E A Negri Pty Ltd v Technip Oceania Pty Ltd [2010] VSCA 44

PRACTICE AND PROCEDURE - Whether primary judge erred in dismissing application to stay, or strike out, amended counterclaim - Whether primary judge erred in refusing separate trial of claims made against third party in amended counterclaim - Decisions interlocutory - Whether attended by sufficient doubt to warrant grant of leave to appeal - Leave to appeal refused.

1 The Woodside Otway Gas Plant Project ('the Project') is a major development involving the construction of a gas plant at Port Campbell. Woodside Energy Ltd, the developer, engaged Technip Oceania Pty Ltd ('Technip'), the respondent to this application, as the main contractor to undertake the construction of the plant. Technip, in turn, engaged Vetco Aibel Australia Pty Ltd[1] ('Vetco') to be general works sub-contractor on the Project. Under its contract with Technip, Vetco was permitted to sub-contract works to third parties, in which event Vetco would be reimbursed by Technip for the costs of those works, together with a fee of 8.66%.

2 The applicant, E A Negri Pty Ltd ('Negri'), is a civil works and plant hire contractor. By two agreements dated 15 November 2004 (later modified), and 12 January 2005, Negri was retained by Vetco to carry out earthworks and road construction on the Project. Those works were substantially completed by about June 2005. On 20 June 2005, Technip, as principal, and Negri, as sub-contractor, entered into an oral agreement whereby Negri would carry out additional works for which Technip would be directly responsible. The agreement was that Negri would be renumerated for the additional works in accordance with the existing rates and prices, as varied from time to time, charged by Negri to Vetco for carrying out the earlier works.

3 By Writ and Statement of Claim, dated 3 December 2008, Negri commenced proceedings against Technip in the Building Cases Division of the Commercial List of the County Court. It claimed that Technip had failed to pay for all of the additional civil works that Negri had undertaken. It sought to recover the outstanding amount of $9,830,833.24.

4 By its Defence and Amended Counterclaim, dated 10 March 2009, Technip denied Negri's claim. Technip maintained that, in fact, it was owed $1,209,119 by Negri.[2] Put simply, it claimed that that sum was the product of a series of overpayments that had been made to Negri in the period leading up to June 2005, while Negri was sub-contracted to Vetco. Technip sought payment of that sum on two bases. First, that Negri had contravened s 52 of the Trade Practices Act 1974 (Cth), or s 9 of the Fair Trading Act 1999 (Vic), by engaging in misleading or deceptive conduct, and secondly, that Technip had made the 'overpayments' in the mistaken belief that it was legally obligated to do so.[3]

5 The matter is complicated somewhat by the fact that, in its Amended Counterclaim, Technip made identical claims, under both misleading or deceptive conduct, and in restitution, against Vetco. By an arrangement between the parties, Vetco, though named as second defendant to the Amended Counterclaim, has not yet filed any pleading in response. Vetco is awaiting the outcome of Negri's application to have the Amended Counterclaim stayed or 'struck out'.

6 In the Amended Counterclaim, Technip pleaded, as against both Negri and Vetco, that its contract with Vetco contained the following implied terms:

• Vetco would carry out its obligations with 'reasonable competence and economy'; and
• Vetco's entitlement to any costs associated with the Project would be 'limited to such costs as are reasonably incurred'.[4]

7 Technip alleged that the amounts claimed by Negri in the invoices for works which it carried out on the Project as Vetco's sub-contractor exceeded the costs of carrying out those works with 'reasonable competence and economy'. It alleged that it had paid Vetco in full for the amounts Negri claimed under the invoices, together with the agreed fee of 8.66%. It claimed that it had paid those amounts under a mistaken belief, namely that the amounts claimed for the works did not exceed the amounts to which either Vetco, or Negri, were otherwise entitled.

8 Technip claimed that, to the extent that Negri had no legal entitlement to the money it received from Vetco, Negri was unjustly enriched at Technip's expense.

9 The matter was transferred from the County Court to the Supreme Court in about May 2009.

10 By Summons filed in the Technology, Engineering and Construction List of the Commercial and Equity Division of the Supreme Court, dated 2 October 2009, Negri sought a stay, pursuant to r 23.01 of the Supreme Court (General Civil Procedure) Rules 2005, of each of the claims made against it in Technip's Amended Counterclaim. Negri contended that Technip's attempt to rely upon mistake, as a basis for a claim in restitution, was misconceived. It argued that Technip's pleading failed to disclose a cause of action, and was 'scandalous, frivolous, or vexatious, and/or an abuse of the process of the Court'.[5]

11 The Summons also spoke of the counterclaims brought by Technip being 'struck out'. However, it did so only under the rubric of r 23.01. That rule deals only with the stay of any proceeding generally, or in relation to any claim, or alternatively, summary judgment in a proceeding generally, or in relation to any claim.

12 Importantly, r 23.01 makes no provision for any pleading to be 'struck out'. The power to 'strike out' a pleading is specifically conferred by r 23.02. The relevance of Negri's failure to invoke r 23.02 will be considered later in these reasons for judgment.

13 There were two bases upon which Negri sought a stay of the Amended Counterclaim.

14 The first was that no claim could be made for monies paid under mistake of law in circumstances where the recipient of those monies had been paid them not by the payer (Technip), but rather by a third party (Vetco). Negri argued that, as the monies had been paid by Vetco under a contractual arrangement between Vetco and itself (to which Technip was not party), Technip could not avail itself of the remedy of restitution.

15 The second related to deficiencies in the manner in which the misleading or deceptive conduct claims had been pleaded, including in particular, Technip's failure to allege reliance upon any misrepresentation.

16 On 30 November 2009, Vickery J dismissed Negri's Summons. His Honour concluded that, contrary to Negri's submission, Technip's claims were not 'hopeless' and were 'at the very least... arguable'. He refused to order that the Amended Counterclaim be struck out, pursuant to r 23.02, and rejected Negri's contention, as set out in its Summons, that Technip's claims against Vetco should be the subject of a separate trial.

17 Negri now seeks leave to appeal from that judgment.

18 The orders under challenge before this Court are, plainly, interlocutory in nature.[6] Leave to appeal is therefore required.

19 The principles applicable to the grant of leave to appeal from interlocutory orders are well established.[7] They are conveniently set out in Herald & Weekly Times Pty Ltd v Buckley:[8]

Leave to appeal against an interlocutory order ought not be granted unless manifestly wrong or, as it is more often put, attended by sufficient doubt to warrant appellate intervention, and productive of substantial injustice. The court ought exercise particular caution in interfering with an exercise of discretion in relation to an interlocutory matter of practice and procedure, and appellate restraint is especially desirable in complex cases like this which are being case managed.[9]

Rule 23.01 - Summary dismissal

20 Negri submitted that leave to appeal should be granted because Vickery J had erred in failing to stay, or summarily dismiss, Technip's claims as set out in the Amended Counterclaim. Negri argued before us, as it had below, that Technip's reliance upon mistake of law as the basis for a claim in restitution was misconceived, and that its failure to plead reliance was fatal to its claims for misleading or deceptive conduct.

21 The power to stay, or summarily dismiss a claim as disclosing no reasonable cause of action must be exercised with caution, and only in the clearest of cases.[10] If it appears that there is a real question to be tried, whether of fact or law, and the rights of the parties depend upon the answer to that question, it is not competent for the Court to dismiss an action as frivolous, vexatious or an abuse of process.[11]

22 As Ormiston J stated in State Electricity Commission of Victoria v Rabel: [12]

... in order to dismiss summarily an action at a preliminary stage, it must be 'very clear indeed' that the action is 'absolutely hopeless' or 'so clearly untenable that it cannot possibly succeed'.[13]

23 These principles were correctly stated and, in our view, correctly applied by Vickery J.[14]

24 It is now well established that payments made under mistake of law can be recovered by way of restitution.[15] Thus, a person who pays money due to a mistaken construction of a contract, or mistaken belief as to its validity, may have a right of recovery.[16] The law on this point is complex, and not yet finally settled.

25 In David Securities Pty Ltd v Commonwealth Bank of Australia,[17] the High Court held that monies paid in the mistaken belief that the payer was under a legal obligation to pay them may be the subject of a claim for restitution. The majority (Mason CJ and Deane, Toohey, Gaudron and McHugh JJ) said:

the payer will be entitled prima facie to recover moneys paid under a mistake if it appears that the moneys were paid by the payer in the mistaken belief that he or she was under a legal obligation to pay the moneys or that the payee was legally entitled to payment of the moneys. Such a mistake would be causative of the payment.[18]

The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution.[19]

27 Before us, Senior Counsel for Negri sought to distinguish David Securities Pty Ltd. He pointed to the fact that, unlike the situation that arose in that case, where the Commonwealth Bank received from its customer more monies than were legally owing, Negri was not a recipient of funds paid by Technip. Rather, it had an independent entitlement to be paid by Vetco under its own contract with that entity, and Technip was not party to that agreement.

28 However, it is clearly established that, in order to succeed in a claim for restitution, it is not necessary for a plaintiff to show that the parties were in a contractual relationship.[20] It has also been held that it is not necessary that the mistake be as between payer and payee.

29 Lipkin Gorman v Karpnale Ltd[21] is illustrative of this proposition. There, a partner of a law firm had, without the firm's consent, drawn on the firm's account and lost the money at a gambling club. The firm sued the club for monies had and received. The House of Lords held that there should be restitution because the gambling club had been unjustly enriched at the expense of the firm. It is important to note that, in their Lordships' view, this was a personal remedy, and did not involve the imposition of a constructive trust.

30 Lipkin Gorman has been characterised as 'a controversial statement' of restitution law in an 'unjust enrichment' framework.[22] In Roxborough v Rothmans of Pall Mall Australia Ltd,[23] Lipkin Gorman was cited without apparent disapproval. Subsequently, in Farah Constructions Pty Ltd v Say-Dee Pty Ltd,[24] the High Court referred to Lipkin Gorman as one of a number of cases upon which the New South Wales Court of Appeal had wrongly based one aspect of its reasoning.[25] However, the High Court went no further than to distinguish Lipkin Gorman. It did not say that the case was wrongly decided. Accordingly, whether Lipkin Gorman will be followed in this country remains to be seen.

31 In Spangaro v Corporate Investment Australia Funds Management Ltd,[26] Finkelstein J held that, in order to obtain restitution on the basis of unjust enrichment, a plaintiff must establish only that:

• the defendant was enriched;
• at the plaintiff's expense;
• the enrichment was unjust (according to defined categories developed in the cases); and
• no restitutionary or other defences would preclude restitution being made.[27]

32 There is nothing in Spangaro to suggest that Technip's claim in restitution is misconceived, or untenable. Indeed Spangaro suggests that the requirement that the defendant's enrichment be 'at the expense of the plaintiff' can be satisfied even where the defendant received the money from a third party intermediary, rather than from the plaintiff.[28]

33 Negri sought, before us, to distinguish both Lipkin Gorman and Spangaro. It submitted that, properly understood, restitution was available in these cases, not based on mistake, but rather on a total failure of consideration. While it is true that both Lipkin Gorman and Spangaro can be distinguished on this basis, it can also be said that they each point to the potential breadth of the concept of unjust enrichment, as it is developing in the common law.

34 It is important to bear in mind that the boundaries of restitution and unjust enrichment have not yet been finally determined. Such concepts are in a state of flux. As Gummow J observed, in Roxborough, case by case development of the concept of unjust enrichment is preferable and the rules and remedies of restitution should develop in accordance with its auxiliary and gap filling role to avoid unjust results in individual cases.[29]

35 Similarly, in Westdeutsche Landesbank Girozentrale v Islington London Borough Council, [30] Lord Woolf said:

Restitution is an area of the law which is still in the process of being evolved by the courts. In relation to restitution there are still questions remaining to be authoritatively decided.[31]

36 It is also relevant to note that, as Gummow J emphasised in Roxborough, the judicial development of restitution has increasingly emphasised substance over form.[32]

37 Senior Counsel for Negri acknowledged before us that he had been unable to find any case which stood, definitively, for the proposition that Technip's intended reliance upon mistake, as the basis for restitution, was untenable.

38 In a developing area of law, such as this, the absence of any binding authority rejecting a claim of this nature leads us to conclude that such a claim cannot be regarded as being so clearly hopeless that it cannot possibly succeed. That was the conclusion reached by Vickery J, and one with which we respectfully agree. It follows that his Honour's rejection of Negri's application for a stay under r 23.01 is not attended with sufficient doubt to warrant the grant of leave to appeal.

39 For the sake of completeness, we note that Senior Counsel for Negri, during the course of his submissions before us, identified a number of supposed deficiencies in the manner in which both the claim in restitution, and the claims in misleading or deceptive conduct, had been pleaded by Technip in the Amended Counterclaim. It was submitted, in particular, that Technip had failed to plead the material facts by which it was alleged that Technip had relied upon any misleading or deceptive conduct, or that its loss was caused by the alleged contravention.

40 It is likely, in our view, that Technip's pleading is deficient in several respects, just as Negri contends. There may also be a need for further and better particulars to be provided in relation to some of Technip's claims. However, Negri has not, to this point, formally requested such particulars. Nor has it specifically invoked r 23.02 as the basis for a strike out application, as distinct from having elliptically done so. In those circumstances, it would be wrong to use pleading deficiencies as the basis for the extreme course of staying, or summarily dismissing, Technip's claims, under r 23.01.

Rule 23.02 - The refusal to make a strike out order

41 To the extent that Negri's application could be regarded as having been brought pursuant to r 23.02, as well as r 23.01, that application was refused by Vickery J on the basis that a strike out had not been sought until after the conclusion of oral argument. His Honour observed that the matter had first been raised in an email from Negri's solicitors to his Honour's Associate, and had not been claimed as relief in Negri's original Summons of 2 October 2009.

42 The relevant part of that Summons was in the following terms:

Pursuant to Rule 23.01 of the Rules that the counterclaims by the Defendant/Plaintiff by counterclaim against the first Defendant by Counterclaim, E.A. Negri Pty Ltd, ("Negri") in paragraphs 33(b), 35, 36, 37, 46, 49, 50 and 51 of the Amended Counterclaim be stayed or struck out on the grounds that they do not disclose a cause of action, are scandalous, frivolous or vexatious and/or are an abuse of the process of the Court.[33]

43 Negri submitted that, although the Summons did not refer in terms to r 23.02, such a reference was to be inferred from the alternative claim that the Amended Counterclaim be 'struck out'. It submitted that r 23.02 was necessarily invoked since it alone confers power to 'strike out' a pleading. Rule 23.01 is confined to applications to stay, or summarily dismiss.

44 It is apparent from a review of the transcript that both the primary judge, and Senior Counsel for Technip approached this matter on the basis that Negri was not making an application pursuant to r 23.02. The relevant passage involves an exchange between his Honour and Mr Almond SC, Senior Counsel for Technip:

HIS HONOUR: In other words what we're saying is that the claim, even if it's repleaded, doesn't make - can't possibly succeed, that's what they're saying under 23.1. They're not, it seems, making an application pursuant to Order 23.02 to strike out the pleading.

MR ALMOND: No.

HIS HONOUR: ... as a defective pleading.

MR ALMOND: That's correct.

45 Mr Golvan QC, Senior Counsel for Negri, then interjected:

MR GOLVAN: We believe that the submission has been made in that direction, Your Honour.

HIS HONOUR: Well, your summons doesn't say that, Mr Golvan.

46 If that comment was Mr Golvan's attempt to ensure that r 23.02 was specifically invoked as part of his submissions, we can only observe that the argument was barely pressed.

47 It should be noted that r 23.01 which governs stays, or summary dismissal, and r 23.02 which governs the 'strike out' of pleadings, differ in a number of respects. For example, on an application under r 23.01, any party may rely on affidavit evidence in support of, or opposition to, summary judgment.[34] However, under r 23.02, the Court is bound to consider only what appears in the pleading itself.[35]

48 It was submitted before us that, had Negri squarely formulated an application for relief under r 23.02 , Technip's response would have been different. It might, for example, have conceded some deficiencies in its pleading, and sought to rectify them. It might have responded to a claim that its particulars were inadequate by seeking to make good that deficiency. In the circumstances, and having regard to the way in which the matter had been argued, it would have been quite unfair to Technip, in our view, for his Honour to have struck out its claims on the basis of pleading deficiencies.

49 On the question of prejudice, we note that Negri is not precluded from bringing such an application in the future.

50 Vickery J declined to make an order splitting the proceeding in the manner sought by Negri. His Honour's reasons read as follows:

The principal submission advanced by Negri was that the counterclaims raised by Technip significantly enlarge the issues before the Court and are in respect of separate and substantial claims. It was submitted, therefore, that it is inconvenient and unjust to Negri to permit the counterclaims to be heard in the same proceeding as the claims by Negri against Technip when they can and should be heard in a separate proceeding.

However, I accept the submissions advanced by Technip, that there is likely to be factual overlap between the facts which found Negri's claim and the case proposed to be advanced by Technip in its amended counterclaim. This was described by senior counsel for Technip, Mr Almond QC, as 'a complete and total overlap'. He said further that 'the claims and the counterclaims are inherently intertwined'. Mr Almond also submitted that one of the issues in the case will be the extent to which the works performed under the C1 Contract and the C2 Contract overlapped with the works performed under the Additional Works Contract.

Although I am not yet in a position to determine the precise extent of the overlap, I am satisfied that there is a reasonable prospect of this occurring and there are likely to be common issues in the proceeding, particularly on the question as to what works were in fact done on the Project by Negri, and whether those works or any part of them were undertaken for Vetco or for Technip and under which contract. This becomes plain when the invoices referred to in argument are examined. They prima facie indicate a degree of temporal overlap between the work performed and services provided by Negri under the different contractual regimes.

Although these matters were put in issue by Mr Golvan QC who appeared for Negri, the finding that I have made drives me to the conclusion that, in the exercise of my discretion, I should decline to make orders permitting Negri's claims against Technip to proceed separately from the trial of Technip's amended counterclaim.[36]

51 There is some uncertainty as to whether Negri maintains that all counterclaims presented by Technip should be tried separately from Negri's claim against Technip, or whether it is only Technip's counterclaims against Vetco that fall within that contention. Vickery J appears to have understood the argument to be that all counterclaims should be tried separately. On one view, that is still the position taken by Negri, although it must be said that neither its written submissions in support of leave to appeal,[37] nor the oral submissions presented before us, make that entirely clear. In the end, it probably makes little difference.

52 In the event, Negri argued below, and before us, that there were no substantial overlapping issues between its claim against Technip, and the various claims raised in Technip's Amended Counterclaim. It submitted that hearing these matters together would both delay, and considerably extend the length of the trial. It argued that there could be no injustice or inconvenience to Technip in directing that separate trials take place.

53 The primary judge is the head of a specialist list and is well accustomed to hearing complex matters of this nature. His Honour's direction that the trial of both Negri's claim, and Technip's counterclaims, be heard together involves an exercise of discretion and calls upon judgment and experience in matters of case management, and practice and procedure. It would be unusual for this Court to grant leave to appeal against an exercise of discretion of that kind. We are not persuaded that his Honour's refusal to order separate trials was wrong, or that his decision is attended by sufficient doubt to warrant the grant of such leave.

54 For the reasons given, we refuse Negri's application for leave to appeal.

[2] Technip has other claims against Negri involving larger amounts, as well as larger claims against Vetco, as set out in its Prayer for Relief in the Amended Counterclaim. It is unnecessary for present purposes to set these out.

[3] David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353.

[4] Respondent's Amended Counterclaim, dated 10 March 2009, [22].

[5] Applicant's Summons, dated 2 October 2009, [5].

[6] See Doundoulakis v Antony Sdrinis & Co [1989] VicRp 68; [1989] VR 781, 782.

[7] See generally Niemann v Electronic Industries Ltd [1978] VicRp 44; [1978] VR 431; and Decor Corp Pty Ltd v Dart Industries Inc [1991] FCA 655; (1991) 33 FCR 397.

[8] [2009] VSCA 75; (2009) 21 VR 661.

[10] General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125, 128-130; Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd [2008] FCA 1458; (2008) 251 ALR 166, [6].

[11] Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, 91.

[12] [1998] 1 VR 102.

[13] Ibid, 109 (citations omitted). See also Andeco Construction Group Pty Ltd v Greater Union Pty Ltd [2009] VSC 470.

[14] E A Negri Pty Ltd v Technip Oceania Pty Ltd [2009] VSC 543, [16].

[15] David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353.

[16] See generally Mason K., Carter J. & Tolhurst G., Mason and Carter's Restitution Law in Australia, (2nd ed, 2008), [415].

[17] [1992] HCA 48; (1992) 175 CLR 353 ('David Securities Pty Ltd').

[20] See Mason, above n 16, [212]-[213].

[21] [1991] 2 AC 548 ('Lipkin Gorman').

[23] (2001) 208 CLR 516 ('Roxborough').

[24] [2007] HCA 22; (2007) 230 CLR 89.

[26] (2003) 47 ACSR 285 ('Spangaro').

[29] Roxborough (2001) 208 CLR 516, 544.

[30] [1996] UKHL 12; [1996] AC 669.

[32] See also Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344 , 376 where Deane and Dawson JJ said:

'In particular, the notions of good conscience, which both the common law and equity recognized as the underlying rationale of the law of unjust enrichment, now dictate that, in applying the relevant doctrines of law and equity, regard be had to matters of substance rather than technical form.'

[33] Applicant's Summons, dated 2 October 2009, [5].

[34] Rule 23.04(1).

[35] Rule 23.04(2).

[36] E A Negri Pty Ltd v Technip Oceania Pty Ltd [2009] VSC 543, [39]-[42].

[37] Applicant's written submissions, dated 18 December 2009, [8]-[13]. There is an apparent disconformity between [9], which speaks of the unfairness to Negri unless there is a separate trial of Technip's counterclaim against Vetco, and [12(f) & (g)] which seem to call for a separate trial of both that counterclaim, and the counterclaim against Negri. [13] adds to the confusion.