BETWEEN : MACMAHON CONTRACTORS PTY LTD (ABN 37 007 611 485)

Practice and procedure - Application to strike out parts of statement of claim - Grounds including lack of reasonable cause of action, insufficient particulars, absence of material facts, unacceptably uncertain and ambiguous terms, and consequent delay of trial - Approach of the court - Active discouragement of interlocutory disputes - Limits on oral argument - Contemporary purpose of pleadings in context of modern case management - Parties apprised of case to meet by pleadings and participation in systems of pre­trial case management - Whether impossible to discern arguable issues from the pleading - Whether objections constitute matters relied on for defence

Rules of the Supreme Court 1971 (WA), O 20 r 19(1)(a) and (c), O 29, O 29A

1 TEMPLEMAN J: This is an application by the defendants to strike out parts of the plaintiff's further amended statement of claim (the statement of claim). The application is said to have been made under O 19 r (1)(a) and (c) of the Rules of the Supreme Court 1971 (WA). This is an obvious error. The defendants' intention was clearly to apply under O 20 r 19(1)(a) and (c).

2 The action has been entered into the Commercial and Managed Cases (CMC) List under Practice Direction No 4 of 2006.

Where an interlocutory dispute cannot be avoided, it will wherever possible be determined by the Case Manager after the exchange of written submissions, either on the papers or following a short hearing at which the time permitted for oral argument will generally be limited by direction to 20 minutes or perhaps half an hour for each party. The legal representatives of the parties will be actively encouraged to comply with Order 59 rule 9 by meeting face to face or at least conferring by telephone.

The parties have exchanged extensive written submissions in relation to this application. Having considered the submissions, I concluded that it was possible to determine the matter on the papers without the need for oral argument.

4 The plaintiff identifies itself in the statement of claim as an engineering contractor. The plaintiff identifies the defendants as equal participants in a joint venture known as the North-West Shelf Venture. The plaintiff alleges that on 22 July 2005 it entered into a written contract with the defendants (by the first defendant as their agent) by which it agreed to carry out and provide certain site preparation and temporary facilities works for the defendants in connection with their proposed Liquefied Natural Gas Processing Plant at a site on the Burrup Peninsula in the north of Western Australia.

5 The plaintiff pleads particulars of the contract which is said to comprise:

Part 1 Form of Agreement ('FA')

Part 2 General Conditions of Contract ('GC')

Part 3 Required Insurances

Part 4 Schedule of Rates and Prices ('Schedule of Rates')

Part 5 Scope of Work ('Scope of Works')

Part 6 Standards, Specifications, Regulations, Procedures and Drawings

Part 7 General Provisions

Part 8 Administrative Procedures

6 The plaintiff then pleads the effect of express terms of the contract which are identified by reference to the general conditions.

7 The plaintiff contends that as a result of delays, disruption and directions given by or on behalf of the defendants, it has incurred costs in carrying out the contract works for which the defendants have refused to make payment. The plaintiff claims an extension of time for carrying out the works and a declaration that it is owed $15,122, 761.81 by the defendants.

8 The statement of claim in its original form was filed on 1 November 2007 and has been the subject of various objections by the defendants. The history is set out in the O 59 r 9 memorandum dated 20 October 2008 prepared by the defendants' solicitors. The matters in dispute are summarised in the following way:

1. The issues referred to herein will be amplified in written submissions which will be filed in accordance with the timetable referred to in 11(b) below.
2. The proper purpose of pleadings in a matter such as this will be in issue. The defendants adopt the view that the pleadings must identify with clarity the issues in dispute between the parties, particularly in a case which requires many witnesses and involves thousands of documents and in which expert evidence will be necessary. The plaintiff has taken the view that sufficient is pleaded in order to enable the defendants to plead and, separately, that it considers that the FASC and particulars provide the material facts and all necessary particulars of the case that the defendants are required to answer.
3. The plaintiff seeks to add a gloss to express time periods in the contract (a copy of which has already been filed), that it only had to comply with them 'as far as reasonably practicable', in the face of express terms in the contract to the contrary and without alleging any basis for the modification of the express terms.
4. The plaintiff pleads the implication of certain terms, alternatively, a proper construction of the contract in the same terms, which are contradictory of express terms in the contract, without alleging any material facts, or providing any particulars, in support of the implication or construction, other than the four corners of the contract.
5. The plaintiff alleges an oral variation of the contract in the face of a no oral modification clause and a non-waiver clause and without pleading any consideration moving from it to the defendants for the alleged modification of the contractual relations.
6. The plaintiff pleads an estoppel in unacceptably uncertain and ambiguous terms.
7. The plaintiff has failed to make the necessary allegations which would sustain a claim for an extension of time under the contract, or for delay or acceleration costs, and, in any event, such particulars which have been supplied in relation to such claims do not support it.
8. The plaintiff has not pleaded the necessary allegations to disclose a reasonable cause of action in respect of its claims for additional costs for variations under the contract. In particular, the plaintiff has not made the necessary allegations to establish that directions given by the first defendant gave rise to variations under the contract in respect of which it was entitled to additional payments; it complied with the notice and information requirements of the contract in relation to variations; or that the first defendant and it entered into variation instruments, as required by the contract, or the first defendant instructed it to proceed with the variations, notwithstanding the terms of the variations not having been agreed between them.
9. The plaintiff pleads that the first defendant has breached the term of the contract providing for the first defendant's determination of the final contract price (GC 13.9(c)), by not allowing certain claims in the final contract price, in circumstances where the plaintiff has failed to make the necessary allegations to sustain a reasonable cause of action for such claims under the relevant clauses of the contract.

9 As foreshadowed in par 2 above, the issues were indeed amplified in written submissions. The defendants' submissions extended to 58 pages and referred to 59 authorities. In addition, the defendants filed a bundle of papers comprising 163 pages, together with 10 claims logs, each comprising a multi-paged spreadsheet containing references to a considerable amount of factual material.

10 The plaintiff's submissions in response extended to 67 pages and made reference to 56 authorities.

11 Under O 20 r 19(1)(a), the court may strike out a pleading if it discloses no reasonable cause of action. The court may take that course under r 19(1)(c) if the pleading may prejudice, embarrass or delay the fair trial of the action.

12 Rule 19(2) provides that no evidence shall be admissible on an application under par (1)(a).

13 The defendants rely mainly in their submissions on the general conditions of the contract and partly on the material contained in the bundle. It appears, therefore, that to a considerable extent, the application is brought under O 20 r 19(1)(c).

14 The approach of the court to applications of this kind is now well settled. In Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161, Martin CJ heard an application to strike out parts of the plaintiff's substituted statement of claim. His Honour said:

Before dealing with this specific application, I would observe that both I and the other members of this Court are firmly of the view that interlocutory disputes of this kind must be actively discouraged. In many cases, interlocutory disputes, particularly disputes relating to pleading issues, consume very substantial amounts of time and expense on the part of both the parties and the Court. In many cases, the time and expense involved in the consideration and resolution of the interlocutory dispute is entirely disproportionate to its significance to the just and effective resolution of the case as a whole by mediation or trial. For this reason, this Court will use the existing powers available under the Rules of the Supreme Court ('the Rules') and if necessary amend the Rules to actively discourage disputes of this kind. In very general terms, interlocutory disputes of this kind will only be entertained by the Court if the time and expense involved in their resolution is proportionate to the significance of the dispute to the just and effective resolution of the case. This principle is, in my view, already inherent in the provisions of the Rules when read as a whole, including in particular O 1 r 4A and r 4B, O 29 and O 29A [2].

15 That decision was delivered on 1 August 2006. Practice Direction No 4, by which the CMC List was established, was published on 9 August 2006. Echoing the learned chief justice's observations in Youlden Enterprises, par 13 of the practice direction provides:

A fundamental objective of the new List, and indeed the general practices and procedures of the Court, will be the discouragement of interlocutory disputes with all means at the Court's disposal, including costs orders in appropriate cases. The procedure specified in Order 31A rule 4 will generally be followed, as will the approach set out in the commentary to paragraph 31A.2.6 of the Red Book.

16 Paragraph 31A.2.6 of the Red Book refers to the practice of the court in dealing with interlocutory disputes under the former Expedited List. That list was subsumed in the CMC List.

When an interlocutory dispute arises the parties will usually be ordered to endeavour to resolve it by discussion. If discussion does not bring the issue to resolution, the parties will be ordered to exchange those written submissions on the subject which they would be obliged to file and serve if the matter came before the expedited list judge upon an opposed application, and then discuss their differences further: see [31A.14.1], pars 4 - 11. If these steps have been followed and issues still remain unresolved, only then will a disputed interlocutory application be heard by the expedited list judge at a special appointment ... The respective submissions should be of such a quality that the expedited list judge may make his or her ruling at the hearing with the minimum of oral argument. The judge may limit the time allowed for oral argument pursuant to r 5(3): see [31A.14.1], par 9. It will not be usual for the judge to give reasons when disposing of contested interlocutory applications: see [31A.5.7].

18 In fact, as I have noted above, the practice direction goes further than providing for limiting oral argument on interlocutory applications: par 14 provides that 'wherever possible' the application will be determined either on the papers or following a short hearing. In addition, par 7 of the practice direction provides that the CMC List will be implemented using the powers conferred upon case managers by O 29 and O 29A. These include, for example in O 29 r 2(1)(e), a power to dispense with any interlocutory proceedings or steps.

19 The practical application of these principles is demonstrated by the decision of Martin CJ in Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281. The decision was made in relation to an application by the plaintiff for an order that the defendant provide the plaintiff with written objections to its statement of claim 'setting out in a succinct form the primary reasons why the defendant says the statement of claim does not disclose a reasonable cause of action and/or why the statement of claim is not in a form which the defendant can plead to ...'

20 The chief justice noted that the list of objections already filed by the defendant was approximately 40 pages in length, whereas the substituted statement of claim was 56 pages in length. The chief justice said that the question raised by the application was how to determine 'the best way of enunciating and resolving a dispute between the parties as to the adequacy of the statement of claim'. His Honour continued:

It is, I think, important when approaching an issue of that kind to bring to mind the contemporary purposes of pleadings. The purposes of pleadings are, I think, well known and include the definition of the issues to be determined in the case and enabling assessment of whether they give rise to an arguable cause of action or defence as the case may be, and apprising the other parties to the proceedings of the case that they have to meet.

In my view, the contemporary role of pleadings has to be viewed in the context of contemporary case management techniques and pre-trial directions. In this Court, those pre-trial directions will almost invariably include; firstly, a direction for the preparation of a trial bundle identifying the documents that are to be adduced in evidence in the course of the trial; secondly, the exchange well prior to trial of non-expert witness statements so that non-expert witnesses will customarily give their evidence-in-chief only by the adoption of that written statement; thirdly, the exchange of expert reports well in advance of trial and a direction that those experts confer prior to trial; fourthly, the exchange of chronologies; and fifthly the exchange of written submissions.

Those processes leave very little opportunity for surprise or ambush at trial and, it is my view, that pleadings today can be approached in that context and therefore in a rather more robust manner, than was historically the case; confident in the knowledge that other systems of pre-trial case management will exist and be implemented to aid in defining the issues and apprising the parties to the proceedings of the case that has to be met.

In my view, it follows that provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met, the Court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the Court to be spent extensively debating the application of technical pleadings rules that evolved in and derive from a very different case management environment.

Most pleadings in complex cases, and this is a complex case, can be criticised from the perspective of technical pleading rules that evolved in a very different case management environment. In my view, the advent of contemporary case management techniques and the pre-trial directions, to which I have referred, should result in the Court adopting an approach to pleading disputes to the effect that only where the criticisms of a pleading significantly impact upon the proper preparation of the case and its presentation at trial should those criticisms be seriously entertained.

In this case, I have reviewed the statement of claim and the objections to it and I have done so in the case management context to which I have referred. It is my view, that many of the objections which have been taken are pedantic and pettifogging in nature. In many cases, elucidating and resolving the objection would consume an amount of time and resources, which is entirely disproportionate to the benefit to be derived from that process in terms of the identification of the true issues which have to be met in the case.

In many cases, consideration and determination of each objection would give rise to precisely the type of time and resource wasting forensic exercise which the Commercial and Managed Cases List was created to discourage. That is not to say that buried within those voluminous objections there might not be a criticism that should be properly be seriously entertained, but having looked myself at the statement of claim, it is my view that any lawyer looking at that pleading, genuinely interested in knowing what issues are to be tried and the case that has to be met, would have no difficulty in ascertaining those matters [4] - [10].

21 Another example illustrating the modern approach to case management is to be found in the decision of the Full Court in Murchison Zinc Company Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167. There, the court heard an appeal from the decision of the case manager dismissing an application to strike out substantial portions of the plaintiff's statement of claim.

22 The Full Court noted that even if the statement of claim was 'less than optimal' in certain respects, 'and as regards compliance with O 20 r 8', it did not mean that the case manager had erred in declining to strike it out. The Full Court said:

It is plain, from what he said, that his Honour was conscious of the fact that the statement of claim is still deficient, in some respects at least. It was, no doubt, at least partly for this reason that his Honour expressed his intention not to have this case tried on the pleadings and foreshadowed that he will direct the parties to confer with a view to identifying a list of issues which they require to be adjudicated. We have already mentioned that he said in this respect that, while the issues will be based upon the pleadings, it should be possible to formulate those issues in a clear and concise manner. We have been told nothing which suggests that this could not be done. His Honour has also said that he expects that, once the experts have conferred, the issues will be narrowed very considerably. There is, once again, nothing to suggest that his optimism in this respect is unfounded [34].

23 The present defendants, in their written submissions, submit that unless the plaintiff properly pleads and particularises its case, the proceedings are in danger of being delayed unnecessarily and not confined to the real issues of law and fact.

In particular, nothing in the approach discussed in Barclay Mowlem v Dampier Port Authority (2006) WASC 281 at [4], or Murchison Zinc Co Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167 at [28] justifies the [statement of claim's] departure from the rules and principles of pleading in this case. Those rules continue to apply and reflect the principles set down in Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658, at 664. The commentary in Seaman at paragraph [20.0.3] accurately records the role and importance of proper pleading.

25 The passage in Seaman referred to above contains the statement that:

Clients whose lawyers treat pleadings as a formality will be ill-served. Applications to strike out pleadings as failing to disclose a reasonable cause of action frequently involve an exploration of the limits of the substantive law. Pleadings are the backbone of civil litigation and are not merely formal ... and they play an essential part in civil actions, so to shrug off a criticism as a mere pleading point is bad law and bad practice ... This is because a trial is not at large but of the issues joined by the pleadings ... (citations omitted)

26 I see nothing in the decisions of the chief justice in Youlden Enterprises, Barclay Mowlem Construction or the Full Court in Murchison Zinc Company which is inconsistent with the principles set out in [20.0.3] above. Indeed, in Barclay Mowlem, the chief justice noted the need for a pleading to fulfil 'its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met ...' [7]. And in Murchison Zinc, the Full Court noted that the proposed list of issues on which the case manager proposed to try the case would be based on the pleadings: [34].

27 I have considered the statement of claim in the present case. In relation to each claim, the plaintiff has set out the effect of the contractual provision (express or implied) on which it relies and facts which are said to make the relevant provision applicable. Where the claim is based on what is, in effect, a waiver of an express term, or an allegation that the defendants are estopped from relying on the strict terms of the contract, the factual basis for the allegation is set out.

28 In my view, the statement of claim serves the purpose of informing the defendants of the case they have to meet. Indeed, much of the material in the defendants' written submissions constitutes matters on which the defendants wish to rely for their defence. It would therefore be open to me to dispense with the application under O 29 r 2. However, having considered the opposing contentions, I shall set out my views in relation to the specific matters raised in the defendants' application.

29 The plaintiff contends in pars 5.3, 5.5 and 5.8 that notice of certain matters was sufficient if given to the defendants 'so far as reasonably practicable'. The defendants contend that these words are not found in the contract and imply a standard which the plaintiff has not defined.

30 The plaintiff contends that, as a matter of construction, having regard to the commercial purpose and intent of the contract, its construction is arguable: particularly having regard to the factual matters set out in the particulars of its claim, which are annexed to its submissions.

31 In my view, the plaintiff's contentions are arguable and should be left to the trial.

32 The plaintiff contends in par 6 that as a matter of construction, or alternatively as a matter of implication, the first defendant's powers to grant an extension of time and to determine the final contract price would be exercised:

• according to the proper construction of the contract;
• in good faith;
• reasonably; and
• with reasonable skill and care.

33 The defendants contend that the plaintiff has not pleaded any facts, material or otherwise, on which an implied term could properly be based.

34 The plaintiff emphasises that the term arises either as a matter of construction or implication: and that the construction argument will proceed in any event.

35 Both parties rely on the decision in WMC Resources Ltd v Leighton Contractors Pty Ltd (1999) 20 WAR 489. However, the parties differ in their interpretation of the decision and its application to the present case.

36 In my view, that is a matter which is arguable and should be left to the trial.

37 The plaintiff claims in par 7 that certain provisions of the contract relating to notification of relevant events were varied by an oral agreement made during the course of a progress meeting on 15 September 2005.

38 The defendants rely on a provision of the contract which precludes oral variations. The defendants then contend that the plaintiff has failed to plead any consideration for the variation which is said to have been alleged in vague terms. The defendants contend that the particulars are vague and embarrassing because they refer to lengthy documents which are included in the bundle.

39 The plaintiff says, justifiably in my view, that these are matters of defence. Further, I consider that the defendants' reliance on the 'lengthy documents' is an attempt to resolve the issue by reference to only some of the evidence on which the issue will no doubt turn. I therefore consider that the statement of claim and the foreshadowed defences to it raise a triable issue.

40 The plaintiff contends in par 8 that as a result of a representation or an assumption that it did not need to comply strictly with the notification requirements of the contract, the defendants are estopped from requiring such strict compliance.

41 The defendants contend that there cannot have been any reliance sufficient to ground an estoppel because the pleaded reliance is said to pre-date the date of the alleged representation or the date on which the assumption is alleged to have arisen.

42 As the plaintiff points out, the defendants appear to have overlooked the fact that the plaintiffs rely on the first defendant's conduct 'during the term of the Contract'. In any event, the issue cannot be resolved without first resolving the construction/implied term issue relating to the notification requirements referred to above.

43 In my view, the issues are arguable and will need to be resolved at trial.

44 The plaintiff claims in pars 10, 12 - 14, 29 and 30, an entitlement to be granted extensions of time in which to achieve practical completion under the contract. The plaintiff claims associated costs of the delays which, it alleges, it was required to suffer.

45 The defendants contend that the plaintiff has failed to plead or particularise sufficient material facts to establish a causal connection between the first defendant's conduct and the extension of time sought.

46 The plaintiff contends that the allegations pleaded in the statement of claim must be read in conjunction with the substituted schedule of material facts which sets out in considerable detail the progress of the works and the changes in the critical path. The substituted schedule of material facts runs to some 60 pages, including what appear to be critical path analyses. In my view, it would be entirely inappropriate to attempt to resolve this issue on a strike out application. It is clearly arguable.

47 The plaintiff contends in par 15 that the first defendant's refusal to grant any or any reasonable extensions of time was not in accordance with the proper construction of the contract and/or not in good faith and/or unreasonable and/or made without reasonable care and skill.

48 The defendants contend that the relevant paragraph 'is merely a series of argumentative assertions and unsupported conclusions'.

49 In my view, this contention overlooks the fact that par 15 contains the plaintiff's contentions as to the legal effect of the first defendant's conduct pleaded in the preceding paragraphs: particularly, pars 9 and 14.

50 Allowing for the fact that the allegations contained in par 15 include a lack of good faith, I consider that the preceding paragraphs identify the plaintiff's case with sufficient precision.

51 The plaintiff makes various claims for variations under cl 29.4 of the general conditions of the contract.

52 The defendants contend that although the plaintiff may have been given directions in relation to the works the subject of the variation claims, and has carried out the works and thereby incurred additional costs, that does not entitle the plaintiff to claim for a variation.

53 The dispute turns on the true construction of the contract. It is clear from par 19(g) to (i) of the plaintiff's response to the defendants' request for particulars of the statement of claim, dated 25 September 2008, that the plaintiff's claim for variation is based on the construction there set out. I do not think it appropriate to attempt to resolve this construction issue on a strike out application. The matter is arguable: and the defendants can be in no doubt about the case they have to meet.

54 These paragraphs raise the same issues as par 1(f) above. It is not necessary to deal with them separately.

55 For these reasons, I conclude that the application should be dismissed. The parties should now confer for the purpose of agreeing directions for the further conduct of the action. If the parties are unable to agree, each party should submit the minute they propose to my associate, within seven days of publication of these reasons.

56 The parties have not made submissions in relation to costs. I therefore set out my views on a tentative basis so that the parties will have the opportunity to make submissions if they wish to persuade me to a different view.

57 I have referred above to par 13 of Practice Direction No 4 of 2006. Reference is there made to the discouragement of interlocutory disputes with all means at the court's disposal, including costs orders in appropriate cases.

58 In the present case, the parties have conferred appropriately. As is clear from the O 59 r 9 memorandum from which I have quoted above, the conferral process has enabled the parties to understand their respective cases and has alerted the plaintiff to what the defendants perceive to be inadequacies in its case.

59 In these circumstances, I consider that the strike out application was unnecessary and that the defendants should therefore pay the plaintiff's costs of the application.

60 In my view, it is unlikely that the relevant legal costs determination would be adequate to compensate the plaintiff for the amount of work it was required to carry out in order to answer the defendants' compendious submissions.

61 If that is so, I would be minded to order payment of the plaintiff's costs above those fixed by the determination under s 215 of the Legal Practice Act 2003 (WA).

62 I was informed by the plaintiff's solicitors, through my associate, that in anticipation of a hearing of the application, the plaintiff's solicitors had photocopied for me and for the defendants, each of the 56 authorities on which it relies: although only three were marked with an asterisk denoting that, had there been a hearing, counsel would have intended to read from them.

63 In my view, the practice of photocopying authorities for the court is to be discouraged. It is contrary to the spirit of Practice Direction No 5 of 2007 which provides, in par 5.6, only for the delivery of copies of unreported decisions which are not freely available on the World Wide Web.

64 In these circumstances, I propose to direct that the plaintiff's solicitors bear the photocopying costs themselves and not charge their clients, either directly or indirectly, for those costs.

65 Before making final orders as to costs or photocopying costs, I will give the parties an opportunity to file short outlines of submissions within seven days of the publication of these reasons.