DM DRAINAGE & CONSTRUCTIONS PTY LTD as Trustee for DM UNIT TRUST t/as DM CIVIL -v- KARARA MINING LTD [2014] WASC 170 (19 May 2014)

DM DRAINAGE & CONSTRUCTIONS PTY LTD as Trustee for DM UNIT TRUST t/as DM CIVIL -v- KARARA MINING LTD [2014] WASC 170 (19 May 2014) - WASC 2014 case summary — Zoe

[67]

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.

[97]

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.

[99]

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.

[126]

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.

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Judgment (195 paragraphs)

DM DRAINAGE & CONSTRUCTIONS PTY LTD as Trustee for DM UNIT TRUST t/as DM CIVIL -v- KARARA MINING LTD [2014] WASC 170 (19 May 2014)

Legislation Cited (1)

Cases Cited (9)