Appeal - Application for leave to appeal out of time - Refusal of Master to join applicant as party to proceedings - Test to be applied in considering joinder of party - Extent to which interests of party might be affected by outcome of preliminary question - Master erred in discretion

Procedure - Rules of the Supreme Court O 18 r 6(2)(b)

Builders Registration Act 1939

Suitors' Fund Act 1964, s 10

Australian Tape Manufacturers Association Ltd v The Commonwealth (1990) 64 ALJR 540

Boyce v Munro (1997) 98 A Crim R 221

Cuthbertson v Hobart Corporation [1921] HCA 51; (1921) 30 CLR 16

J N Taylor Holdings Limited (In Liquidation) v Bond (1993) 59 SASR 432

Link Agricultural Pty Ltd v Shanahan [1998] VSCA 3; (1998) 28 ACSR 498

Maritime Union of Australia v Patrick Stevedores Operations Pty Ltd [1998] 4 VR 143

Newport Association Football Club Limited & Ors v Football Association of Wales Limited [1995] 2 All ER 87

Peter v Shipway [1908] HCA 69; (1908) 7 CLR 263

Rogala v Caris Corp Ltd, unreported; SCt of WA (Burt CJ); 27 September 1983

Vandervell Trustees v White [1971] AC 912

1 MALCOLM CJ: I agree with the reasons to be published by Templeman J and the orders proposed by his Honour.

2 OWEN J: I have read the reasons to be published by Templeman J. I am in agreement with those reasons and there is nothing further I wish to add.

3 TEMPLEMAN J: The applicant Homestyle Pty Ltd ("Homestyle") seeks leave to appeal out of time against the refusal of a Master to join it as a party to the proceedings commenced by originating summons between the first and second respondents, the City of Belmont ("the City") and Link Interiors Pty Ltd ("Link").

4 According to its notice of appeal, Homestyle seeks leave also to appeal against the judgment of the trial Judge on the originating summons. However, for reasons to which I shall refer below, it now seeks to have that judgment set aside.

5 Homestyle is a registered builder pursuant to the Builders Registration Act 1939. In March 1998 it responded to an advertisement placed in The West Australian newspaper by the City of Belmont for "suitably qualified and experienced builders" to register their interest in undertaking the refurbishment of the City's administration building.

6 Some 20 persons or organisations responded to the advertisement. Of those, four were asked to tender. Each of the tenderers submitted prices of about $3 million. The two lowest prices were submitted by Homestyle and Link.

7 The matter was discussed at a public meeting of the City's council on 11 May 1998. The meeting was attended by Homestyle's General Manager, Mr Gerard Michael Forde and by its solicitor.

8 According to Mr Forde the solicitor asked a number of questions at the meeting. In particular, he asked whether it was the council's intention to award the contract to a registered builder: and if so, whether Link was so registered. The questions were answered by Mr Rick Lutey, the City's Engineering Director. He said it was council's intention to award the tender to a registered builder. He said he did not know whether Link was registered. Homestyle's solicitor then asked the council to defer any decision on the grant of the tender until it had clarified Link's standing as a registered builder.

9 Council then resolved to award the tender to Link, subject to confirmation that it was a registered builder or would use a registered builder to undertake works which could be undertaken only by a registered builder.

10 On the day following the council meeting, Homestyle's solicitor wrote to the City's Chief Executive Officer to inform him that (as was the fact) neither Link nor any of its directors were registered builders. He went on to refer to the provisions of the Builders Registration Act which prohibit a person who is not registered under the Act from entering into any contract or engagement to construct any building. He said that the recommendation by the council on 11 May contradicted a fundamental basis for the tender process in which those invited to express their interest were obliged to undergo "a substantial pre-qualification". He asserted it to be the contractual duty of public bodies to act fairly to each of the tenderers in the performance of the tender process: and he referred to authority in support of that proposition.

11 The solicitor concluded by referring to his instructions to demand a written undertaking from the City that it give at least seven days notice in writing if it intended to award the tender to any company other than Homestyle. If no such undertaking was given, his instructions were to apply to the Supreme Court for injunctive relief and/or damages without further notice.

12 On the same day, Mr Lutey wrote to Link in terms which differed somewhat from the resolution passed at the council meeting of the previous night. He said:

"I am pleased to advise that at last night's Ordinary Council meeting it was resolved to award the tender for the Council Administration Building refurbishment to Link Interiors in accordance with the tender specification and for your tender price of $2,987,300 subject to confirmation that you are a registered builder and subject to Council obtaining legal advice that all relevant laws and regulations have been adhered in awarding the tender.

We request your confirmation of the builders registration matter ASAP, while we seek the necessary legal advice."

13 Despite this, on 14 May 1998 Mr Lutey wrote to Homestyle's solicitors to inform them that the City would not be awarding the tender "at this time".

14 On 19 May, the City apparently received advice from its solicitors that it might be possible for Link to become registered under the Builders Registration Act, but that if it was not registered at "the time in question" it would not be lawful for Link to enter into a contract with the City to carry out the works.

15 On 28 May, Mr Lutey sent Link a letter in which he expressed the view that the City had been unable to enter into a contract on 11 May because Link was not a registered builder. He invited Link's comments. Link responded on the following day by informing the City that it had become registered pursuant to the Builders Registration Act with effect from 28 May.

16 It was in these circumstances that the City made its application to the Court.

17 The City commenced proceedings by originating summons filed on 14 July 1998. It sought the following relief:

"1. Pursuant to order 58 Rule 10 of the Supreme Court Rules, a declaration as to the true construction of the documents associated with a proposed contract between the City of Belmont and the Defendant for the City of Belmont Administration Building refurbishment.

2. In particular and without prejudice to the generality of 1, a declaration whether on the true construction of the documents and in the light of the circumstances and the relevant law:

2.1 The tender by the Defendant for the contract for the carrying out of the City's Administration Building refurbishment was a tender which the Council of the Plaintiff is able to accept; and

2.2 Whether the resolution of the Council of the Plaintiff at its meeting of 11 May, 1998 amounted to an acceptance of the Defendant's tender conditional upon the Defendant becoming registered as a builder under the Builders Registration Act 1939; and

2.3 Whether the Defendant's tender and the Council's resolution of 11 May, 1998 together with the relevant tender documents became a contract between the Plaintiff and the Defendant upon the Defendant becoming a registered builder on 28 May, 1998, or at any other time.

18 It is not clear how the originating summons came to the notice of Homestyle. However, it applied to be joined as a party to the proceedings pursuant to O 18 r 6(2)(b). The application was supported by an affidavit sworn by Mr Forde. It was heard by a Master on 15 September 1998. The learned Master delivered his reasons on 23 September.

19 The learned Master referred to the text of O 18 r 6(2)(b) which is in the following terms:

"(2) At any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application -

(b) order that any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, be added as a party."

20 He went on to refer to the wide discretion given by the rule and "the myriad of circumstances which can render ... precedent of little assistance".

21 Later in his reasons, the Master accepted Homestyle's submissions that it had a right to fair dealing in the competitive tender process. The Master referred to authority which supported the view that having called for tenders, the City was subject to contractual commitments in relation to the whole or parts of the tendering process: Hughes Aircraft Systems International v Air Services Australia [1997] FCA 558; (1997) 146 ALR 1; Willow Grange Pty Ltd v Yarra City Council, unreported; SCt of Vic; 7427 of 1997 per Byrne J. The Master went on:

"Breach of this contractual obligation would no doubt sound in damages. It may also provide the basis for an injunction to restrain a party, in the position of the plaintiff, from entering into a contract when there had been a breach of the requirement of fair dealing. But there is no authority to suggest that if a contract has in fact been entered into in breach of such a term, that contract will fall away."

22 I pause to note that although Homestyle accepts there is no authority for the proposition that a contract awarded to a tenderer by a principal who has acted unfairly in the tendering process is void or voidable, it contends that the proposition is properly arguable. It wishes to take the point in these proceedings.

23 Returning to the Master's reasons: he took the view that on the present state of the law the questions raised by par 2.2 and par 2.3 of the originating summons were of no concern to Homestyle. In terms of O 18 r 6(2)(b), the effect of the Master's decision was that it was not necessary for Homestyle to be present before the Court in order to ensure that the dispute between the City and Link as to the existence of a contract between them, might be "effectually and completely determined and adjudicated upon".

24 The Master went on to direct that the issues raised by par 2.2 and par 2.3 of the originating summons be tried separately from the other issues raised by the originating summons. This was on the basis that if those issues did fall to be determined, it might then be appropriate for Homestyle to be joined.

25 Although the Master in his reasons proposed to dismiss Homestyle's summons, he was ultimately persuaded to adjourn the summons so that it could be used as a vehicle for the joinder of Homestyle on the other issues should that be necessary.

26 The Master delivered his decision on 23 September 1998. Homestyle did not then appeal. We were told by counsel that this was a considered decision based on the desire to avoid wasting the time of the Court: an appeal might have been unnecessary if it was held on the trial of the preliminary issues that there was no contract between the City and Link.

27 The preliminary issues were tried by Wheeler J on 11 February 1999. Her Honour delivered a decision on 12 March 1999 in which she held that a contract had come into existence between the City and Link at the latest by 14 July 1998.

28 It is in those circumstances that Homestyle now seeks to appeal against the order of the Master that the matters raised in par 2.2 and par 23 of the originating summons be tried separately and first and that Homestyle not be joined as a party.

29 Homestyle's principal contention is that in exercising his discretion against joining it as a party to the originating summons proceedings, the Master did not take sufficient account of the extent to which its interests might be affected by the outcome of the preliminary question raised by par 2.2 and par 2.3.

30 In my view, the test to be applied in considering the joinder of a party is that stated by Lord Diplock in delivering the opinion of the Judicial Committee of the Privy Council in Pegang Mining Co Ltd v Choong Sam (1969) 2 MLJ 52, 55 - 56:

"The cases illustrate the great variety of circumstances in which it may be sought to join an additional party to an existing action. In their Lordships' view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard. To achieve this object calls for flexibility of approach which makes it undesirable in the present case, in which the facts are unique, to attempt to lay down any general proposition which could be applicable to all cases.

It has been sometimes said in Moser v Marsden [1892] 1 Ch 487 and in Farbenindustrie AG Agreement [1944] Ch 41 that a party may be added if his legal interests will be affected by the judgment in the action but not if his commercial interests only would be affected. While their Lordships agree that the mere fact that a person is likely to be better off financially if a case is decided one way rather than another is not a sufficient ground to entitle him to be added as a party, they do not find the dichotomy between 'legal' and 'commercial' interests helpful. A better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?"

31 That passage was adopted by the Full Court of the Federal Court in News Limited v Australian Rugby Football League Limited [1996] FCA 870; (1996) 64 FCR 410. In a joint judgment, the Court said (at 525) that:

"The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent. This is particularly so with remedies in the nature of an injunction: see Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 at 322 per Kirby P. The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases where the effect of the order on non-parties can be characterised as only indirect or consequential."

32 Homestyle submits that it is affected directly by the answers to questions raised by par 2.2 and par 2.3 of the originating summons. It points out that if Wheeler J had held that no contract existed between the City and Link, it would then have been open to Homestyle to seek an injunction to restrain the City from entering into any such contract until the question of fairness in the tendering process had been resolved. Homestyle's claim to an injunction would no doubt have been reinforced by the consideration referred to by Byrne J in Willow Grange Pty Ltd v Yarra City Council (supra), that in circumstances such as this, damages are an inadequate remedy and are difficult to quantify in any event.

33 Homestyle has not sought an injunction because it has not been necessary to do so. The City has not notified Homestyle or its solicitors of its intention to award the tender.

34 In the course of argument before us, Link did not dispute that the interest claimed by Homestyle was the opportunity to contract with the City in place of Link. However, Link submitted that this gave Homestyle only an indirect interest in the outcome of the dispute as to the existence of a contract between the City and Link.

35 I do not agree. The test as propounded by Lord Diplock is whether the rights claimed by the party seeking joinder will be affected by any order which may be made in the action. And in the present case, one order which might have been made was that questions 2.1 and 2.2 be answered in the negative because no contract existed between the City and Link. That being so, I regard as unanswerable Homestyle's submission that it was affected directly by the answer to those questions. Homestyle's submission is strengthened in any event, by the fact that it wished to argue that if there was a contract between the City and Link, that contract was void or voidable because of the City's failure to deal fairly with all tenderers. That issue is raised by question 2.1 in the originating summons. On Homestyle's case, that issue is so intertwined with questions 2.2 and 2.3 that they should not have been separated.

36 In fact, despite the Master's order, the issue was apparently raised before Wheeler J. She came to the conclusion that there had been "... no impropriety in the tender process which would require the avoidance of this contract as a matter of public policy". However, that conclusion was reached without any consideration of Mr Forde's evidence and without the benefit of argument from Homestyle.

37 We were informed by counsel for the City that his client was content to abide by the decision of the Court and that it relied on the written submissions made to the Master. In those submissions, the City referred to what was said to be the leading Australian case on locus standi: Australian Conservation Foundation Inc v The Commonwealth (1980) 146 CLR 493. However, that case is not directly in point and I gain no assistance from it in the present context.

38 There is a further consideration. Although I do not suggest that the originating summons application was in any way collusive, it is fact that the City wishes to award the tender to Link. In these circumstances, I think it was undesirable to have excluded Homestyle from the proceedings when it was the only party who had a genuine interest in arguing that there was no contract between the City and Link.

39 Equally, if the learned trial Judge had fallen into error in answering questions 2.2 and 2.3, only Homestyle would have a genuine interest in taking the matter on appeal.

40 It is common ground that Homestyle is a proper party to the proceedings for the determination of questions 1 and 2.1 raised by the originating summons. It would therefore be open to Homestyle to renew its application to be joined as a party and have the originating summons re-listed.

41 Alternatively, it would be open to Homestyle to commence its own proceedings against the City and Link, alleging that the City was in breach of its obligation to deal fairly with tenderers and seeking an injunction to restrain the City from entering into a contract with Link. Although as between the City and Link, it has been held by the learned trial Judge that a contract exists, that decision cannot be binding on Homestyle when the Court refused to make it a party to the proceedings.

42 It is therefore theoretically possible that the evidence which Homestyle wished to adduce in the originating summons proceedings in relation to question 2.1, and which it could adduce in its own proceedings against the City and Link, might lead to a different result from that reached by the learned trial Judge.

43 Taking all these considerations into account, I am persuaded that the learned Master fell into error when he directed that the issues raised by questions 2.2 and 2.3 of the originating summons be tried as preliminary issues without joining Homestyle.

44 Homestyle's notice of appeal is directed as much to the decision of the learned trial Judge as it is that of the learned Master. However, as counsel for Homestyle informed us, with commendable frankness, he realised during the course of his preparation that this was not the correct approach. Counsel now submits that if a matter proceeds to judgment in the absence of a necessary party, justice requires that the judgment be set aside and that there be a retrial. That was the course taken by the Full Court of the Federal Court in News Limited v Australian Rugby Football League Limited (supra). That decision was approved and a similar order made by the High Court in State of Victoria v Sutton [1998] HCA 56; (1998) 156 ALR 579.

45 I accept Homestyle's submission that that would be the appropriate disposition of this appeal should leave be granted. For those reasons, I think it neither necessary nor desirable to consider the merits of the appeal against the decision of the learned trial Judge as presently formulated.

46 As I have noted above, Homestyle elected not to appeal from the decision of the learned Master but to await the outcome of the trial of the preliminary issues. Although this has resulted in delay, I am not persuaded that the delay has been unduly prejudicial. We were informed by counsel for the City that it does wish to have its administration building refurbished. However there is no evidence that the work is required to be carried out as a matter of urgency.

47 The trial of the preliminary issues was conducted on affidavit evidence. Even if a retrial were to involve cross-examination on affidavits or viva voce evidence, there would be no additional inconvenience caused to the persons concerned. Their attendance might well be required in any event in the determination of the remaining issues in the originating summons.

48 Although a retrial would result in costs being wasted, the resulting prejudice could be cured to a very large extent by the making of appropriate orders pursuant to s 10 of the Suitors' Fund Act 1964.

49 In all the circumstances, I am persuaded that the interests of justice require that the appeal be allowed and the following orders made: namely that the appellant be granted an extension of time within which to apply for leave to appeal against the order of the learned Master dated 23 September 1998, the appeal be allowed, the order of the learned Master be set aside, the order of Wheeler J dated 12 March 1999 be set aside, the appellant be joined as a defendant to the originating summons and the originating summons be remitted to the learned Master for directions to be given for a hearing on the basis that all issues be tried together.