McMahon Services Australia Pty Ltd v Howmet Systems Australia Pty Ltd, formerly Alcoa Australia Rolled Products Pty Ltd

Federal Court of Australia|2022-01-28|Before: Besanko J

The applicant's Interlocutory application dated 15 June 2021 be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 This is an Interlocutory application by the applicant for further particulars of two paragraphs in the Defence filed by the respondent. The applicant in the proceeding is McMahon Services Australia Pty Ltd and it brings a total cost claim against the respondent in relation to the decommissioning and demolition of the respondent's Aluminium Smelting Plant in Yennora which is located in Western Sydney, New South Wales (the project). 2 Paragraph 114 of the applicant's Statement of claim is as follows: 114. The Change to Services caused the increased costs incurred by McMahon claimed in these proceedings, and: 114.1. the time-related costs of Variations as described at paragraphs [55] to [57] (inclusive) above are the best particulars that can be provided at this stage as to the causes of McMahon's claimed increased costs from those variations and delay and disruption; and 114.2. because of the nature of change in scope of works and delay and disruption, including the ongoing nature of them, and continual rescheduling, it is impractical and unreasonable, through no fault of McMahon, to provide further particulars of: 114.2.1. causation, beyond the matters described in the factual matters relied upon above; and 114.2.2. the different classes of costs and the causation of specific heads of costs in respect to each category, beyond that provided in the factual matters relied upon below; 114.3. the Change to Services, and the effects flowing from them, are the substantial causes of McMahon's claimed increased costs; 114.4. there are no other relevant and substantial causes of McMahon's claimed increased costs; 114.5. the increased costs claimed by McMahon would not have been incurred in any event or but/for the conduct of AARP described herein; 114.6. there has been no claim for, and McMahon's claim excludes, any increased costs substantially caused by matters other than AARP's actions; and 114.7. the costs claimed by McMahon are reasonable. 3 The phrase "Change to Services" used in this paragraph is defined elsewhere in the Statement of Claim as follows: Change to Services means additional works performed by McMahon as directed by AARP or for the benefit of AARP … 4 The paragraphs in the Defence which are relevant for the purposes of the Interlocutory application are as follows: 114. It denies paragraph 114 and says further that: … (c) in breach of the Contract, McMahon failed to exercise due skill, care and diligence in the execution of the Services by mismanaging the planning, timing and sequencing of the Services as required by Clause 5.2 of the Umbrella Agreement; Particulars Particulars will be provided prior to the hearing. (d) McMahon underestimated the equipment requirements to perform the demolition work and consequently underestimated the tender price and the period of time required to complete the Services; and Particulars Particulars will be provided prior to the hearing. … 5 The order which is sought by the applicant is that the respondent provide further particulars of paragraphs 114(c) and 114(d) of the Defence.

Particulars Provided to this Point 6 The respondent, in response to the applicant's request for particulars of paragraphs 114(c) and 114 (d), provided the following particulars: McMahon failed to exercise due skill, care and diligence in the execution of the Services by mismanaging the planning, timing and sequencing of the Services as required by Clause 5.2 of the Umbrella Agreement Inevitably, proper particulars of this allegation will be the domain of the delay expert to be retained by our client. However and for present purposes, our client will maintain: 1. McMahon did not follow the contract program from the outset. 2. McMahon under-estimated the time taken to perform project related tasks and activities, such under-estimate being caused in part by ineffective equipment and the resultant change in methodology. 3. There was no proper sequence adopted by McMahon with areas left incomplete for long durations. 4. Actual work fronts at any given time were as high as 11 and were consistently at 9. McMahon underestimated the equipment requirements to perform the demolition work and consequently underestimated the tender price and the period of time required to complete the Services 1. At page 18 of the Project Execution Plan (forming part of the Tender Proposal) under the heading "Deconstruction & Mechanical Demolition" you state as follows: McMahon Services will maximise the use of its specialised demolition excavators to undertake the mechanical demolition of processing plant and equipment. Demolition shears and grapple attachments will be utilised to mechanically demolish materials into manageable sized pieces. McMahon Services' 12 tonne, 9 tonne and 6 tonne Genesis shears have been purpose built for processing heavy gauge steel and have been successfully utilised to deliver similar projects of the same scale. Capitalising on the capabilities of these machines by undertaking demolition work mechanically, reduces the amount of hot working and working at heights which would otherwise be required to deconstruct large pieces of plant and equipment. This emphasis on mechanical methods will have significant positive safety and programme outcomes to the project. 2. The specialised mechanical equipment was first utilised on site on 7 May 2016 at the Hot line run out table. This activity had a scheduled start to finish 4-day timeframe that took initially 9 days and was finalised after 49 days over 11 months. The activity to remove the building was straight forward but the machine was ineffective due to its inability to demolish the heavy gauge steel construction of the plant and equipment within the building. 3. The 1250 excavator and shear moved to the Scalper building on 14 May 2016 and proceeded to commence demolition activities. On 16 May 2016, when the excavator attempted to demolish the Scalper plant and equipment it suffered a major hydraulic failure. The excavator was returned to service on 27 May 2016. The machine recommenced activities of shearing the large heavy gauge internal equipment and once again failed with a major hydraulic issue on the same day. 4. This time the failure coincided with an inspection of the shear mechanism which identified twisting resulting in the shear having to leave site for repairs and did not return for 5 weeks, returning on 13 July 2016. Once recommissioned and returned to service the shear once again failed resulting in a further delay. 5. The Scalper building, and associated internal equipment, was one of the smaller activities on the site scheduled in the original and subsequently supplied programmes for a 3 day activity. The failure of the specialised demolition equipment to perform on this minor activity resulted in the activity taking 70 days over 3 months. 6. With the larger more complex demolition activities still to be executed McMahon modified its methodology due to its equipment proving ineffective. The methodology changed from the use of shears to cut up the internal equipment to deconstruction by disassembly of the equipment. This change in methodology required a larger workforce, additional equipment including two extra cranes having to be brought to site resulting in delays to the completion of the Services.

The Basic Contentions and the Relevant Rules of Court 7 The applicant contends that these particulars are not the necessary particulars of the two paragraphs within the relevant Rule of Court. As I understand it, the respondent contends first, that these particulars are the necessary particulars having regard to the context of the pleadings. It does not deny that there are likely to be further particulars - for example, it says as much in the particulars to paragraph 114(c) of the Defence - but secondly, it contends that it is appropriate in the circumstances that any further particulars be provided after the parties make/give discovery of relevant documents and exchange their respective expert evidence. 8 The obligation on a party to provide the necessary particulars of each claim, defence or other matter is contained in r 16.41 of the Federal Court Rules 2011 (Cth). That rule also contains notes which clearly identify the object of particulars. It is in the following terms: 16.41 General (1) A party must state in a pleading, or in a document filed and served with the pleading, the necessary particulars of each claim, defence or other matter pleaded by the party. Note: See rule 16.45. (2) Nothing in rules 16.42 to 16.45 is intended to limit subrule (1). Note 1: The object of particulars is to limit the generality of the pleadings by: (a) informing an opposing party of the nature of the case the party has to meet; and (b) preventing an opposing party being taken by surprise at the trial; and (c) enabling the opposing party to collect whatever evidence is necessary and available. Note 2: The function of particulars is not to fill a gap in a pleading by providing the material facts that the pleading must contain. Note 3: A party does not plead to the opposite party's particulars. Note 4: Particulars should, if they are necessary, be contained in the pleading but they may be separately stated if sought by the opposite party or ordered by the Court. (See also r 16.08(b).) 9 The rule under which the applicant brings its Interlocutory application is r 16.45 which is in the following terms: 16.45 Application for order for particulars (1) If a pleading does not give a party fair notice of the case to be made against that party at trial and, as a result, the party may be prejudiced in the conduct of the party's case, the party may apply to the Court for an order that the party who filed the pleading serve on the party: (a) particulars of the claim, defence or other matter stated in the pleading; or (b) a statement of the nature of the case relied on; or (c) if there is a claim for damages - particulars of the damages claimed. (2) An application under subrule (1) may be made only if: (a) the particulars in the pleading are inadequate; and (b) the party seeking the order could not conduct the party's case without further particulars. (3) A respondent who applies to the Court for an order under subrule (1) before filing the respondent's defence must satisfy the Court that an order is necessary or desirable to enable the respondent to plead. Note: The intent of the pleading rules is that a party should include all material facts in its pleadings as initially filed so that there is no unfairness to another party by any lack of particularity. If the party has not done so, the Court may at trial refuse to allow the party to present a case that is outside the terms of their pleading.

The Evidence on the Interlocutory Application 10 The applicant relies on two affidavits from the its solicitor (Ms Katarzyna Fidos) and the respondent relies on two affidavits from its solicitor (Mr Joseph Mulcahy). 11 Ms Fidos' first affidavit, which was filed in support of the applicant's Interlocutory application, is largely directed to establishing the facts as I have already stated them. 12 In his first affidavit, Mr Mulcahy recites the particulars provided to the applicant which are set out above (at [6]). 13 It was not always clear from the respondent's evidence and submissions which paragraph, paragraph 114(c) or paragraph 114(d), it is referring to. It describes paragraph 114(c) as the "project mismanagement defence" and paragraph 114(d) as the "change of methodology" defence. The particulars provided to this point suggest that the defences overlap to an extent. 14 In his first affidavit, Mr Mulcahy accepts that full particulars of both paragraphs would need to be the subject of expert evidence by which I take him to mean that full particulars can only be provided after expert evidence is available. 15 With respect to paragraph 114(c), Mr Mulcahy said that it will be necessary for the respondent to do the following: (1) engage a "delay" expert; (2) obtain from the applicant the programs it prepared during the course of the contract in native format and provide those to the delay expert; and (3) instruct the expert to prepare an as-built program. That exercise can take considerable time and is rarely completed before discovery by the contractor. 16 With respect to paragraph 114(d), Mr Mulcahy states that with respect to the underestimate of the tender offer as a consequence of the inadequate machinery which formed the basis of the applicant's tender offer, it may be necessary for the respondent to obtain assistance from a "quantum" expert in relation to the make-up of the tender offer and in order to adequately instruct the quantum expert, it may be necessary to obtain discovery from the applicant of the documents relating to the composition of the tender offer. Mr Mulcahy said that he will also need to take instructions from four persons involved in the project who are no longer employed by the respondent. 17 Mr Mulcahy's second affidavit was filed after the respondent had been provided with the applicant's submissions. In that affidavit, Mr Mulcahy refers to a submission made by the applicant to the effect that the respondent has the relevant project documents available to it and the relevant material facts. Mr Mulcahy states that the basis upon which this assertion has been made is not clear to him. He provides a schedule of the categories of project documents required from the applicant in order for the respondent to provide particulars of the applicant's mismanagement of the works, that is, the plea in paragraph 114(c). The respondent does not have these documents. The schedule is as follows: No. Category Relevance

All programs provided by McMahon to AARP from the date of the Tender Proposal to October 2017 in native format including the program described as the McMahon Programme (in paragraph 29 of the SOC) created as part of the Tender Proposal and the program attached to the Contract as Attachment 4 Schedule. These programs are the "as planned programs" which are required to assist AARP's delay expert to determine the true cause of delays by comparing these programs against the sequence of work actually carried out (i.e. against an as built program).
All site diaries which record the as-demolished progress of the works. These documents are relevant to factual questions concerning the dates that work on site actually occurred and are also necessary to enable AARP's delay expert to prepare an as built program.
All signed daily work permits issued in respect of the Services, including all: These documents disclose work authorised on the dates they bear and are relevant to factual questions concerning the dates that work on site actually occurred and are also necessary to enable AARP's delay expert to prepare an as built program. • General Work Permits; • Hot Work Permits; • Working at Height Permits; and • Crane Lift Permits.
All signed Safe Work Method Statements issued in respect of the Services. These documents summarise the work and how the work crew was to perform various activities. The documents are relevant to factual questions concerning the dates that work on site actually occurred and are also necessary to enable AARP's delay expert to prepare an as built program.
All signed Job Safety Analyses referred to as JSAs issued in respect of the Services These documents analyse the scope of specific activities to be performed and are relevant to factual questions concerning the dates that work on site actually occurred and are also necessary to enable AARP's delay expert to prepare an as built program.

18 Mr Mulcahy also sets out the categories of project documents required from the applicant in order for the respondent to provide particulars of the applicant's change of methodology, that is, the plea in paragraph 114(d). The respondent does not have these documents. The schedule is as follows: No. Category Relevance

All documents relating to the amounts included in the tender sum offered by McMahon in respect of: These documents are relevant to McMahon's assertion (at paragraph 30 of the SOC) that the Tender Proposal was sufficiently priced with the resources set out in the Tender Proposal being sufficient to meet the duration for performance as set out in the McMahon Programme. The documents are also directly relevant to the total cost nature of the claim and the assessment of the impact of McMahon's change in methodology alleged by AARP at paragraph 114(d) of the Defence. • its specialised demolition excavators as referred to at page 18 of the Project Execution Plan (forming part of the Tender Proposal) (Specialised Demolition Excavators); and • associated labour to operate that machinery.
All documents relating to the failures or breakdowns of the Specialised Demolition Excavators from the commencement of work on site until 31 July 2017 including documents relating to the failures, repairs and recommencement of work including the 1250 excavator and shear which: These documents are relevant to McMahon's allegation (at paragraph 114 of the SOC) that the only substantial cause of delay and increased costs to the works was the variations. The documents are also directly relevant to the total cost nature of the claim and the assessment of the impact of McMahon's change in methodology alleged by AARP at paragraph 114(d) of the Defence. • failed on 16 May 2016; • was returned to service on 27 May 2016; • failed later that same day; and • was returned to site on 13 July 2016.
All internal documents relating to the change of McMahon's demolition methodology (in whole or in part) from the use of the Specialised Demolition Equipment to deconstruction by disassembly including the introduction of two extra cranes in or about July 2016. These documents are relevant to McMahon's allegation (at paragraph 114 of the SOC) that the only substantial cause of delay and increased costs to the works was the variations. The documents are also directly relevant to the total cost nature of the claim and the assessment of the impact of McMahon's change in methodology alleged by AARP at paragraph 114(d) of the Defence.

19 In Ms Fidos' second affidavit, she deposes to the fact that the respondent complains of being at a disadvantage if required to provide particulars of the applicant's alleged mismanagement of the timing and sequence of the services in the absence of an as-built program. Ms Fidos states that the applicant has engaged Mr Gerard King of King Planning Pty Ltd to prepare an as-built program and that she is instructed that the applicant is prepared to release to the respondent a copy of the as-built program at this stage and in advance of completion of any report to be prepared by Mr King, to assist the respondent in providing the further and better particulars sought in the Interlocutory application. The respondent has provided a letter in response to this proposal in which it sought further information and raised matters by way of query which the applicant's solicitor is in the course of addressing.

Analysis 20 The applicant submits that the particulars provided in relation to both paragraphs 114(c) and 114(d) are inadequate and, in terms of knowing the case it has to meet, it is liable to be taken by surprise. It submits, correctly in my view on all the evidence, that the respondent accepts that further particulars are required and will be provided. The issue is one of timing, having regard to the Court's power to order discovery and the parties' ability to obtain expert evidence. 21 The applicant submits that the respondent's submission that a reason to postpone an order for particulars is that Mr Mulcahy wishes to obtain "instructions" from four persons who are no longer employed by the respondent should be rejected. If that were the only reason given by the respondent for postponing the provision of particulars, then I would accept that proposition. No reason has been advanced by the respondent that it cannot speak to the potential witnesses and even if that was going to take a period of time, then an order for the particulars to be provided within an extended period of time could be made. 22 However, that is not the only reason advanced by the respondent for postponing the provision of particulars. It has put on evidence that it needs documents before it will be in a position to provide full particulars. That evidence is reasonably general, but it is the only evidence (as distinct from a submission by the applicant) before me and I accept it. 23 The applicant submits that it must know the case it has to meet. That is correct. The applicant also submits that it should not have to incur the expense of its experts having to address every conceivable case it may have to meet. Expert evidence can be expensive, sometimes very expensive, and there is force in the applicant's submission. 24 The thrust of the respondent's opposition to the application is the need for it to obtain discovery of documents and expert evidence before providing particulars. It also relied on the need to approach four former employees, but I have already addressed that submission. The respondent pointed to the documents it needs from the applicant before it will be in a position to provide full particulars of paragraphs 114(c) and 114(d) of the Defence. Those documents are identified by Mr Mulcahy in his evidence. It submitted that expert evidence will enable it to identify and formulate with appropriate precision the necessary particulars. 25 In Deemah Marble & Granite Pty Ltd (in liq) v Sutherland [2001] NSWSC 829, Young CJ in Eq provides a summary of the principles relevant to the provision of particulars. Relevantly to this case, his Honour said (at [6]): Before dealing with the request under these heads, I should set out a basic summary of the principles that I need to apply: (1) The basal function of particulars is to reduce costs by alerting the opponent to the scope of the real case being made so the opponent is not caught by surprise, nor does the opponent waste time and money in preparing to meet issues that the other party does not intend to raise: see eg Sims v Wran [1984] 1 NSWLR 317, 321 and Banque Commerciale SA (In Liquidation) v Akhil Holdings Limited (1990) 169 CLR 279 at 286. … (4) The party's obligation is only to supply the best particulars he or she can supply, provided that after discovery those particulars are supplemented, if possible; see Marshall v Inter-Oceanic Steam Yachting Co (1885) 1 TLR 394. (5) When one party has the means of knowing the real facts, ordinarily the opponent will not be ordered to supply particulars until after discovery: Millar v Harper (1888) 38 Ch D 110; TPC v CC (NSW) Pty Limited (1995) 131 ALR 581, 593. (6) The degree of particularity depends upon the nature of the case: American Flange and Manufacturing Co Inc v Rheem Australia Pty Limited [1963] NSWR 1121, 1126. … (8) The order for particulars is discretionary, the object being to ensure the efficient process of the Court. (See also Power Infrastructure Pty Ltd v Downer EDI Engineering Power Pty Ltd (No 3) [2011] FCA 539; Trade Practices Commission v CC (NSW) Pty Ltd (No 4) [1995] FCA 1418; (1995) 58 FCR 426 at 439 per Lindgren J; National Mutual Life Association of Australasia Ltd v Tolfield Pty Ltd (No 3) [2012] FCA 100; (2012) 201 FCR 261 at [14].) 26 In my opinion, an order for the provision of particulars should not be made at this stage. The respondent should not be ordered to provide particulars before it has had the opportunity to inspect documents properly discoverable by the applicant, having regard to the discovery obligations under the Rules of Court. I would go no further than that at this point. I mean by that that I would not at this point state that full particulars should not be provided until after expert reports have been exchanged. I would wish to leave open the possibility that it may be appropriate to make an order on an application after the making of discovery, particularly if it transpires that the applicant provides Mr King's as-built program to the respondent as has been proposed.

Conclusion 27 The applicant's Interlocutory application should be dismissed. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Besanko.

Federal Court Rules 2011(Cth)rr 16.08, 16.41, 16.45

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