BETWEEN : MURCHISON ZINC COMPANY PTY LTD (ACN 008 950 178)

Practice and procedure - Supreme Court procedure - Pleadings - Engineering contract - Application to strike out part of statement of claim - Whether statement of claim adequately particularised - Application to strike out refused even though pleading defective since issues to be defined otherwise than by pleading

Supreme Court Act 1935, s 60(1)(f)

Trade Practices Act 1974, s 51A, s 52

Aintree Holdings Pty Ltd v Corderoy (1996) 16 WAR 416

Bailey v Commissioner of Taxation [1977] HCA 11; (1977) 136 CLR 214

Bomanite v Slatex Corporation Australia Pty Ltd [1991] FCA 536; (1991) 32 FCR 379

Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566

Lenijamar v AGC (Advances) Ltd [1990] FCA 520; (1990) 27 FCR 388

Neptune Oil Co Pty Ltd v Fowler (1963) 63 SR (NSW) 530

Rubenstein v Truth & Sportsman Ltd [1960] VicRp 75; [1960] VR 473

Tony Sadler Pty Ltd v McLeod Nominees Pty Ltd (1994) 13 WAR 323

Trade Practices Commission v David Jones (Aust) Pty Ltd [1985] FCA 228; (1985) 7 FCR 109

Wharf Properties Ltd v Eric Cumine Associates [No 2] (1991) 52 BLR 8

Wilson v Metaxas [1989] WAR 285

WMC Resources Limited v Leighton Contractors Pty Ltd [1999] WASCA 10; (1999) 20 WAR 489

1 JUDGMENT OF THE COURT: This is a renewed application for leave to appeal against a decision of a Judge of this Court in interlocutory proceedings (as to which see s 60(1)(f) of the Supreme Court Act 1935 and SCM Chemicals Ltd v Saipem Australia Pty Ltd (1991) 4 WAR 569 at 573, 583). The applicant is, in such a case, generally required to demonstrate both that the decision of the court below is wrong, or at least attended with sufficient doubt to justify the grant of leave, and that substantial injustice would be done by leaving the decision unreversed (Wilson v Metaxas [1989] WAR 285 at 294). The discretion to grant or withhold leave is broad and these criteria are neither exhaustive nor rigid (see Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566 at 571). Moreover, what is a substantial injustice must depend upon all of the circumstances of the case (Jingellic, above, at 571 and Western Australia v Bond Corporation Holdings Ltd (1991) 5 WAR 40 at 55).

2 The decision in respect of which leave to appeal is sought is one dismissing an application to strike out substantial portions of the plaintiff's statement of claim.

3 On 24 January 2000 the plaintiff, an underground and civil works contractor, filed (in proceedings which have been on foot since 1996) a reamended substituted statement of claim against the defendant, a mining company which acts as manager and agent for a number of companies which have combined to form what has been described as the "Golden Grove Joint Venture". It was this statement of claim which was under attack in the proceedings giving rise to the application for leave to appeal.

4 The plaintiff's claim, as pleaded, arises out of two contracts. The first of these was made on about 19 September 1994 and is described in the statement of claim as the "September 94 Contract". The second, which is pleaded to have replaced the first, is a contract in writing executed by the parties in late November 1995 and is described in the statement of claim as the "November 95 Contract".

5 Each of these contracts (and they are pleaded to have contained many common terms) was for the excavation and construction, by the plaintiff on behalf of the defendant, of a decline. The plaintiff pleads (par 3 of the statement of claim) that the defendant agreed to pay to it rates and prices for that work in accordance with a contractual schedule and also such other amounts as might become due to it by reason of any variations by the defendant to the work under "the Contract" (presumably a reference to each contract). It pleads also (par 3) that the defendant would "reasonably consider requests for, and grant to the Plaintiff, extensions of time for the completion of the work under the Contract and pay consequent delay and disruption costs in accordance with the terms of the Contract".

6 It says (par 19) that on about 3 and 4 December 1994 the defendant directed it to excavate the decline at a level some 12 metres higher and 2.21 metres to the right of the location shown in the original contractual drawings. This, it says (par 20(a)), was a variation of the contract works (presumably under the "September 94 Contract", the "November 95 Contract" not yet having been made, although the pleading, which generally does not distinguish between the two contracts, refers to changes to the "levels, lines, positions or dimensions of all or part of the Works within the meaning of General Conditions clause 40.1(c) of the Common Terms", this last phrase being a reference to terms common to both contracts.)

7 The plaintiff also says (par 23) that it encountered ground conditions which differed from those contemplated by the original works. This, it says (par 22), caused part of the decline to collapse on 7 January 1995. The plaintiff pleads that it asked the defendant to issue a variation permitting it to utilise an adequate ground support method (different from that originally contemplated) to accommodate these different ground conditions but that the defendant refused to do so notwithstanding that the ground conditions and the work required to be performed by the plaintiff to overcome those conditions in the performance of the contract were, in fact, a variation to the contract works (par 24).

8 Next, the plaintiff pleads (par 40) that it also encountered substantial inflows of water as a consequence of the change in location which, it says, required a different excavation cycle and slowed its rate of advance (par 45). This, it says (pars 42 and 43), should have led to a direction from the defendant that cover grouting be carried out so as to have conditions not materially different from those tendered for by the plaintiff but, instead, the defendant required the plaintiff to employ existing pumping facilities. That, it says (par 44), was a variation of the contract works in respect of which it is entitled to be paid.

9 Then, it says (par 49 to par 51), between about 3 and 31 July 1996 it encountered difficulties with ventilation attributable to the removal of a fan for maintenance purposes by the defendant. These difficulties required a further modification of its work methods. This modification was, it says (par 51), such as to amount to a variation by the defendant of the work under the contract for which the plaintiff was also entitled to be paid.

10 In par 52 of the statement of claim the plaintiff says that, by reason of the different ground and water conditions and the ventilation problems, "which gave rise to variations as pleaded above", it "incurred extra costs in its performance of the Works (being the difference between the amount paid by the Defendant and the actual cost incurred by the Plaintiff ... )". These, it says, (par 52), amounted to $3,566,632, being "the reasonable costs resulting from ... [its] changed work method" in one part of the contract works area (that between chain 0 and chain 650, described in the pleading as CH 0 to CH 650), as a consequence of different ground conditions, plus $3,734,195, being "the reasonable costs resulting from ... [its] changed work method" in another part of the contract works area (between CH 650 and CH 1814) as a consequence of the different ground conditions, the substantial inflows of water and the ventilation problems. Particulars of these extra costs are provided in schedules 8 and 9 of the statement of claim.

11 Schedule 8 provides, in respect of each material part of the decline (by reference to different chainages), a figure representing the site costs and another representing revenue earned. The valuation of the variation claimed is then calculated in respect of the area between CH 0 and CH 650 and that between CH 650 and CH 1814 by taking, in each case, actual site costs plus 5 per cent profit (the contract rate) and deducting from that figure revenue actually paid. Schedule 9 sets out precisely the same figures in respect of site costs and revenue earned but this time describes them as particulars of delay and disruption costs caused by the ground, water and ventilation conditions encountered. The delay and disruption costs are then calculated from these figures in respect of each of the two areas to which I have referred by taking the total site costs, adding to that total an amount equal to 5.5 per cent thereof (representing offsite overheads) and then deducting from that figure the total revenue paid less a 5 per cent profit component. Explanatory notes are provided in schedule 10 to the statement of claim.

12 There are then four attached schedules or sections (described as Sections A to D) which provide greater detail. Section A provides a cost and revenue summary and contains a breakdown of costs into labour, plant, materials and indirect costs, being the onsite overheads. This breakdown is given in respect of each of the sections of chainage referred to in the cost and revenue summary. Section B contains an analysis of the various site costs, providing a breakdown of each by reference to the cost codes identified in the plaintiff's ledger. It also contains various spreadsheets which analyse the site costs on a weekly basis for each of the sections of chainage identified in the cost and revenue summary. Section C (which was conceded by counsel for the plaintiff to be irrelevant to the plaintiff's claim) contains an analysis of the anticipated costs of the project derived from the contract schedule of rates. Section D contains the valuation, by the plaintiff, of the variation which it claims.

13 Then, in par 53 of the statement of claim the plaintiff pleads, as an alternative claim, that the combination of the difference in the ground and water conditions and the ventilation problems was such as to delay and disrupt it in the respects pleaded, causing it to incur additional costs exceeding the anticipated costs on which its tender was calculated and upon the basis of which it had contracted with the defendant. These additional costs are, once again, particularised as being those in schedules 8 and 9.

14 In par 55 of the statement of claim the plaintiff pleads that it was an implied term of each contract that the defendant would act reasonably in determining whether to extend the date fixed for completion of the contract works. It pleads in par 56 that the different ground and water conditions and the ventilation problems were such as required an extension of 154 days and payment of the delay and disruption costs incurred by the plaintiff but that, in breach of the implied term, no extension was granted and no such payment was made. As a consequence, it says (par 57), it has suffered loss and damage in the form of "the reasonable costs which the Defendant should have paid ... ", being the delay and disruption costs of $6,991,623 set out in schedule 9.

15 In sections 7 and 8 of its pleading the plaintiff makes alternative claims for equitable compensation in respect of what it says was the unjust enrichment of the defendant, arising out of the performance by the plaintiff of the extra work and its provision of extra materials for the defendant's benefit, and for damages arising out of alleged misleading and deceptive conduct by the defendant in breach of s 52 of the Trade Practices Act 1974. The misleading and deceptive conduct is said (in par 115) to be constituted by the provision by the defendant, at the time of the tendering process, of geological and geotechnical information which differed from that actually encountered by the plaintiff and (in par 121) by a representation, not subsequently adhered to (the pleader relies, in this respect, upon s 51A of the Trade Practices Act), to the effect that if, after a contract was entered into, the defendant, by the Superintendent, gave a direction which resulted in a variation to the contract works, the defendant would consider the plaintiff's request for a variation "in accordance with the requirements of General Conditions clause 23 and General Conditions clause 40" and "grant the same in the manner pleaded ... [earlier in the statement of claim]".

16 The defendant, in its application filed on 10 February 2000, sought to strike out all of these claims (although it has already filed a defence and counterclaim in respect of them). It did so upon the basis that no adequate particulars had been provided of the loss and damage alleged or of the various amounts claimed or of the delays alleged. It contended that the particulars were admitted by the plaintiff to be inadequate because, at various points in the statement of claim, it was said that further particulars would be provided. However comments to that effect were deleted from the pleading at the time of the hearing upon the basis that they had been retained in error after amended schedules of particulars had been provided. In addition the applicant complained that schedules 8 and 9 merely set out, as the foundation for the amounts claimed in pars 52 and 53, a comparison between site costs and revenue and did not particularise, at all, what costs and delays were caused by each of the matters alleged in the body of the statement of claim.

17 Counsel for the defendant also pointed to the fact that the statement of claim under attack was the ninth version of that document which has been filed and served by the plaintiff. He reminded the learned Judge below that, at an earlier hearing held on 2 November 1998, his Honour had said that the then proposed form of further reamended statement of claim was not in a form that complied with O 20 r 8 and r 13 of the Rules of the Supreme Court (which require, respectively, that every pleading must contain a statement in a summary form of the material facts, but not the evidence, on which the party pleading relies and that the necessary particulars of any claim must be provided) and that the plaintiff should "start again and go back to first principles". He submitted that the position had not been remedied.

18 The learned Judge below declined to accede to the defendant's application. After remarking that the attack on the statement of claim was based upon a lack of particularity, his Honour said that, in his opinion, the plaintiff had set out the basis for its claim with sufficient clarity in the consolidated schedules 8 and 9, and schedule 10. He did not consider that the applicant would have any great difficulty in checking the plaintiff's figures. That exercise, he said, should present no undue burden for persons with a suitable qualification now that the information had been laid out and explained by counsel. His Honour said also that, given the degree of co-operation which he expected from the parties and their experts, it should be possible for them to reach a considerable measure of agreement about the actual costs which had been incurred. He added that, if either party should act unreasonably in that exercise, its conduct would attract appropriate costs orders.

19 His Honour also said that the particulars provided sufficient detail and that the analysis contained in consolidated schedules 8 and 9 made it possible to see what work was performed and material supplied and the amounts claimed in respect of those items. These, he said (at par 34 of his reasons), amounted to "extra cost, in the sense that ... [they represented] costs which the defendant has refused to pay".

20 While his Honour accepted that it was fundamental to the plaintiff's claim that its costs were reasonable, and that it was for the plaintiff to prove that it acted reasonably, he said that the evidentiary burden would shift to the defendant if the plaintiff adduced evidence that, as an experienced contractor, it took steps which were dictated by the circumstances. He said that, for practical purposes, the issue would be resolved by a consideration of the evidence relating to the work actually carried out and expert opinion as to the appropriateness of that work. He said, in this respect (at par 41 of his reasons):

"I assume that the progress of the work and the method of working is well documented on both sides. I should therefore expect a considerable measure of agreement as to those matters. As to appropriateness, I should expect (and shall in due course direct) experts to confer with a view to identifying areas of agreement and disagreement."

21 While his Honour considered that there remained much force in the criticism grounded upon non-compliance with O 20 r 8, in that there had been "no marked improvement" since the earlier occasion upon which he had suggested that the statement of claim did not comply with that rule, he said that the present application was not based on a failure to comply with that rule and, in any event, it was not his intention to have the case tried on the pleadings.

22 His Honour said, in this respect, the following:

"I shall, in due course, direct the parties to confer with a view to identifying a list of issues which require to be adjudicated. Although the issues will, of course, be based on the pleadings, it should be possible to formulate them in a clear and concise manner. As I have said, I expect that once the experts have conferred, the issues will be narrowed very considerably."

23 For all of those reasons, his Honour said, he should permit the statement of claim to go forward and dismissed the application.

24 In its grounds of appeal the applicant contends that the learned Judge below ought to have concluded that par 52 of the statement of claim, and the claims made by reference to it, should be struck out because they fail to disclose a cause of action in that par 52 does not plead material facts but merely pleads conclusions drawn from facts that are not within the statement of claim. It contends, in this respect, that no material facts are pleaded in support of the assertion that the extra costs claimed resulted from the changed work method and the alleged variation or in support of the assertion that the extra costs claimed were reasonable. It makes similar complaints in respect of par 53 of the statement of claim. It contends that that paragraph, too, does not plead material facts but merely pleads conclusions drawn from facts that are not within the statement of claim in that no material facts are pleaded in support of the assertion that the nature and extent of the different ground and water conditions and the ventilation problems were such as generally to delay and disrupt the plaintiff and to cause it to incur additional costs.

25 The applicant also contends that, having regard for the defects in the statement of claim referred to in its grounds of appeal, his Honour should have ordered that judgment be entered pursuant to O 20 r 19 in terms sought by the applicant, taking into account the fact that the proceedings were first commenced in October 1996, the fact that this was the ninth version of the statement of claim, the comments, referred to above, which were made by the court at the hearing held on 2 November 1998 and other comments made by his Honour on 18 June 1999, when he said that the plaintiff was to provide full particulars of the allegations made in pars 52 and 53 of the statement of claim.

26 We are not persuaded that the learned Judge below erred in his decision not to strike out pars 52 and 53 of the statement of claim, and the claims which depend upon them, on any of the grounds relied upon.

27 As to the first of the complaints made in respect of pars 52 and 53, namely that they plead conclusions which rely upon material facts which do not appear in the body of the statement of claim itself, it seems to us to have been open to his Honour to find, as he did, that the basis for the claim sufficiently appeared from the statement of claim read together with the Schedules.

28 While it is ordinarily required that all of the material facts relied upon to found a cause of action should be pleaded in the body of the statement of claim that is not inevitably so in every case. Because construction cases, in particular, are often factually complex, requiring detailed reference to an extensive range of activities and items of expenditure, it will often be appropriate, in cases of that kind, to permit the pleader to set out in schedules matters which might otherwise more properly be included in the body of the pleading. In John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd (1997) 13 BCL 262 at 265 Byrne J, of the Victorian Supreme Court, said that:

"This [practice] has been found to be a convenient procedure to expose and identify the substance of allegations and responses in building cases where the issues involve great detail, often of a highly technical nature. It has the added advantage of requiring the parties at an early stage to focus on this detail and to identify the matters which are truly in issue."

29 It is important to note, in this respect, that counsel for the applicant did not dispute that sufficient detail has been provided, in a readily understandable form, in the schedules to which we have referred. He expressly acknowledged that "the schedules set out sufficient particularity of the actual costs incurred" and of the revenue received and that sufficient information had been provided as regards the methods of work that were used by the plaintiff. The plaintiff consequently knows what work is said to have been done, what materials are said to have been used, how the work is said to have been done, when it is said to have been done, how much was paid in respect of it and how much is claimed in addition to what has already been paid. It knows what events are said to have given rise to the allegedly changed work methods. It also knows, so far as the contractual claims are concerned, what terms are relied upon. In these circumstances, and having regard for the nature of the case, it was, in our opinion, open to the learned trial Judge to decline to allow the application on this ground.

30 Overlapping this complaint, but raising additional considerations, is the applicant's complaint that the pleading does not sufficiently disclose a nexus between the costs said to have been incurred and the allegedly necessary changes to the plaintiff's work methods.

31 The applicant contended, in this respect, that the plaintiff should have been required to specify what changes to the work methods contemplated by each contract were required to be made as a consequence of each of the events relied upon and what, in each case, were the additional costs which were incurred as a consequence of those changes.

32 The respondent sought to meet this contention by saying that it misunderstands the nature of the claim made by it. It contends that its claim is not one for damages to which a number of causes have contributed but rather, as his Honour found, that it is one which is based upon the plaintiff's entitlement to a variation of the contract. It says that the claim is to be valued and compensated for by reference to the cost of all of the work performed under the contract as varied (less the amount that has been paid) rather than by means of the identification of specific extra costs which have been incurred as a consequence of the events relied upon.

33 We feel compelled to say that if this is the true basis for the claim advanced by the plaintiff then it does not appear as clearly as it might have from the statement of claim. So, for example, the references to the incurral of "extra costs" in various of the paragraphs of the statement of claim, including pars 52 and 53, are such as to introduce, at least, a measure of confusion in this respect. One example is provided by par 13 thereof which sets out, in sub pars (f) to (j), categories of "extra costs" which, the plaintiff says, it "was entitled to claim and be paid ... under the Common Terms". Moreover, the cause of action for damages arising out of the first of the alleged breaches of s 52 of the Trade Practices Act is plainly one which does introduce elements of causation as between the alleged provision of misleading information and extra costs incurred by the plaintiff over and above those which would otherwise have been incurred by it.

34 However, even if the statement of claim is less than optimal in these respects (and as regards compliance with O 20 r 8) that does not mean that the learned Judge below erred in declining to strike it out. 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.

35 It seems to us to have been open to his Honour, as the Judge having charge of the matter, to proceed in this way. We are not persuaded that he erred in finding, in effect, that there is enough in the statement of claim and its schedules to enable the respondent adequately to prepare to meet the case which will be made against it. We were told that the parties have already begun the process of formulating the list of issues to which his Honour referred. No doubt issues of causation will be included in that list insofar as they remain extant after the holding of the conferences between the parties and their experts which have been foreshadowed by his Honour. While it is true that that process will, to some extent, be based upon the pleadings, it does not seem to us that the deficiencies in the statement of claim are such as should have led his Honour to conclude that they will make the process unworkable or that those deficiencies will necessarily be carried through to the formulation of issues for trial in such a way as to prejudice the applicant.

36 Similar comments might be made as regards the applicant's contentions that there is no sufficient plea that the costs incurred by the plaintiff, the subject of its claim, were reasonably incurred. Even putting to one side the fact that the plaintiff does plead, in par 52 of the statement of claim, that the costs there referred to were, in each case, "the reasonable costs resulting from the changed work method", it might be assumed that the reasonableness, or otherwise, of the costs referred to will be raised in the conferences to which we have referred (and that it will, in any event, be necessary for the defendant to undertake the considerable task of making its own assessment of the reasonableness, or otherwise, of the costs claimed from it) and, to the extent that this remains an issue, that it will figure in the list of issues to be adjudicated and in the experts' reports which will have to be exchanged by the parties.

37 The same is true of the allegation that the delays referred to in the statement of claim are not adequately particularised in the schedules. The argument in this respect centred around the propositions that the delays actually particularised in the schedules were less than those pleaded in the body of the statement of claim and that issues of causation were inadequately pleaded. As to the former proposition it might reasonably be anticipated that, if matters are left as they are, the plaintiff will be limited, at trial, to the confines of its claim as particularised (albeit the pleading should be brought into line with the particulars). More importantly as regards both propositions there is, at least as matters presently stand, no reason to assume that outstanding difficulties will not be resolved by way of the conferences (including those between experts) and list of issues proposed by the learned Judge below.

38 It is important to bear in mind the basic function of pleadings. This was described by Isaacs and Rich JJ in Gould v Mount Oxide Mines Ltd (In Liq) [1916] HCA 81; (1916) 22 CLR 490 at 517 (in a passage quoted with approval by Dawson J in Banque Commerciale SA (In Liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 293) in the following way:

"Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest."

39 In circumstances in which the Judge having the charge of the matter has decided that the trial will take place upon the basis of agreed or specified issues, with the pleadings playing only a subsidiary role, then, it seems to us, it is open to that Judge to ensure that any want of clearness in the pleadings themselves is cured in the process of stating the issues for adjudication. There is no reason to assume that his Honour will not, in that process, be astute to ensure that the applicant is sufficiently appraised of the case that it must meet in such a way as to enable it to prepare for trial in as economical and efficient a manner as possible. Indeed, it seems to us that it was those very objectives which led his Honour to adopt the course he took.

40 It might also be worth mentioning that the Practice Direction issued by this Court on 27 November 1974 in respect of building and engineering contracts requires that, where the estimated hearing time of an action of that kind exceeds one day (as will plainly be the case in this action), the party desiring to enter the action for trial must first apply by summons to the court for directions regarding a number of matters, including that of "whether the issues are sufficiently defined by the pleadings and, if not, what amendments, particulars or other consequential orders are required" (our italics).

41 In all of these circumstances it seems to us that the applicant has failed to establish that the refusal of the application below has resulted or will result in any substantial injustice. Nor are we persuaded that there is otherwise any sufficient ground upon which leave to appeal should be granted. We consequently proposed to refuse the application for leave to appeal.