Lake Macquarie City Council v Newcastle Resources Pty Ltd

EX TEMPORE JUDGMENT (REVISED)

1. These proceedings concern damage allegedly caused by a steel slag road-base (the "Mix") supplied by the defendant, now known as Newcastle Resources Pty Ltd ("Newcastle"), to the plaintiff Council (the "Council") for use in roads installed by the Council and by third parties in the Council's local government area. The Council alleges that the Mix has caused degradation to the roads and also damage to properties owned by third parties who have looked to the Council for compensation.
2. The proceedings were commenced in the District Court on 9 March 2018.
3. The proceedings were transferred to this Court on 26 March 2019.
4. On 8 September 2023, the proceedings were set down for hearing for two weeks commencing 25 November 2024.
5. On 3 October 2024, the Council filed a notice of motion seeking leave to rely on late served lay and expert evidence.
6. Newcastle opposed the Council having leave to rely upon that evidence and contended that the trial should continue on 25 November 2024 in the absence of such evidence. Having heard argument on that question, I acceded to the Council's application to rely on the evidence but vacated the hearing date in circumstances where I was satisfied that Newcastle could not meet the recently served evidence by the Council by that date. I then made directions for the service of Newcastle's responsive evidence.
7. The entire proceedings have now been referred to the Honourable J R Sackar KC for determination. The hearing of the reference is likely to occur in or about June 2025. Mr Sackar's report is due by 1 October 2025.
8. Now, by notice of motion filed on 2 December 2024, the Council seeks to amend its Summons and List Statement.
9. Newcastle does not oppose the amendments which seek to align the Council's case with the evidence that has been served.
10. Newcastle, however, opposes the proposed amendments to [C10], to the chapeau of [C32], and to the words "or the plaintiff's own losses" in [C33(a)] of the Council's Technology and Construction List Statement.
11. The form of the proposed amendments is as follows:
12. And:
13. In substance, the amendments seek to: 1. expand the Council's case in contract from one arising from the most recent of the five contracts made between the Council and Newcastle between 2 May 2006 and 19 April 2011, to one arising from all five contracts; and 2. expand the Council's case relating to a contractual indemnity from one relating to any claim arising "out of the performance of the Contracts" (the "Third Party Indemnity") to one relating to "all loss, cost and expense" that the Council might incur by reason of, amongst other things, "any loss of or damage to property caused by [Newcastle] in and about the performance of or failure to perform an obligation in the Contract[s]" (the "Wider Indemnity").
14. This proposal would represent a significant expansion of the Council's case. At present, the Council relies on claims for breach of identified terms in the most recent contract, for breach of an alleged duty of care, and for allegations of misleading or deceptive conduct for the purpose of s 18 of the Australian Consumer Law. [1] The proposed case would in effect impose on Newcastle something tantamount to an absolute contractual duty to indemnify the Council in respect of "its own losses".
15. I decline to grant the Council the leave it seeks.
16. The first point is that the Council has provided no reason for the delay in making these amendments.
17. Mr Shipway, who appeared with Mr Anwar for the Council, informed me from the bar table that the amendments were first contemplated on 8 November 2024, that is, after the hearing date had been vacated.
18. The solicitors for the Council foreshadowed to the solicitors for Newcastle the proposed amendments on 14 November 2024, while the parties were negotiating the terms of the reference to Mr Sackar. The solicitors circulated the proposed form of Amended List Statement on 21 November 2024.
19. On 26 November 2024, the solicitor for Newcastle, Mr Crittenden, wrote to the solicitors for the Council: "1. The amendments seek to introduce a very substantial new claim for contractual indemnity with respect to contracts not previously sued on and for losses not before claimed. 2. The amendments are sought opportunistically off the back of a vacation of the hearing date which in turn was caused by your client's default. As a matter of the exercise of the Court's discretion, the amendments should be refused for that reason alone. 3. Having regard to the matters in 1 and 2, your client is required to explain the delay in seeking to amend including when and in what circumstances it formed the view that it was necessary to amend; 4. The amendments do not please a tenable cause of action, or alternatively, the claim is barely arguable; 5. Our client would need to adduce further evidence to meet the new allegations …"
20. A solicitor, Ms Scarf, who is employed by the solicitor for the Council, made an affidavit on this application on behalf of the Council. Ms Scarf annexed, without comment, Mr Crittenden's email. Ms Scarf's affidavit offered no response to Mr Crittenden's email, nor any explanation for the belated application. Perhaps more significantly, the solicitor on the record for the Council has not made an affidavit giving an explanation for the belated application.
21. One inference that might be drawn is that the amendments arise out of matters that have only just occurred to those advising the Council, that is, after the hearing date had been vacated and after it had been determined that the matter would be referred to Mr Sackar for determination.
22. However that may be, the fact is that no explanation has been offered and I would infer that that is because there is no adequate explanation for what has happened.
23. That is itself a powerful reason to decline leave at this very late stage of the proceedings.
24. There are, however, further difficulties.
25. In their written outline on behalf of the Council, Mr Shipway and Mr Anwar submitted: "Whether the opposed amendments ought to be allowed turns, fundamentally, on whether they need give rise to a need for further evidence. The Council says they do not because the losses in question are already the subject of extensive evidence served in respect of the Council's existing, alternative claims in negligence and for misleading or deceptive conduct. The only consequences having regard to the evidence already served."
26. I do not think that that is correct.
27. At present, the Council's claim for indemnity is under the Third Party Indemnity and relates only to claims made against the Council by six identified property owners in the Council's local government area who have claimed to have suffered damage by reason of the problems with the road surface. Their claims are, I am told, something in the order of $440,000.
28. That figure is dwarfed by the Council's overall claim against Newcastle, which is in the order of $128 million.
29. That larger claim is, as I have said, presently brought as a claim for breach of one only of the five contracts, as well as a claim for breach of alleged duty of care and for alleged misleading or deceptive conduct.
30. The proposed amendments would have the effect of a claim under all five contracts for breach of the Wider Indemnity that would cover not only claims by the six third parties, but also the Council's "own losses"; that is, in effect, the entire $128 million.
31. Mr Lloyd SC, who appeared with Mr Adamopoulos for Newcastle, submitted that for Newcastle to meet that claim it would need to investigate the circumstances in which each of the five contracts was created in order to examine whether, as the Council wishes to allege, the Wider Indemnity was a term of each or any of those contracts.
32. The evidence served by the Council concerning the five contracts is, as Mr Lloyd and Mr Adamopoulos submitted, somewhat formulaic in nature, namely, that: 1. the Council issued a "request for tender"; 2. Newcastle responded by submitting a tender; and 3. the Council then issued a "letter of acceptance".
33. That evidence is given on behalf of the Council by a witness, Mr Walker, who does not depose to having had any personal involvement in the tendering process in relation to any of the five contracts.
34. It seems that Mr Walker has simply described what, as appeared to him, to exist in the Council records. I am told there was no evidence served by the Council with any communication such as emails or facsimiles in relation to the tendering process.
35. The Council's "request for tender" appears to me to be no more than an invitation to treat. Newcastle's tender appears to have constituted an offer made in response to that invitation to treat, which offer was seemingly accepted by the Council's "letter of acceptance".
36. In the hearing yesterday, Mr Lloyd took some time taking me through the documents relied upon by the Council as constituting the five contracts. The documents take up the best part of an entire lever arch binder.
37. The request for tender included multiple schedules including, relevantly, general conditions of contract and, in one case, special conditions of contract which, in some cases, include the Wider Indemnity.
38. However, the tenders themselves, to the extent that they are in evidence, [2] although sometimes referring to "general" or "special" conditions, do not contain within the tender itself any such terms.
39. In those circumstances, Mr Lloyd submitted, and it seems to be correct, that it follows that, at least in the case of some of the contracts, the Wider Indemnity could only have been the term of the contracts if it was somehow incorporated by reference into the contracts. In that case, it would be necessary for the Council to show that it had given reasonable notice to Newcastle that the Wider Indemnity was to form part of the contract. [3]
40. Whether or not that is so, in order to deal with the proposed amendment, Newcastle has to investigate such matters.
41. Mr Crittenden's affidavit has identified the Newcastle personnel who were apparently involved in the negotiation of the contracts and has deposed: "I am informed by Philip Panozzo, the Group Commercial Manager of SCE Group, that from inquiries he had made with NR and the SCE Group: (a) none of the people [then involved] are still working for NR or the SCE Group, and most have not done so for several years; and (b) NR does not know where any of the personnel are currently located; and (c) aside from what has been produced in these proceedings, neither NR nor SCE Group now holds documentary records in relation to what was communicated between the Council and NR at the time the contracts were said to have been formed."
42. It seems clear that, were the proposed amendments to be allowed, Newcastle would be obliged to engage in an extensive and potentially difficult factual inquiry.
43. Mr Lloyd also submitted that Newcastle would have to consider whether it would engage an IT expert to seek to interrogate Newcastle's electronic records to ascertain what communications took place between Newcastle and the Council, now over 10 years ago, in relation to the contracts.
44. It is true, as Mr Shipway emphasised, that the Council's breach of duty and misleading or deceptive conduct cases raise matters which do relate to all five contracts. It is also true that Newcastle has pleaded to the Council's allegations in relation to the five contracts, and has made some admissions in that regard. However, that is in the context where the claim then and now made against Newcastle relates to only one of the contracts.
45. Nonetheless, the proposed amendments would impose on Newcastle the additional burden to which I have referred.
46. It would not be just, in my opinion, to impose that burden on Newcastle at this late stage.
47. Mr Lloyd and Mr Adamopoulos pointed to a number of other matters which were said to provide reasons to refuse the leave, but in view of the conclusions to which I have come, I do not need to deal with them.
48. During oral submissions, Mr Shipway submitted that, alternatively to the amendment sought in the motion, the Council should have leave to make a less ambitious amendment, seeking only to rely on the Wider Indemnity in the most recent and currently pleaded contract. Mr Lloyd said he was not in a position to deal with such an application. In those circumstances I do not propose to deal with it.
49. I will allow the amendments proposed by the Council to its Summons and to the paragraphs in the proposed Third Amended Technology and Construction List Statement referred to in par 3(b) of Mr Lloyd's and Mr Anwar's outline of submissions. Otherwise, the Council's motion of 2 December 2024 is dismissed with costs.
50. I make the following orders: 1. Grant the plaintiff leave to file and serve an Amended Summons in the form served on 29 November 2024. 2. Grant the plaintiff leave to file and serve a Third Amended List Statement in the form served on 29 November 2024, save for the following proposed amendments: 1. the amendments to paragraph [C10]; 2. the amendments in the chapeau of paragraph [C32]; and 3. the addition of the words "or the plaintiff's own losses" in paragraph [C33(a)]. 1. The plaintiff is to pay the defendant's costs thrown away by reason of the amendments. 2. The plaintiff is to file and serve the Amended Summons and Third Amended List Statement by 13 December 2024. 3. The defendant is to file and serve its List Response to the Third Amended List Statement by 31 January 2025. 4. Otherwise dismiss the plaintiff's Notice of Motion filed on 2 December 2024 with costs.