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[2014] VSC 204
Supreme Court of Victoria
2014-06-17
VICKERY J
Original judgment source is linked above.
PRACTICE AND PROCEDURE - DISCOVERY - Supreme Court (General Civil Procedure) Rules - Application for preliminary discovery to found a fresh cause of action under Rule 32.05 - Whether reasonable cause to believe that applicant has or may have a right to obtain relief - Application of the Civil Procedure Act 2010 (sections 7 and 8) to the construction and exercise of the power under r 32.05 -No reasonable cause - Application dismissed.
1 The Plaintiff Applicant, Grocon Constructors ('Grocon') seeks orders for preliminary discovery under Rule 32.05 of the Supreme Court (General Civil Procedure) Rules 2006 (Vic) (the 'Rules').
2 It seeks preliminary discovery in aid of making a decision as to whether to introduce a new cause of action into its existing statement of claim to plead relief arising from allegations of unconscionable conduct in contravention of s 21 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) (the 'ACL').
3 Grocon is of the belief that it has or may have the right to obtain relief from the Defendant, Biosciences Research Centre Pty Ltd ('BRC') under s 21 of the ACL arising from certain events and conduct which occurred on a large construction project in the period from June 2011 to July 2012. However, Grocon considers that it does not have sufficient information to decide whether to commence, what on its case it says would be very significant legal proceedings against BRC founded upon this cause of action that would be required to obtain such relief. Grocon believes BRC has in its possession documents which are relevant to this question. Consequently, Grocon requests that BRC provide it with copies of an extensive range of documents, which it has listed in categories, to enable Grocon to make this decision.
4 Grocon relies on r 32.05 of the Rules. Rule 32.05 provides:
Where-
(a) there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description the applicant has ascertained;
(b) after making all reasonable inquiries, the applicant has not sufficient information to enable the applicant to decide whether to commence a proceeding in the Court to obtain that relief; and
(c) there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had in that person's possession any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist the applicant to make the decision-
the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).
5 Grocon is a large construction company. It subcontracted to undertake the design and construction stages of a new research facility at the La Trobe University Campus at Bundoora known as the Biosciences Research Centre (the 'Facility'). The project was big and costly.
6 The relevant contractual arrangements arose as follows: the principal to the project, Biosciences Research Centre Pty Ltd ('BRC'), which is the Defendant and respondent to this application, entered into a Project Agreement, dated 30 April 2009 (the 'Project Agreement'), with Plenary Research Pty Ltd ('Plenary'). Plenary, by a contract dated 13 May 2009 subcontracted the design and construction of the Facility to Grocon ('the Construction Contract').
7 Major Projects Victoria ('MPV') was engaged to manage the design and construction of the Project. Pursuant to this arrangement, MPV was responsible for performing the day to day management and delivery of the project on behalf of BRC.
Completion Dates and Extension of Time Provisions
8 The Project Agreement provided for various completion dates including a Date for Technical Completion (originally set at 1 July 2011) and a Date for Commercial Acceptance (originally set at 16 August 2011) for the Project. Under clause 26.1 of the Project Agreement Plenary was obliged to, among other matters, achieve Technical Completion by the Date for Technical Completion and Commercial Acceptance by the Date for Commercial Acceptance.
9 The Construction Contract adopted those same dates for Technical Completion (defined in the Construction Contract as 'D&C Technical Completion') and Commercial Acceptance (defined in the Construction Contract as 'Final Completion') and imposed the same obligation to achieve completion by those dates.
10 Both the Project Agreement and the Construction Contract contained provisions relating to progress of the works, entitlement to make and submit extension of time claims ('EOT ') and associated costs for delay to completion in certain circumstances, and a mechanism for the manner in which any dispute about an extension of time claim was to be resolved.
11 The Project Agreement EOT provisions are contained in clause 26. Plenary's entitlement to an EOT is set out in Clause 26.4 of the Project Agreement.
12 Clause 26.9(a) of the Project Agreement provides that, if the conditions precedent in clause 26.5 have been satisfied, the Project Director will extend the relevant Date for Completion by a reasonable period determined by the Project Director. A unilateral power to extend is provided for under clause 26.10 of the Project Agreement.
13 Clause 26.16 of the Project Agreement provides that:
any dispute about an extension of time or acceleration under this Clause 26, including a determination or rejection of an extension by the Project Director ... under Clause 26.9, may be referred by either party for resolution by an Independent Expert in accordance with the Accelerated Dispute Procedures ...
14 The Construction Contract EOT provisions are also contained in clause 26 in a manner essentially equivalent with those in the Project Agreement, which may be summarised as follows:
1. Clause 26.1 - obligation to achieve D&C Technical Completion by the Date for D&C Technical Completion and Final Completion by the Date for Final Completion;
2. Clause 26.4 - delays entitling Grocon to claim an EOT;
3. Clause 26.9 - subject to the satisfaction of conditions precedent the Independent Certifier will extend the relevant date by a reasonable period determined by the Independent Certifier in the following circumstances:
a. where BRC has given Plenary an EOT for an Extension Event under the Project Agreement to the Date for Technical Completion or Date for Commercial Acceptance and, subject to Clause 55A, if the Builder's claim for an extension of time is a BRC Linked Claim; or
b. where the delay is caused by a Construction Extension Event or a BRC Linked Claim to which Clause 55A.3 applies;
4. Clause 26.16 - subject to clause 55,[1] any dispute about an EOT claim, including a rejection of an extension, may be referred for resolution to an Independent Expert in accordance with the Accelerated Dispute Resolution Procedures.
15 As is usual in contracts of this type both the Project Agreement and the Construction Contract provide a dispute resolution mechanism. The Accelerated Dispute Resolution Procedures referred to in clause 26.16 are set out in Clause 52 of both the Project Agreement and the Construction Contract.
16 The Construction Contract also provides for the manner in which certain claims between Grocon and Plenary might be addressed in circumstances where the claimed entitlement is in respect of the same circumstances, act or omission as a claim between Plenary and BRC. This is set out in clause 55A of the Construction Contract entitled 'BRC Linked Claims and Entitlement'.
17 This was a beleaguered project hampered by delay and conflict.
18 The Project Agreement was amended by an Amending Deed dated 16 June 2011 ('PA Amending Deed'). By the PA Amending Deed, the Date for Technical Completion under the Project Agreement was deferred from 1 July 2011 to 19 October 2011 and the Date for Commercial Acceptance was deferred from 16 August 2011 to 30 November 2011.
19 A similar Amending Deed (the 'CC Amending Deed') was concluded between Plenary and Grocon extending the dates for D&C Technical Completion and Final Completion under the Construction Contract so as to match those under the Project Agreement.
20 By about September 2011, Grocon determined that it could not achieve D&C Completion (and therefore Final Completion) by the due dates. In October 2011, shortly before the Date for D&C Technical Completion had been reached, Grocon made three EOT claims under the Construction Contract claiming that the delay was due to three directions given by BRC in September 2011. They were:
1. a claim in relation to works associated with an area known as the 'PC3 suite' seeking initially a 133 working day[2] EOT relating to the installation of insect mesh to accommodate insect research in that area (the 'PC3 claim');
2. a claim seeking initially a 123 working day EOT relating to compliance of the facility with numerous accreditation requirements (the 'Accreditation claim'); and
3. a claim seeking a 25 working day EOT relating to BRC's proposed methodology and extent of testing for validating that the Facility is fit for purpose including complying with all the accreditation requirements (the 'Additional Testing claim').
21 Grocon was therefore forecasting in October 2011 that it would be delayed in achieving Technical Completion under the Construction Contract until 31 May 2012 and achieving Commercial Acceptance until about 12 June 2012.
22 Plenary passed these three EOT claims on to BRC as claims by Plenary for equivalent EOTs under the Project Agreement.
23 In November 2011, the Project Director rejected all three of Plenary's EOT claims, including on the grounds that the works were matters within Plenary's existing contractual requirements and therefore did not involve any additional work and that in any event the alleged delay caused by these matters had not been substantiated. Plenary in turn rejected Grocon's EOT claims.
24 In late November 2011, Grocon served on Plenary a Notice of Dispute and Submissions under clause 50.2 of the Construction Contract. Grocon sought to dispute the Project Director's and/or Plenary's rejection of the three EOT claims and raised other disputes with Plenary under the Construction Contract (some of which did not concern BRC).
25 Shortly thereafter Plenary served a Notice of Dispute on BRC also seeking to challenge the Project Director's rejections of the three EOT claims under the Project Agreement.
26 By their Notices of Dispute (so far as they involve matters relating to BRC), both Grocon and Plenary sought an extension of time of 226 days to the Date for Technical Completion and the Date for Commercial Acceptance. Grocon sought financial compensation from Plenary under the Construction Contract for prolongation costs of approximately $15.5m, or approximately $68,000 a day. Plenary sought financial compensation from BRC of approximately $14m, or approximately $62,000 a day, for financing costs and recovery of the $15.5m prolongation costs sought by Grocon.
The Notice of Dispute and Proceedings Between Plenary, Grocon and BRC
27 Following the delivery of Plenary's Notice of Dispute, BRC sought the referral of the EOT (and related) claims to expert determination. Plenary refused a referral to expert determination on the basis that it was entitled to refer the claims to arbitration. Grocon took a similar position.
28 BRC commenced proceedings by way of Originating Motion on 1 May 2012. In those proceedings BRC sought a declaration that the Project Agreement required the dispute the subject of Plenary's Notice of Dispute be resolved by an Independent Expert in accordance with the Accelerated Dispute Resolution Procedures set out in clause 52 of the Project Agreement.
29 BRC's application for declaratory relief was heard on 21 May 2012. Judgment was delivered on 19 June 2012.[3] Croft J. found that subclause 26.16 of the Project Agreement required that the dispute which was the subject of Plenary's Notice of Dispute be resolved by an Independent Expert. Orders were made on 4 July 2012. Plenary appealed that decision on 18 July 2012. The appeal was heard on 17 May 2013. The Court of Appeal delivered judgment on 20 August 2013 confirming that, for all but one aspect of Plenary's Notice of Dispute relating to incentive payments, the appropriate forum for resolution of the dispute was by way of expert determination. [4]
30 There has been no further resolution of the EOT claims to date. Completion was certified under the Project Agreement as follows:
1. Date of Technical Completion - 19 June 2012; and
31 The Independent Certifier certified D&C Technical Completion under the Construction Contract on 19 June 2012 and Final Completion on 18 July 2012.
32 By letter dated 28 November 2012 Grocon delivered to BRC a claim for loss and damage it alleged it had suffered as a result of the conduct of BRC and its representatives during the project. The claim was extensive and detailed. Including attached schedules, it extended to 77 pages and was supported by two folders of documents (the 'November 2012 Claim'). This was a non-contractual set of 'claims' in that the procedure was not specifically contemplated by any contract between any of the relevant parties.
33 Grocon alleged in its November 2012 Claim in summary, that 'throughout the delivery of the Project, the conduct of BRC Co and its delegates has fallen far short of the standards reasonably expected of them. Grocon has previously touched upon some of BRC Co and its delegate's impugned conduct. However, given BRC Co's failure to respond to Grocon's previous claims within the contractual time limits, and its failure to ever properly engage with the substantive allegations, Grocon has been left with no alternative but to advance this claim in order to protect its position and pursue its rights.'
34 In its November 2012 Claim, Grocon set out events following or in connection with entry into the PA Amending Deed and the CC Amending Deed which it said it relied upon in support of allegations that:
(a) BRC engaged in conduct that was misleading or deceptive or was likely to mislead or deceive;
(b) the representations relied upon were false and misleading and/or deceptive, and/or likely to mislead or deceive and BRC and/or the Project Director did not have any reasonable basis for making the representations. Alternatively, at the time, the representations were made by BRC and/or the Project Director, they were knowingly false; and
(c) BRC engaged in conduct that was, in all the circumstances, unconscionable.
35 The November 2012 Claim outlined in some detail the factual and legal basis said to found Grocon's unconscionable conduct claims.
36 As to the principal conduct which Grocon relied upon in its November 2012 Claim to support its allegations of unconscionable conduct, it said the following:[5]
[50] Up until around mid-August 2011, Grocon reasonably believed that BRC Co and the prospective Facility Users wanted to and intended to begin occupying the Facility as soon as possible, or at least from the then proposed dates of Commercial Acceptance. For this reason, Grocon reasonably believed that the Project Director and BRC Co had a commercial incentive to work with it to ensure that the Project was completed on time.
[51] In fact, it is now apparent that the Facility Users did not intend to move into the Facility on or around the revised date for Commercial Acceptance, namely 30 November 2011.[6]
[52] In light of this understanding, it is now clear that BRC Co and the Project Director not only lacked any commercial incentive to work with Grocon to ensure the Project was completed on time, they actually had incentives to delay completion (i.e. they had a conflict of interest with Grocon) because:
(a) Grocon bore the running costs of the Facility during any period of delay thereby saving BRC Co from paying those substantial costs when the Facility Users were not in the Facility.
(b) Any delays to Commercial-Acceptance reduced the total operating term and total Quarterly Service Payments (QSPs) payable, and therefore, in effect, the total price paid by BRC Co for the Facility; and
(c) Under MPV's funding structure, it is paid more in management fees the longer that the Project runs.
[53] In circumstances where the Facility Users are not willing or able to relocate to the Facility as intended by the commencement of the Operating Term, there is no actual loss to BRC Co. BRC Co therefore obtains a financial windfall in the form of reduced QSPs where the Project is delayed until such time as the Facility Users are willing and able to relocate to the Facility and the reduced QSPs are therefore a penalty.
[54] As a result of these incentives to delay, it now appears clear (with hindsight) that the BRC Co and the Project Director did not exercise (or purport to exercise) many of their contractual rights in good faith and for a legitimate purpose (for example in reviewing the design to ensure the Facility would meet the needs of the Facility Users), but rather abused and manipulated the contractual machinery to promote their own illegitimate commercial interests.
...
[136] On around 12 September 2011, Grocon issued its Monthly Works Report for the period 1 August 2011 to 31 August 2011 reporting that, as at that time, it forecast Commercial Acceptance may be delayed by 26 calendar days.
[137] Shortly thereafter BRC Co issued three directions in respect of the Works which caused significant delays to the Project. These directions are:
(a) the instruction received from Project Co on 13 September 2011which forwarded BRC Co's confirmation on 12 September 2011 of its correspondence dated 2 September 2011, in respect of PC3, advising that the Builder is to provide:
'insect mesh to accommodate insect research in the PC3 Plant/Micro/lnsect half of the PC3 suite: CERs, Glasshouses, Airlocks to the glasshouses, Plant Growth Cabinets Room, PC3 Common Plant Room, PC3 Plant Prep Lab, PC3 Microlab 1 ('Swing Lab'), and all corridors, airlocks, entry and exit areas that lead off these spaces, including Decon Room'. (PC3 Direction)
(b) the instruction received from Project Co on 26 September 2011, which forwarded BRC Co's Aconex correspondence dated 26 September 2011, in respect of Accreditation, which relevantly stated:
'We attach a copy of the issues that were raised that have a relationship to Accreditation compliance of the Facility for Project Co and Project Co's Accreditation Adviser to consider, and provide the required advice on how these issues are being met, to ensure the Facility can meet the Accreditation Requirements.
The attached document also outlines a list of classifications across the entire Facility, of all the Third Patty Certifiable areas, as well as the AQIS Approved (quarantine) areas. This describes the classification that will be applicable to the Facility, and will be sought by the Users.
Some issue require clarification and response by Project Co. Some issues require AQIS to provide some clarification, BRC Co notes that for issues that do relate to the Facility being able to meet Accreditation Requirements, Project Co must engage with the relevant Authorities (including AQIS) where required to ensure all facility wide issues are addressed to ensure compliance.
BRC Co is concerned that with the current state of construction works, some of the issues noted in the attached document have a correlation to the facility compliance with the Accreditation Requirements, and that some of these matters should have been addressed some time ago, particularly with the Accreditation Authorities such as AQIS. '(Accreditation Direction)
(c) the instruction received from Project Co on 19 September 2011, which forwarded BRC Co's Aconex correspondence dated 19 September 2011, in respect of Schedule 11 Testing, advising that:
'An AQIS Third Party Assessment of the Facility should be included in the Schedule 11 Completion Test requirements as BRC Co is of the opinion that in order for 4.2(a) to be satisfied, at a minimum, Project Co must conduct an AQIS Third Party Assessment of the Facility through an Independent AQIS Third Party Assessor (approved by AQIS) to satisfy all Accreditation Requirements, including all requirements under AQIS ... '(Additional Schedule 11 Testing Direction)
[138] The three Directions referred to above were given at a time when the works were at a very advanced state of completion. Works were being commissioned in accordance with the Completion testing process. Commissioning is an extensive, complex and heavily sequence-dependent process. As a result of BRC Co's directions, Grocon was required to halt the commissioning process, which was partially complete, and re-order and re co-ordinate activities.
...
[144] The directions had a serious impact on the progress of the works and entirely undermined Grocon's attempts to achieve D&C Technical Completion by the Date for D&C Technical Completion.
...
[147] Grocon submitted three extensions of time claims, which were passed on to BRC Co by Project Co, in respect of each of the three directions. Grocon claimed a total of 226 Days delay. Each of these claims was rejected peremptorily and out of time, in disregard of the time limit stipulated under the Project Agreement. For the reasons set out at Section D.5 Grocon reserves its position that time is at large.
[148] Grocon submits that the seriousness of the impact of the instructions on the progress of the Works was exacerbated by BRC Co's failure to issue the instructions promptly and within a reasonable time before the Date for D&C Technical Completion (Technical Completion).
...
[150] Grocon submits that, in light of the instruction from the Project Director as to the change in date for the relocation of Facility Users referred to in Section B, the unreasonable and unjustified delay in the issue of the three directions until such time as the Works were significantly advanced, BRC Co engaged in conduct that is misleading or deceptive and because of this conduct Grocon incurred loss. Further, Grocon submits that such conduct amounts to unconscionable conduct for the purposes of s 21 of the ACL.
37 The central delays referred to in Grocon's November 2012 Claim which were said to have resulted from the instructions given after 12 September 2011, when it was said that the works were at a very advanced state of completion, had been previously advised to Plenary in an earlier letter from Grocon dated 22 March 2012.
38 BRC responded to Grocon's November 2012 Claim in a short and generalised letter more than 7 months later, on 15 July 2013. BRC said that it 'has given careful consideration to Grocon's claim delivered in November 2012' and that BRC 'is satisfied that its personnel have behaved appropriately and has concluded that the claim does not disclose any basis of liability for BRC Co.' and further that 'BRC Co has undertaken a detailed investigation of the various circumstances relied on by Grocon in its claim. Matters investigated include all relevant correspondence (not limited to correspondence referred to in the Claim), interviews with the relevant personnel engaged in the delivery of AgrBio on behalf of BRC Co, and consideration of the legal basis on which the claim was based.'
39 BRC also said that it did not intend to respond to every issue raised in Grocon's November 2012 Claim. Although it dealt briefly with the misleading and deceptive conduct claims, it made no specific mention of the unconscionable conduct claims.
40 In order to succeed on an application for preliminary discovery under Rule 32.04 Grocon must establish:[7]
41 If Grocon establishes these matters, the Court retains a residual discretion as to whether to make an order for preliminary discovery.
General principles of Interpretation and Application of Rule 32.05
The following general principles are not controversial. The rule should be construed benevolently, because it is intended to assist an applicant who does not have sufficient, precise information to commence a proceeding, and to prevent the bringing of speculative suits. It must be given the fullest scope its language will reasonably allow.
It is not necessary to show precisely what cause of action the applicant may have, merely that the facts are such from which it may reasonably be believed that the applicant may have a right to obtain relief. The word 'may' indicates that the putative belief does not have to amount to a firm view that there is a right to relief. Although some 'fishing' enquiry is permitted, a 'flimsy foundation' or 'mere hunch' will not be sufficient to constitute reasonable cause. An applicant does not have to prove that there will be, only that there may be, a real benefit from making the order. The benefit may be the drawing of an appropriate pleading with proper particulars and the avoidance of substantial amendment after discovery, or, alternatively, the possible avoidance of unnecessary and fruitless litigation. (citations omitted)
43 In United Energy Limited v Energy Risk Management Pty Ltd[11] in a decision that has also been since cited with approval,[12] Gillard J discussed the purpose of the Rule. His Honour's observations are particularly relevant in light of the reasons expressed by BRC for resisting production of the documents, and it is appropriate to set out His Honour's observations at some length:[13]
[29] Often in the past a proceeding was instituted in the expectation that the plaintiff had a good cause of action postponing a final decision as to the merits until all the discovery and inspection steps were completed.
[30] If it turned out upon a proper consideration of all relevant documents that the plaintiff did not have a cause of action, it causes, inter alia, much anguish, soul searching and results in wasted legal costs and time. It does nothing for the administration of justice that the party has to go down that path to determine whether he has a good cause of action.
[31] The object of the rule is to avoid that undesirable situation occurring and to enable a prospective plaintiff to see the relevant documents which the prospective defendant has or has had in his possession in order to make an informed decision as to whether he has a good cause of action.
[32] It is clear from the wording of the rule that the applicant does not have to show that he does have a good cause of action before he can obtain his order, and indeed to require him to do so would defeat the very object of the rule.
[33] On the other hand, an applicant would have to show more than a mere hunch, a hope or a suspicion that he may have a good cause of action. The fact that the end result of a successful application is a fishing expedition for evidence is not a ground for refusing relief. See Dunning v United Liverpool Hospitals (1973) 1 WLR 586, 591 per Stamp LJ and Clarkson v DPP [1990] VicRp 65; (1990) VR 745 at 758 per Murphy J.
[35] The prime object of the rule is to enable access to documents to enable an informed decision to be made. The fact that in the process the applicant gathers evidence also, is not a ground for refusing relief; it is an inevitable by product of the procedure.
[36] The rule sets out what matters have to be considered and established on an application and places the onus on the applicant to establish the bases for an order. However, in my opinion the power should be exercised to give effect to the clear purpose of the provision which is to advance the administration of justice, namely, that a prospective plaintiff should be able to make an informed decision whether to proceed or not upon proper material before issuing his proceeding.
[37] By providing this facility to assist the decision making process, speculative or baseless claims can be avoided with a consequential saving in cost and time.
[38] These conclusions lead to a conclusion that the rule should be liberally applied.
...
[43] The rule is to enable a prospective plaintiff to make an informed decision. If an order is not made the only course open to the prospective plaintiff is to issue the proceeding and then put in operation procedures available to gain access to the other party's documents. This may involve an application for an interlocutory injunction in which a subpoena is issued to produce the documents at court on the application. Another course is the discovery process during the interlocutory steps. The practical result will be inspection later rather than sooner and the incurring of legal costs. If a decision is then made to discontinue, costs will have been unnecessarily incurred and time wasted, factors which reflect upon the administration of justice.
The pragmatic approach supports a sooner rather than a later decision and an approach by the court to readily facilitate the making of an informed decision by a prospective plaintiff on proper materials at an early stage. (citations in original)
... The policy behind the rule is that even where there is a reasonable cause to believe that a person may have a right to relief, nevertheless that person may need information to know whether the cost and risk of litigation is worthwhile. As Hely J pointed out in St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147, [26], the question does not concern the right to relief but rather 'whether to commence proceedings'. Inspection of documents in the possession of the proposed defendant may enable a properly informed decision to be made whether to commence a proceeding to obtain the relief. The 'bare pleadable case' approach diverts attention from the true purpose of the rule. A person may have a pleadable case, but still not sufficient information upon which to decide whether to embark upon litigation ...
At present, as his Honour observed, the case that Optiver has is a purely circumstantial one relying upon inference. For all it knows, there may be facts and circumstances which make it equally likely, or more probable than not, that Tibra obtained its software in ways that did not infringe any of Optiver' rights. In our opinion, Optiver has not sufficient information to enable a decision to be made whether to commence a proceeding.
Application of the Civil Procedure Act 2010 (Vic)
45 Grocon contends that the Civil Procedure Act 2010 (Vic) (the 'Civil Procedure Act') further supports an interpretation and application of Rule 32.05 favourable to its position.
46 It relies on the stated purpose of the Civil Procedure Act 'to reform and modernise the laws, practice, procedure and processes relating to civil proceedings in the Supreme Court' and that it has 'an overarching purpose in relation to the conduct of civil proceedings to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute'.[17]
47 Counsel for Grocon urged the Court in submissions to seek to give effect to the overarching purpose of the Civil Procedure Act 'in the exercise of any of its powers, or in the interpretation of those powers, including any procedural Rules'.[18] Grocon also invokes the overarching obligations (contained in sections 18, 19, 23, 24 and 26 of the Civil Procedure Act), which it says impose the obligation on BRC to disclose the existence of all documents which it ought reasonably consider critical to the resolution of the dispute.
48 Counsel for Grocon conceded in submissions that the direct impact of the Civil Procedure Act on the application of Rule 32.05 does not appear to have been the subject of any decision.[19]
49 However, Grocon nevertheless submits that its position is consistent with the terms of the legislation, and also with recent appellate authority on the broader objects of case management and the impact of legislation such as the Civil Procedure Act on the powers of the Courts.[20]
50 Pursuant to s 7 of the Civil Procedure Act, the overarching purpose of the Act is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.
51 Pursuant to s 8 of the Civil Procedure Act, the Court is required to give effect to overarching purpose, inter alia, in the exercise or its powers, or in the interpretation of those powers which arise from its procedural rules. Section 8 provides:
(1) A court must seek to give effect to the overarching purpose in the exercise of any of its powers, or in the interpretation of those powers, whether those powers -
(a) in the case of the Supreme Court, are part of the Court's inherent jurisdiction, implied jurisdiction or statutory jurisdiction; or
(b) in the case of a court other than the Supreme Court are part of the court's implied jurisdiction or statutory jurisdiction; or
(c) arise from or are derived from the common law or any procedural rules or practices of the court.
52 Consistently with giving full effect to the overarching purpose of the Civil Procedure Act and to the observations already referred to in the relevant case law (such as those of Hollingworth J in Beston Parks, above), it is accepted that r 32.05 should be construed benevolently, and that it should be given the fullest scope its language will reasonably allow in its exercise.
53 However, that does not mean that the plain language of the requirements of the Rule should be eroded to the point where the prescribed tests are sucked dry of meaningful content. The tests remain as the defined gateways to the application of the Rule.
54 Rule 32.05(a) requires 'reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description the applicant has ascertained.'
55 It is accepted that the principles guiding the ascertainment of 'reasonable cause' for the purposes of r 32.05(a) include:
1. that the reasonable cause supporting the belief must be objectively established;[21]
2. that the 'reasonable cause to believe' is a belief that the applicant has or may have a right to relief, not a conclusion that a prima facie case in fact exists;[22]
3. that it is not incumbent on the applicant to establish every element of the cause of action, but it is necessary to examine each of the elements of the cause of action, and the evidence must incline the mind towards the matter of fact in question;[23]
4. that the evidence relied upon to found the belief can be circumstantial.[24]
56 Section 20 of the ACL prohibits unconscionable conduct within the meaning of the unwritten law, from time to time. This means that actions relating to unconscionable conduct, which is a concept that has developed in the common law and the principles of equity, may be commenced under the ACL and the remedies provided by the ACL may be applied to a breach of the provision.
57 However, the prohibition against statutory unconscionable conduct, upon which Grocon seeks to rely, is now embodied in s 21 of the ACL. The text of the ACL is the second schedule to the Competition and Consumer Act 2010 (Cth). The text of the schedule is given force of law in Victoria by s 8 of the Australian Consumer Law and Fair Trading Act 2012 (Vic).
58 The prohibition as it currently appears in s 21(1) of the ACL is as follows:
A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to a person (other than a listed public company); or
(b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company);
engage in conduct that is, in all the circumstances, unconscionable.
59 Section 21(1) appears to have been inserted by the Competition and Consumer Legislation Amendment Act 2011 (Cth) s 4.[25] The explanatory memorandum for that Act included the following observations:
2.13 This section does not define 'unconscionable conduct', but it also does not limit it to the concept as understood under the 'unwritten law, from time to time'.
...
2.15 Section 21 does not apply to conduct relating to the supply or possible supply of goods or services to or from a listed public company. [Schedule 2, item 4, paragraphs 21(1)(a) and 21(1)(b) of Schedule 2]. A listed public company is defined in section 2 of the ACL. Such companies do not require the protection of the unconscionable conduct provisions of the ACL.
60 Accordingly, the concept of unconscionable conduct in s 21 of the ACL is not bound by the common law and equitable principles, and while the Court may consider any relevant matters, the ACL specifies a guiding list of factors in s 22.
61 In Director of Consumer Affairs Victoria v Scully & Anor[26] in dealing with unconscionable conduct 'within the meaning of the unwritten law' found in the provisions contained in Part 2 of the Fair Trading Act 1999,[27] the Court of Appeal reaffirmed the element of moral obloquy as an essential element of this cause of action. Santamaria JA, who delivered the judgment of the Court of Appeal said:[28]
[48] ... a distinctive quality of unconscionable conduct as against unreasonable or unfair conduct is that it is unethical. The characteristic of unreasonableness or unfairness may form the basis (or a significant part of the basis) of a conclusion that conduct is unconscionable. As Allsop P said, in Tonto Home Loans Australia Pty Ltd v Tavares,[29] it is necessary to show at least 'some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party'.[30]
[49] ... it is a noticeable feature of all the cases, thus far, in which conduct has been held to be 'unconscionable' that the conduct has been found to be unethical in some manner or other.
62 Based on the information and evidence set out or described in its affidavit material and the November 2012 Claim, Grocon submits that there is reasonable cause to believe that it has or may have the right to obtain relief from the Court founded on claims for unconscionable conduct in that: from July 2011 to July 2012, during the course of the construction of the Biosciences Research Centre Facility, BRC and its agents, MPV, exercised their contractual powers unfairly and unreasonably, in a manner that caused significant loss and damage to Grocon.
63 Grocon also submits that BRC and MPV's impugned conduct was part of a deliberate strategy designed to delay the completion of the Facility, for illegitimate commercial purposes. If this was conduct prompted by a deliberate strategy of this kind, Grocon says that it would have the right to relief for contraventions of s 21 of the ACL.
64 In the events that occurred following the Amending Deeds, Grocon says that BRC and its delegates acted contrary to its representations. Further it says that BRC and its delegates acted in unconscionable ways. Broadly speaking this impugned conduct was described in Grocon's November 2012 Claim, which was effectively mirrored by what was stated in the affidavit of Grocon's solicitor, Matthew Edward Croagh dated 17 December 2013, filed in support of this application, as follows:[31]
a. BRC Co and its delegates' failure to close-out Design Stage 2, including:
65 Grocon further submitted that whether that conduct was unconscionable needed to be viewed in the light of all of the surrounding circumstances, including:
a. The higher standards expected of the Project Director and BRC as a result of a number of Acts and policies, including the Public Administration Act 2004 (Vic), the Code of Conduct for Victorian Public Sector Employees (No 1) 2007, moral exemplar principles, and the like;
b. The Public Private Partnership (PPP) contracting structure and the various policies associated with such projects, including Partnerships Victoria framework;
c. The nature of the DDP (including the transfer of design risk to Grocon, but the retention of a right on input and review by BRC and its agents), which meant that Grocon was vulnerable to BRC and its agents; and
66 Based on the described alleged conduct of BRC and its agents and these perceived conflicts of interest, Grocon concluded in the November 2012 Claim that:[32]
As a result of these incentives to delay, it now appears (with hindsight) that the BRC Co and the Project Director did not exercise(or purport to exercise) many of their contractual rights in good faith and for a legitimate purpose (for example in reviewing the design to ensure the Facility would meet the needs of facility users), but rather abused and manipulated the contractual machinery to promote their own illegitimate commercial interests.
67 Grocon sought to demonstrate in its application that its allegations have been seriously considered, repeatedly articulated and made directly to BRC, and (where possible) supported by relevant documentary evidence.[33] It said that despite repeated opportunities to do so, and the seriousness of the unconscionable conduct claims, BRC has failed to engage with, or provide any material, information or evidence to properly refute the factual allegations that underpin the 22 March 2012 letter or the November 2012 Claim.
68 Grocon submitted that BRC has not set out any reasonable legal arguments as to why Grocon's proposed claim might fail. Instead it claims that BRC has delayed, relied on technical arguments in response to the serious contractual claims, made bare denials of allegations, and obfuscated through statements such as 'we disagree that... the matters discussed in the letter dated 22 March 2012 will necessarily be among the factual matters to be determined by the relevant decision maker'; 'BRC believes that this claim is an unnecessary distraction'; and 'there is no requirement on the part of BRC to provide a detailed written response to each and every allegation raised by Grocon in its November 2012 Claim'.
Conclusion as to 'Reasonable Cause to Believe' under r 32.05(a)
69 BRC submits that best that Grocon can mount on this application is to allege that, in the context of a significant level of disputation in the course of the Project, the conduct of BRC and the Project Director was 'unfair and unreasonable'.
70 It denies that there is sufficient basis for Grocon to suspect that the conduct which is sought to be impugned was part of a deliberate course of conduct engaged in by BRC (and the Project Director and MPV as agents for BRC) to delay the completion of the facility, for their own illegitimate commercial purposes.
71 BRC points to Mr Croagh's Affidavit where he identifies two so-called illegitimate purposes:
72 At paragraph 55 of his Affidavit, Mr Croagh deposes to the basis for Grocon's suspicion that BRC and its agents acted for the alleged 'illegitimate commercial purposes'. It is said to be based upon inferences drawn from 'circumstantial evidence' referenced in footnote 45 of the ACL Claim.[34]
73 BRC submits that none of Grocon's speculation or its circumstantial evidence bears scrutiny.
74 The suspicion that BRC deliberately delayed certification of completion while the Facility Users were not ready to occupy the Facility is apparently based upon an alleged statement made by the Project Manager at a meeting on 22 August 2011 that he had spoken with Facility Users and they were not relocating to the Facility until mid-2012.
75 The first time this alleged statement by the Project Director was raised by Grocon was in a letter from Grocon addressed to Plenary dated 22 March 2012. Grocon did not copy this letter to BRC or the Project Director. Plenary subsequently forwarded this letter to BRC. The Project Manager has refuted the allegations made by Grocon in the letter of 22 March 2012. Contemporaneous documents in the period September to November 2011 directly contradict any suggestion that Facility Users were not planning on moving into the Facility in December 2011. The monthly reports of the Transition Plenaryntrol Group for September, October and November 2011 exhibited at SGO-9 to Mr O'Reilly's Affidavit establish that as late as October 2011, personnel were still planning to relocate to the Facility in December 2011 and that it was only in November 2011, when it was inevitable that Grocon was not going to complete the Facility on time, that it was accepted that a December move to the Facility would not be achieved. Even then the minutes reveal that a move in February/March 2012 was being investigated.
76 Footnote 45 to the ACL Claim also refers to an agreement recorded in Plenaryntrol Group minutes dated 26 October 2011[35] that training sessions for Facility users would be shut down until timing agreed. A reading of the minutes makes it clear that the decision to shut down training was made because Grocon had advised the meeting that it was targeting Commercial Acceptance on 16 July 2012 (not 30 November 2011 which was the contractual Date for Commercial Acceptance). Unsurprisingly it was agreed that training sessions for Facility users would be shut down until timing was agreed.
77 Grocon's next reference in footnote 45 is that it was 'advised' in February or March 2012 that the Facility Users were not moving into the Facility until July 2012. This is hardly surprising since Grocon itself had informed Plenary and BRC that it could not achieve Technical Completion before 31 May 2012 and it was targeting 16 July 2012 for Commercial Acceptance.
78 None of this material objectively viewed gives ground for a belief that BRC and its agents deliberately delayed certification of completion because the Facility Users were not ready to occupy the Facility. In any event it was not within BRC's power to 'deliberately delay certification' if in fact Grocon (and thus Plenary) had achieved Technical Completion and Commercial Acceptance. A wrongful refusal of certification could have been challenged under the Project Agreement.
79 A key driver for the delay in achieving completion was, according to Grocon at the time, the issue of the three directions in September 2011. From September 2011 Grocon was advising that it was targeting Commercial Acceptance on 18 July 2012. That is in fact when Commercial Acceptance was achieved. Whatever the merits of Grocon's claim that the three directions entitled it to an EOT to the Date for Commercial Acceptance until 18 July 2012, there is no suggestion that the Project Director was not entitled to give the directions. Whether Grocon got an EOT was dependent upon whether the directions simply required Grocon to comply with its existing contractual obligations or whether they involved additional work.
80 Given that the major alleged cause of delay was the PC3 direction (the others essentially running concurrently), and that as early as July 2011 the Project Director had required the PC3 works to comply with the contract, it is difficult to see how a direction to perform the works can have been unfair and unreasonable and otherwise motivated by any illegitimate commercial purpose. The works were directed to be done by the Project Manager (and were done), the issue was whether the works were within Grocon's existing contractual obligations or were effectively a variation entitling Grocon to an EOT.
81 As for the so-called illegitimate commercial advantages that BRC and MPV might gain from the alleged unconscionable conduct set out in Mr Croagh's Affidavit at paragraph 54, these simply do not withstand close analysis.
82 BRC will not obtain any reduction in the amount of compensation for EOT claims, nor is it able to ensure that Grocon would bear the costs of running the Facility if the Project Director was to have given a direction which entitled Grocon to an EOT. Conversely if the direction simply required Grocon to comply with its existing contractual obligations there is nothing 'illegitimate' (or even unfair) in the fact that Grocon does not get compensated for the time it takes to perform its contractual obligations. Grocon alleges that BRC gave at least three directions entitling Grocon to a total EOT of 226 days. The issue between Grocon and BRC is not whether the directions were given but whether those directions entitled Grocon to an EOT.
83 None of the matters raised by Grocon in its ACL Claim or in Mr Croagh's Affidavit at paragraph 54 can serve to support the alleged illegitimate commercial purposes. If Grocon is right that the three directions entitle it to an EOT of 226 days because they were additional works, then BRC (not Grocon) will be liable pay all the prolongation costs. Equally, there is no basis for alleging that BRC was acting illegitimately if in fact the directions did nothing more than require Grocon to perform its existing contractual obligations. If that took, as Grocon claims, an additional 226 days up to the middle of July 2012, then BRC did not need to 'deliberately delay certification'. Indeed, in the event, certification was not delayed at all.
84 For the same reasons, deliberately delaying Commercial Acceptance in order to reduce the Quarterly Service Payments payable to Plenary also does not bear scrutiny. Any delay to Commercial Acceptance that entitled Plenary and therefore Grocon to an EOT would not save BRC any money. Although it is true that BRC would not incur the Quarterly Service Payments it would incur the prolongation costs payable to Grocon (through having to reimburse Plenary) and would also incur financing charges to Plenary. The prolongation costs and financing costs claimed by Plenary in its EOT claims exceed the Quarterly Service Payments. There is therefore no likely benefit to BRC.
85 The allegation that MPV would be paid more in management fees at Grocon's expense is incorrect. Although MPV's fees on this project may be greater if the project is extended, it is only reimbursed its actual cost. The fee is charged by MPV to the relevant department seeking to procure the project. There is no cost passed to Grocon by MPV in respect to management fees. If public servants move from working on one project to another then the fee is allocated to a different project and potentially charged to a different government department. There is no evidence that MPV makes any profit in managing and delivering projects for various government departments. There is therefore no evidence of any commercial incentive to delay a particular project.
86 The evidence filed in support of Grocon's application therefore does not provide an objective basis for establishing a reasonable belief that BRC or the Project Director may have acted unfairly or unreasonably in the manner alleged. The mere assertion that in Grocon's view the impugned conduct was unfair and unreasonable without more is not sufficient to found a successful application under r 32.05(a).
88 Furthermore, the contemporaneous project record, upon which BRC addressed at some length, discloses nothing which is consistent with any moral taint on the part of BRC and/or MPV's agents associated with the unconscionable conduct allegations which Grocon seeks to press.
89 Ultimately, there is no evidence, objectively considered, which establishes or goes to demonstrate any deliberate strategy for 'illegitimate commercial purposes' on the part of BRC. As the existence of a moral taint is essential to a claim founded upon unconscionable conduct to establish a right to obtain relief, I find that there is no reasonable cause on the material before the Court to believe that Grocon has or may have any right to obtain relief from BRC on the basis of unconscionable conduct.
90 Each of the elements prescribed in the Rule must be established in order for an application for preliminary discovery to be successful,[38] and preliminary discovery cannot itself be used to remedy deficiencies in the satisfaction of those elements. Therefore, the finding that Grocon has clearly failed to establish the first requirement, that is the requirement of r 32.05(a) of a reasonable cause to believe that it has or may have the right to obtain relief in this Court on the basis of unconscionable conduct, obviates the need to further consider the elements of r 32.05(b) and (c) in order to dispose of this application.
[1] The reference in the contract to clause 55 was conceded before the Court by both parties to be a mistake and should in fact be a reference to clause 55A.
[2] In its Notice of Dispute Grocon claimed an EOT of 226 calendar days.
[5] Relevant parts noted by reference to the paragraph numbers contained in the November 2012 Claims.
[6] The following was included in footnote no. 45 in the November 2012 Claims: 'For example, on 22 August 2011 the Project Director advised representatives of Grocon and Project Co that he had spoken with the Faci1ity Users and they were not relocating to the Facility until mid-2012. During that same meeting the Project Director stated he would not grant Technical Completion if there is a screw missing; every window must be clean, every defect 100% complete. At that time, Grocon was in its completion campaign. The Project Director's statements were made less than 2 months after the Conditions Precedent under the Amending Deeds were satisfied or waived. It is noted that Commercial Acceptance was achieved on 18 July 2012. The content of this meeting formed the subject of detailed correspondence from Grocon to Project Co dated 22 March 2010 (Aconex correspondence GRO-GCOR-02631) to which no response or denial has been received as at the date of this claim. See also, item 16 of PCG Meeting Minutes dated 26 October 2011, which record it was agreed that [training] sessions [of the Facility Users] will be shut down until time agreed'; the attendance records for Facility User training modules; also, in around February or March 2012 Hayley Snelling of DPI advised Jemma Isaac of Grocon that the Facility Users did not intend to relocate to the Facility until 16 July 2012; in around March or April 2011 Tony Gendall of La Trobe University (LTU) advised Geoff Vass of Grocon that LTU Facility Users were not planning on moving in to the Facility until September 2012; and on 16 August 2012 the joint venture confirmed in a discussion with Paul di Gioacchino of Grocon that they would commence the process of transitioning into the Facility from 4 September 2012.'
[7] Australian Football League v Stadium Operations Ltd [2009] VSC 264, [4] (Warren CJ) ('AFL').
[8] [2008] VSC 392 ('Beston Parks').
[9] See eg AFL [2009] VSC 264 [3]. See also D.C. Payments Pty Ltd and anor v Ardon [2013] VSC 277, [38] (Zammit AsJ).
[11] [1998] VSC 133 ('United Energy').
[12] See eg Murdesk Investments Pty Ltd v Secretary to the Dept of Business and Innovation [2011] VSC 436, [67]; AFL [2009] VSC 264 [60], [69].
[13] United Energy [1998] VSC 133 [29]-[43].
[14] [2008] FCAFC 133; (2008) 249 ALR 495 ('Optiver').
[15] Order 15A Rule 6 of the Federal Court Rules 1979. This has since been superseded by the Federal Court Rules 2011, Rule 7.23.
[16] [2008] FCAFC 133; (2008) 249 ALR 495 [36]-[37] (Heerey, Gyles and Middleton JJ).
[17] Sections 1(a) and 1(c) of the CPA.
[19] See, however, Murdesk Investments Pty Ltd v the Secretary To the Department of Business and Innovation [2011] VSC 436, where Dixon J had regard to the principles of timeliness, cost-effectiveness and justice contained in s 8 of the CPA in granting special leave to rely on fresh affidavit material in a preliminary discovery application; See also Age Company Ltd (ACN 004 262 702) and Others v Liu and Another [2013] NSWCA 26; (2013) 296 ALR 186, [57] (Bathurst CJ, Beazley, McColl JJA), in which the NSW Court of Appeal referred to the overriding purposes of the equivalent Act, as contained in s 56 of the Civil Procedure Act 2005 (NSW) in its consideration of an application for preliminary discovery pursuant to r 5.2(2)(a) of the Uniform Civil Procedure Rules 2005 (NSW).
[20] See eg. Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management (2013) 308 ALR 199 at [7], [51]-[67]; Yara Australia Pty Ltd & Ors v Oswal [2013] VSCA 337, [5]-[27].
[21] Beston Parks [55]; AFL [2009] VSC 264 [63].
[22] Optiver [47], and cases cited there.
[23] Optiver [48], and cases cited there.
[24] Grocon relies on the findings and reasoning employed in Optiver at [37], and National Hearing Centres Pty Ltd v Vic O Tech Pty Ltd & Ors [2012] VSC 630, [32]-[34] (Vickery J).
[25] Director of Consumer Affairs Victoria v Scully & Anor [2013] VSCA 292, footnote 37.
[26] Director of Consumer Affairs Victoria v Scully & Anor [2013] VSCA 292 ('Scully').
[28] Scully [2013] VSCA 292 [48]-[49].
[30] Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 [293].
[31] November 2012 Claim paragraph [20]; Affidavit of Matthew Edward Croagh dated 17 December 2013, paragraph [16].
[33] Grocon sought to demonstrate this by evidence of the letter of 22 March 2012, the November 2012 Claims and by virtue of the present application which it says has failed to illicit any offer from BRC to produce documents of the character sought by Grocon.
[34] Exhibit MEC-3 to the Affidavit of Mr Croagh, 17.
[35] Exhibit SGO-13 to the Second Affidavit of Mr O'Reilly.
[36] Beston Parks [2008] VSC 392 [53].
[37] United Energy Limited v Energy Risk Management Pty [1998] VSC 133 [33] (Gillard J).
[38] Echo Tasmania Pty Ltd v Imperial Chemical Industries Plc [2008] FCAFC 58 at [43]; Hooper v Kirella Pty Ltd [1999] FCA 1584; (1999) 96 FCR 1 at 11. Benchmark Certification Pty Ltd v Standards Aust Int Ltd [2004] FCA 1489; (2004) 212 ALR 464.
Grocon Constructors (Vic) Pty Ltd
Biosciences Research Centre Pty Ltd [2014] VSC 204
(2004) 211 ALR 147
(2008) 249 ALR 495
(2013) 296 ALR 186
(2013) 308 ALR 199
(1999) 96 FCR 1
(2004) 212 ALR 464