Neumann Contractors Pty Ltd v Wyong Shire Council

Supreme Court of NSW|2011-05-20|Before: Einstein J, Rolfe J, Hunter J

The proceedings 1These proceedings were commenced by Summons on 5 May 2009. 2Neumann Contractors and Wyong Shire Council entered into a contract for the performance of certain construction works at a landfill site at Passage Road, Wyong, New South Wales. 3The proceedings concern the circumstances in which (1)the works were taken out of the plaintiff's hands (2)subsequently completed by the defendant. 4The plaintiff ( Neumann Contractors ) and the defendant ( WSC ) have each filed applications in respect of the proceedings.

The dispute 5In brief terms, the works under the contract were for the rehabilitation of the Site and the construction of a complex of sporting fields and associated facilities. 6The works involved excavation and re-levelling of the existing landfill, compaction, the application of a geo-synthetic clay liner over the waste to "seal" it, the placement of a drainage system and fill, the laying of turf for sporting fields and the associated works (pathways, roads, garden beds, etc). 7The works were commenced by Neumann Contractors in or about March 2007 and progressed until March 2009. 8Following correspondence and communications on matters concerned with the performance of the works (including "show cause" notices), WSC took the works out of the hands of Neumann Contractors. 9Neumann Contractors asserts : (1)that WSC has repudiated the contract by its conduct and it has validly determined the contract (2)in the alternative, the contract was frustrated. (3)Neumann Contractors claims damages or a restitutionary quantum meruit. 10WSC denies the allegations. It has not filed and served any Cross Summons.

11By notice of motion filed on 25 March 2011, WSC seeks a separate determination of the issues of liability and quantum, primarily on the basis of the costs that it will incur in preparing evidence in answer to the quantum evidence served by Neumann Contractors. This application is opposed. 12By notice of motion filed on 29 April 2011, Neumann Contractors seeks leave to file and serve an amended Summons and List Statement in the form of the draft provided, which shows the amendments in mark-up. 13Further, by notice of motion filed on 29 April 2011, Neumann Contractors seeks that: (1)WSC provide further and better discovery by the production of all documents identified by the categories identified in Annexure "C" to this notice of motion; and (2)In the absence of any substantiation, the claims of client legal privilege made by WSC be rejected in respect of the documents produced by: (3)GHD Geotechnics Sydney Laboratory, in answer to a subpoena dated 7 September 2010; and (4)Douglas Partners, in answer to a subpoena dated 22 October 2010. 14The earlier decision by Macready AsJ on the hearing of a separate question for determination has also been the subject of some examination in the instant applications. That judgment was self-explanatory and it is unnecessary to do otherwise than to note that a particular issue before the Court was whether the Enviro-Agg material complied with the specification.

The application for separate determination 15Neumann Contractors opposes the application of WSC for the separate determination of the issues of liability and quantum. 16This application falls to be considered in light of the application for amendment of the Summons and List Statement. The amendments raise claims in respect of matters which arise prior to the taking of the works out of the hands of Neumann Contractors but which are relevant to the objective consideration of the conduct of WSC in doing so. 17Neumann Contractors had made this same application by notice of motion filed on 10 July 2009. The application was then opposed by WSC. Written submissions were delivered on behalf of WSC as to why separate determination was not appropriate. 18Neumann Contractors accepts now and ultimately accepted by reason of its consent to the dismissal of its motion the assessment of the matter stated in the submissions served for WSC. 19The matter has proceeded since 2009 on the basis that there would be no separate determination of liability and quantum. Discovery and evidence has been prepared and served on the basis that there would be a determination of all matters.

General principles concerning separate question applications 20In general the following holds true although not all separate question are orders refused: (1)The power of the Court to order the separate determination of an issue is a discretionary power which must be exercised judicially, but cannot otherwise be fettered: Dunstan v Simmie & Co Pty Ltd [1978] VR 669 at 670 per Young CJ and Jenkinson J. (2)In exercising the, the Court is now enjoined to give effect to the overriding purpose of the Supreme Court Rules ; namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings and cannot be stated in a more confined way. 21The Court begins with the proposition that it is ordinarily appropriate that all issues in a proceeding should be disposed of at the one time: Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 141 per Giles CJ in Comm D, Hadid v Australis Media Ltd (unreported, Supreme Court of NSW, 29 March 1996 per Rolfe J). Accordingly, it is for the party who wishes to have a question separately determined to show that it is desirable for that to occur. (1)Without being exhaustive, the separate determination of an issue may prove to be an appropriate procedure in at least the following sets of circumstances: (a)where the resolution of that separate issue will have the effect of resolving the entirety of the litigious controversies or of substantially narrowing the field of litigious controversy: CBS Productions Pty Ltd v O' Neil [1985] 1 NSWLR 601 at 606 per Kirby P, Dunstan v Simmie & Co Pty Ltd ( supra, at 671 per Young CJ and Jenkinson J); (b)where the resolution of that separate issue carries with it a strong prospect that the parties will thereafter be able to resolve their dispute themselves and thus avoid further litigation: Tallglen v Pay TV Holdings ( supra, at 141 - 142 per Giles CJ in Comm D); (c)where there is a clear demarcation between that issue and all other issues in the case, including issues going to the credit of witnesses: CBS Productions Pty Ltd v O'Neil (supra, at 606 per Kirby P), Tallglen v Pay TV Pty Ltd (supra, at 142 per Giles CJ in Comm D), Rajski v Carson (1988) 15 NSWLR 84 at 88 per Kirby P and Hope JA. (2)Conversely, the separate determination of an issue will rarely be an appropriate procedure where: (a)there are intertwined issues of fact or law between the separated question and the other questions such that the determination of the separate question will not have any substantial effect upon the width of the field of litigious controversy or the prospect of the settlement of the balance of the litigation: Law Society of New South Wales v Bruce (unreported, Supreme Court of NSW, 23 April 1996, per Rolfe J), Parramatta Stadium Trust v Civil and Civic Pty Ltd (unreported, Supreme Court of NSW, 27 August 1996, per Hunter J). (b)where there is a commonality of witnesses and issues of credit as between the separate issue and other issues in the case which will or may necessitate a ruling on the credit of one or more of the common witness, thus possibly precluding that same judicial officer from again dealing with the matters going to the credit of the common witness in accordance with the decision of the Court of Appeal in Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411: Story of Sydney Pty Ltd v Ling (unreported, Supreme Court of NSW 15 November 1994, per Rolfe J), Century Medical v THLD [2000] NSWSC 5; (unreported, Supreme Court of NSW, 3 February 2000, per Rolfe J). (c)there is a possibility that the resolution of the separate issue will not finally determine the issue but will merely result in an appeal from that decision in relation to that separate issue, creating a multiplicity of proceedings, interruption to the Court and undesirable fragmentation of the proceedings: Story of Sydney Pty Ltd v Ling (supra), Century Medical v THLD (supra). (3)The experience of Courts suggests that the separation of proceedings often does not result in the quicker and cheaper resolution of proceedings as anticipated, but often has the reverse effect, merely causing added delay and expense to the resolution of the litigation. Thus, before an issue is to be separately determined, it must be possible to clearly see that it will facilitate the quicker and cheaper resolution of the proceedings: Tallglen v Pay TV Pty Ltd (supra, at 142 per Giles CJ in Comm D), Parramatta Stadium Trust v Civil and Civic Pty Ltd (supra), Century Medical v THLD (supra). (4)As Giles CJ in Comm. D (as his Honour then was) said in Tallglen (supra, at 142): "Part 31, rule 2 of the rules empowers the Court to make orders for the decision of any questions separately from any other question, whether before, at or after any trial or for the trial in the proceedings, and for the statement of a case and the question for decision. In the ordinary course, all issues in proceedings should be decided at the one-time, but separate decision of a question may be appropriate where, for example, the decision of the question is critical to the outcome of the proceedings and (at least if decided in one-way) will bring the proceedings to an end. In particular circumstances the separate decision of a question may be appropriate even if it will not bring the proceedings to an end, such as where there is a strong prospect that the parties will agree upon the result when the core of their dispute is decided or where the decision will obviate unnecessary and expensive hearing of other questions, but such occasions must be carefully controlled lest fragmentation of the proceedings (particularly when the exercise of right of appeal is borne in mind) brings delay, expense and hardship - that which the making of an order was intended to avoid. It is often the case that the need to make findings of fact for a decision of the separate question, especially findings which may involve issues of credit, tells strongly against the making of an order because related facts, and renewed issues of credit, will or may arise at a later stage in the proceedings. Experience teaches that it should be able to be seen with clarity that decision of a separate question will be beneficial in the conduct of the proceedings and the resolution of the parties dispute."

Turning to the present issues 22The Court accepted that the whole the facts concerning the works, the contract and its administration should be considered to determine whether the conduct of Wyong Shire Council constituted a repudiation of contract. 23It is well established that the objective determination as to whether conduct constituted a repudiation requires a consideration of the whole of the relevant conduct in context (see Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168, paragraphs [33] to [66], in particular [62] and [63]). 24The case does not involve a limited focus on certain contract terms, notices and the question of available drainage aggregate material. The issues as to frustration and repudiation require a consideration of the whole of the conduct of the parties and the administration and performance of the contract. This consideration will necessarily spill over into an assessment of quantum issues. 25Moreover, there are issues of credit that arise, particularly the conduct of the Council officers that acted as Superintendent and Superintendent's Representative. These are points that will necessarily be addressed in dealing with the matters of quantum and liability. The Court accepts that it should be wholly informed on the evidence so as to make appropriate findings as to credit. 26The observations made by Counsel for WSC in 2009 when opposing Neumann Contractors' application for a separate determination were accurate and remain so. Moreover, unless the prospect of a cross claim is formally abandoned, then the separate determination of liability questions will not result in the finalisation of the litigation.

The essential proposition put forward by the Council 27Mr Roberts, appearing for the defendant, endeavoured to sustain his proposition that the separate question orders should be made by advancing the following propositions: What emerges from the pleadings is that Neumann's case rests on answers to the following questions: (1)Was there in fact any compliant material available to Neumann? (2)Was there a contractual requirement that such material as was available be reasonably, practicably and/or commercially available ? (3)In the circumstances of the answers to those questions, was Council entitled pursuant to the contract to reject Enviro-Agg and insisted on strict compliance with the specification clause 217? (a)In this context it is important to recall that the Court has already found that Enviro-Agg does not comply with the specification. [2008] NSWSC 1295 at [62] (b)If the Court were to find that compliant material was available (and that it was reasonably, practicably and/or commercially available if that is a contractual requirement) at the very least, Neumann's frustration case would fail. (c)A finding that such material was available would also provide the factual basis for the Court to then determine whether or not, in light of such a finding, Council's conduct pleaded in paragraphs 31 to 37 was a breach of the contract as pleaded in paragraph 38. If the Court were to find that the Council was entitled to reject Enviro-Agg and require compliance with specification clause 217 Council's conduct would not amount to a breach. (d)Such a finding would also enable the Court to go on to determine whether Neumann had shown reasonable cause in answer to the second notice to show cause and whether Council was, therefore, entitled to take the works out of Neumann's hands.

The suggested effect of such findings on the future of the case 28Furthermore Mr Roberts contended as follows: (1)If the Court were to find as Council contends that compliant material was relevantly available Neumann's frustration case would fail. There would be no basis to embark on an assessment of the quantum meruit value of the works on the basis that the contract was discharged by frustration. (2)If the Court were to go on to find that, in light of the availability of complaint material, Council was not in breach for requiring that such material be used, Neumann's case based on the breaches pleaded in paragraph 38 would fail. In that case, to the extent that any damages are said to flow from those breaches independently of the repudiation case, there would be no need to embark on an assessment of such damages. (3)If Council were not in breach for requiring compliant material to be used and the Court were to, therefore, conclude that Neumann had failed to show reasonable cause in response to the notice pleaded in paragraph 44, Neumann's repudiation case would fail. In that case there would no need to go on and assess the damages said to flow from such repudiation.

Decision 29Having carefully considered these submissions, they must be rejected. 30The simple fact is that the litigation cries out for final determination at the earliest possible time. 31Fundamentally, Neumann Contractors seeks to have the whole case completed. These parties have been locked in litigation since 2007 and there have been three separate suits brought, including the present 2009 proceedings. The 2007 proceedings are still not finished (the referee's report is to be delivered shortly). 32The Court accepts that consistently with the "just, quick and cheap" object of section 56 and the observations of the High Court in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27 as to the undesirability of prolonged litigation, the whole of the dispute between these parties should be determined at a single hearing. This ought to include all matters of liability and quantum by reference to the proposed Amended Summons and List Statement. 33In my view the proposed "split" of the case will only prolong the matter, particularly if there is an appeal of the decision as is likely given the combative nature of the parties. This is a classic case of the traditional or "long way", actually being the short way. 34It is now 2.5 years since the works were taken out of Neumann Contractor's hands.

Orders made on 12 October 2010 35Shortly after the commencement of the proceedings, WSC filed a motion seeking a stay pending completion of the works (19 June 2009) and Neumann Contractors filed a motion seeking that the issue of liability be determined separately (10 July 2009). 36Both motions were opposed. On the basis of the matters stated in the affidavits filed for WSC and its written submissions, the respective motions of each party for a stay or separate determination were adjourned, with directions for discovery and the preparation of evidence by Neumann Contractors made. The matters stated for WSC meant that no stay would be necessary and no separate determination was warranted. 37Thereafter, directions were made on 11 December 2009, 19 March 2009 and 9 July 2010. These directions concerned discovery and the service of evidence on all matters by Neumann Contractors. 38On or about 8 October 2010, in circumstances where Neumann Contractors was in default of directions for the service of its evidence, WSC sought orders that: (1)Neumann Contractors serve all of its evidence in chief on all matters by 15 October 2010; (2)Neumann Contractors be prevented from relying on any evidence served after 15 October 2010; (3)In default of serving any evidence by 15 October, the Summons be dismissed with costs. 39This application was stood over to 12 October 2010 before Justice Hammerschlag. 40Prior to that directions hearing, Neumann Contractors sought to agree orders whereby the matter of liability could be determined separately to the matter of quantum. WSC refused to consent to that course and insisted that orders be made for the service of evidence on all issues, with "guillotine" provisions in respect of evidence not served by the nominated dates. 41On 12 October 2010, Justice Hammerschlag made the following orders: (1)Neumann Contractors was to serve its lay and expert evidence in chief on liability by 5pm, Friday 5 November 2010; (2)Neumann Contractors is not entitled to rely on any evidence on liability not strictly served in accordance with (a) other than with the leave of the Court, noting that such leave will only be granted in exceptional circumstances; (3)Neumann Contractors is to serve its lay and expert evidence in chief on quantum by 5pm Friday 19 November 2010; (4)Neumann Contractors is not entitled to rely on any evidence on quantum not strictly served in accordance with (c) other than with the leave of the Court, noting that such leave will only be granted in exceptional circumstances; (5)If Neumann Contractors defaults in compliance with order (a) then 7 days after such default the proceedings will be dismissed in accordance with rule 12.7 unless the Court orders otherwise; (6)WSC's notice of motion seeking a stay of proceedings filed 19 June 2009 is dismissed; (7)Neumann Contractors' notice of motion seeking a separate determination of liability and quantum filed 10 July 2009 is dismissed; (8)Each party to bear their own costs of the notices of motion referred to in orders (f) and (g) above. 42Following these orders, Neumann Contractors employed substantial efforts and costs to prepare and serve its evidence on all issues. 43Neumann Contractors has served its evidence on all matters of liability and quantum consistent with the orders made by the Court on 12 October 2010. 44The material served includes the evidence as to the claims which Neumann Contractors seeks to pursue by the proposed amendments to the Summons and List Statement. 45As noted, the application for a separate determination of liability and quantum has already been made and dismissed in these proceedings. 46The Court accepts that it is not appropriate to make multiple applications for the same relief unless there has been a material change of circumstance or significant new evidence has been found that was not reasonably available at the time the first application was made (see Ritchie's 25.1.80, and the authorities cited). 47There is no suggestion of either matter in this case. There is no reasonable explanation as to why WSC previously opposed the separate determination of liability and quantum, to the extent of seeking and obtaining "guillotine" orders for Neumann Contractors to serve its evidence on both liability and quantum, but now seeks a separate determination. 48If WSC had not opposed the application for separate determination and had it dismissed in October 2010, and at the same time obtained a "guillotine" order in respect of the quantum evidence, the costs incurred by Neumann Contractors in respect of the preparation and service of its quantum evidence would not have been incurred at all at this remove. 49It does not sit well for WSC to now seek to avoid the cost of meeting the evidence as to quantum served by Neumann Contractors pursuant to those orders. 50In all of the circumstances the application for a separate determination of issues of liability and quantum requires to be dismissed.

The plaintiff's motion for leave to amend 51The plaintiff seeks leave to amend by way of an amended technology and construction list statement in respect of its amended summons. The material amendments are introduced under the heading nature of dispute. The specific additional amendments are set out in paragraphs 2a, b, c and d. 52Introducing the amendment, the plaintiff took the Court to the salient factors. 53In opposing the amendments, Mr Roberts contended that the plaintiff had not given a proper explanation of why the amendments now came forward. 54The Court is satisfied that it was only in the course of preparing the plaintiff's evidence under the previous guillotine timetable that the full breadth of the additional claims became apparent to the plaintiffs side of the record. That explanation is accepted and the principled exercise of the relevant discretion is to grant leave to the plaintiff to propound the amendments on the usual basis that the defendant be given a proper opportunity to reply to the new material and that the costs thrown away by the amendment should be paid by the plaintiff to the defendant

The access to documents issue 55The plaintiff's notice of motion sought access to the documents listed in Annexure C of Elizabeth Weir's 29 April 2011 affidavit and the documents identified in a subpoena on GHD Geotechnics. 56As I understand the position, the parties have reached an accommodation in relation to the privilege issue, which consequently will be deferred. However, the discovery issue contained in orders 2 and 3 remains. 57In relation to this issue, I accept that the defendant has met its discovery requirements. In these circumstances, it is not appropriate for the Court to exercise its discretion under r21.1 of the Uniform Civil Procedure Rules by providing the plaintiff access to documents that came into existence after the commencement of these proceedings. If the plaintiff seeks production of otherwise excluded documents, it has open to it the process set out in r21.10. In seeking production, these documents should be identified with the required degree of specificity.

Other matters 58As far as I recall the position, I have dealt with all of those issues which were pressed. 59The parties will be given an opportunity to address on costs as soon as practicable.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 May 2011

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