltd v Kvaerner [20].

[66] Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [No 3] [2012] VSC 99 [614]; Banabelle Electrical v State of New South Wales [2005] NSWSC 714 [86] [89].

[67] Walter Lilly v Mackay [486(a)].