[2005] VSC 78
General information, not legal advice.
Supreme Court of Victoria
2005-03-24
Byrne, J
Original judgment source is linked above.
Practice and procedure - pleading - whether sufficient in form - whether sufficient particulars.
2 This case has had a chequered history. Much of the last 12 months has been occupied by Ipex seeking to put its claim in proper form. For this reason, and because of the complexity of the claims, I assumed on 11 June 2004 the management of the case through its interlocutory stages. This imposes upon me a general obligation to ensure, as far as possible, that the case is made fit for trial. I have for this reason reserved my decision in this application so that I can undertake an analysis of the claims which Ipex is having such difficulty in formulating. Strictly speaking, however, the matter for my decision is a pleading dispute. I will therefore allow the amendment if it is in proper form, accepting as I must for present purposes, that the assertions of fact will be made out. Nor am I concerned with any argument that the proposed claim or any part of it is futile in the sense that this is understood in General Steel Industries Inc v Commissioner for Railways (NSW)[1].
4 Central to the Services Agreement is the obligation of MWC to pay a Services Fee for the Services agreed to be provided[2]. The Services Fee is defined in cl. 1.1 by reference to Schedule 3, Item 1. This Item simply identifies the fees as those "set out in Schedule C, Fees and Charges of the Service Provider's[3] correspondence". Schedule C comprises 23 pages of figures broken up in different ways, including monthly and annual summary costs for different teams of personnel to be provided by Ipex or for activities to be performed by them. The total cost shown in that schedule is $4,639,217. It does not appear on the face of the document that the component parts of the total cost are made up by reference to any given volume of Helpdesk calls.
5 In a letter dated 24 May 2000, which is incorporated in the Services Agreement[4], Ipex provided to MWC a number of written responses to questions on a number of contractual matters including this question 6:
Question: It is not possible to pre-empt every event that may arise in an IT operations area. It is [MWC] expectation that regardless of the event/circumstances you will do what has to be done to provide Services to the level of our SLA without extra cost to [MWC]. Can you please confirm or outline any exceptions?
"Ipex confirms that your calculation of $5,218,204 is the total fixed contract price. No variation to the price will occur due to salary increase or CPI increase. Where WMC significantly increases/decreases the number of users or changes the scope of the contract an increase/decrease may occur."
"If the nature, extent or content of the Services is increased or decreased in accordance with cl. 15(a), the service fee may be increased or decreased by a reasonable amount as determined by the MWC representative. If the Service Provider is dissatisfied with any direction or determination made by the MWC representatives in accordance with this clause, the Service Provider may give notice of dispute in accordance with cl. 22."
9 I include this brief summary of the contractual documentation, not in order to resolve the complexities and inconsistencies which it contains, but to set out the background for the disputes between the parties which Ipex has endeavoured to formulate in its statement of claim which is under challenge. I do this because, since the proceeding was commenced on 17 February 2003, a good deal of criticism has been directed to the Ipex pleading. Ipex responds that this is merely nit picking and that its claim is clear on a fair reading of the pleading. My concern as the judge managing this case is to extract from the document what precisely is the claim of Ipex so that the issues so exposed might be addressed in the interlocutory stages and ultimately at trial in a manageable way. It will also enable me to identify which of the complaints of MWC may be properly put to one side as of no real consequence and to focus on those criticisms which are directed to the core of the Ipex claims.
10 I should add, too, that Ipex has had abundant opportunity to remedy the deficiencies and conceptual flaws exposed in its pleading over the past months. I regret that these same deficiencies appear very often to recur with each amendment. The inference which I am inclined to draw from this is that the problem lies. not in any or lack of skill on the part of its legal advisers, but rather in inherent weaknesses in its case. The time has now come to deal with the pleading with some severity.
12 The statement of claim is itself a formidable document. It comprises 33 paragraphs over 17 pages and also more than two large folders of schedules. The plaintiff puts its claims for extra payment under seven causes of action:
13 (1) A breach of a term of the Services Agreement that the likely number of Helpdesk calls to be received by Ipex throughout the contract would be of the order of 433 per month.[8] The term[9] is said to be partly in writing and partly to be implied. Insofar as it was written it was contained in Part B, Section 6 of the Requirements Specification. This is a summary of Helpdesk calls received before the Services Agreement was entered into, in the six months from October 1999 to March 2000, broken up by call category. The document shows an average of 433 calls per calendar month. The breach alleged is that the average number of Helpdesk calls actually received during the three year term of the contract exceeded 433[10]. It is said in Schedule 4 that the average monthly number of calls was in fact 795, that is, 183.65% of the number mentioned in the Requirements Specification[11]. The pleaders then allege, not that their client suffered loss and damage by reason of the breach, but rather that, as a consequence, Ipex incurred the extra cost of providing extra staff to satisfy these enquiries[12]. It may be that this should be read as an allegation of loss and damage, but the concepts might be very different. The amount claimed is approximately $9.4M which is particularised in Schedule 4 to the pleading. I shall return to the quantification of this loss and damage later.
14 (2) A breach of a term of the Services Agreement that Ipex would apply an average of 12.06 Full Time Equivalent employees (FTEs) per annum during the term of the contract.[13] The term[14] alleged is said to be contained in identified pages of schedule C. These show how Ipex arrived at this number of FTEs as part of its tender. The breach alleged in paragraph 11 does not quite match the term pleaded, for it is said that there was a requirement (presumably by MWC) that Ipex provide an additional 10.09 FTEs per annum. No particulars of this requirement are given and no consequence of this breach is pleaded, so that these allegations go nowhere. I shall say nothing further of this cause of action except that paragraphs 10 and 11 should be deleted as otiose.
15 (3) An entitlement to an adjustment of the Services Fee pursuant to a term of the Services Agreement which permitted this where there was "a significant change in the workload required to provide the Services".[15] Much of the difficulty caused by the allegations in support of this claim arises from the fact that the allegations do not follow a conventional logical sequence. It is worth identifying how these matters are sought to be dealt with in the pleading -
Paragraph 15: A term is alleged that the Services Fee will be modified in the event of a significant change in the workload. The term is particularised in the paragraph as being that contained in cl. C2.1 of Schedule C to the Services Agreement and in cl. A2.15.1 of the Requirements Specification which was provided to tenderers. In each case, the tenderer provided details of its charges so that the service fee could be modified up or down "as facilities and Services are added or discontinued, workloads change significantly and new developments are brought into operation".
Paragraph 14(a) The additional Helpdesk calls over 433 per month constituted a significant change in the workload.
Paragraph 16 As a consequence, the "contract price" should be modified by a fair and reasonable amount.
Schedule 4 It is here that the fair and reasonable amount is calculated.
16 (4) An entitlement to an increase in the service fee pursuant to a term of the Services Agreement[17] that this will occur if there is a change in the scope of the Services agreement. This claim, too, may be analysed as follows -
Paragraph 17 A term is alleged that the contract price may be increased in the event of a change in the scope of the Services Agreement. This term is particularised as arising from the letter dated 5 June 2000 which is set out at [6] above.
Paragraph 14(b) The additional Helpdesk calls over 433 per month constituted a change in the scope of the Services Agreement.
Paragraph 18 As a consequence, the "contract price" should be increased by a fair and reasonable amount.
Schedule 4 It is here that the fair and reasonable amount is calculated.
I shall return later[18] to this claim in more detail. In paragraph 19 it is said in the alternative that the term is to be implied.
18 (6) A further claim, in the alternative to claims (1), (3) and (4), is made for an increase in the service fee consequent upon a variation ordered in February 2002 pursuant to cl. 15 of the agreement.[19] The amount claimed is $6,661,853.42 as particularised in Schedule 8. I shall return also to the calculation of this amount in due course.[20]
19 (7) The claim is next put as one for damages for misleading and deceptive conduct contrary to the Trade Practices Act 1974. [21] The MWC statement as to the number of Helpdesk calls in the six month period to March 2000 which is contained in the Requirements Specification is said to amount to a representation that Ipex could expect a similar volume of calls throughout the term of the contract[22]. Then follow allegations of reliance and falsity and of loss and damage. On this last point, the claim appears to be again the sum calculated under Schedule 4.
This Schedule C was provided by Ipex as part of its tender, breaking up its costs as required by MWC.
22 The claim under Schedule 8 follows the same methodology. In this case the comparison is between the number of desk calls set out in the Requirement Specification, namely 433, and the average monthly calls after February 2002 when the variation was ordered. This average monthly figure is 946, that is, 218.53% of the number in the Requirements Specification. The same calculation is then applied to this excess of 118.53% in the FTEs required for the balance of the contract period, again at the rate of $165 per FTE hour, producing a claim of $6,661,853.42.
23 From the point of view of a judge managing this case, it is worth bringing to light that the facts that underlie this quantification methodology and which will have to be addressed in order to establish the quantum, include the following which appear to be implied in the pleading and in the particulars.
(1) The contract figure of 12.06 FTEs per annum was arrived at in the Ipex tender on the basis that 433 Helpdesk calls per month would be received.
(2) The number of Helpdesk calls encountered in the contract period was in truth a reflection of some change in the MWC requirements rather than the result of some deficiency on the part of Ipex. This may, however, be a matter of liability or causation rather than of quantification.
(3) The number of Helpdesk calls is directly related to the amount of Services provided so that an increase in the number of calls produces a like increase in Services.
(4) The increase in Services provided is reflected by a like increase in the FTEs required to provide those Services.
(5) The increase in FTEs required to provide the Services applies equally to all personnel involved. This means that the increase in Services is reflected in a like increase in FTEs in management and design as it is with technicians.
(6) The cost per FTE hours is a uniform $165 for all personnel and is reasonable.
27 On behalf of Ipex, it was said that this is a matter of evidence. This may be so, but it provides no answer to the complaint. It is said that this paragraph leads into paragraph 6. Indeed, this is so. It is for this reason, as well, that Ipex must set out in detail what Services it was required to provide consequent upon a Helpdesk call and what it was required to provide otherwise.
28 It is said that the information is contained in Schedule 3. This is not correct. Schedule 3 records the calls in fact received and a classification of the type of call. It says nothing about what was required of Ipex under the Services Agreement. I will not accept paragraph 5 in its present form.
29 I add, too, that paragraph 6 suffers from an associated difficulty. In it Ipex alleges that the number of FTEs can be calculated by reference to the number of Helpdesk calls likely to be received. Given the importance of this assertion, it would be very helpful and conducive to the preparation of evidence for trial on both sides, that Ipex disclose how this is calculated.
"18. By reason of the matters alleged in paragraphs 14(b) and 17 the contract price should be increased for the significant change in the workload caused by the change in the scope of the Services Agreement by an amount which is fair and reasonable.
It is apparent that this paragraph does not correspond to the term alleged in paragraph 17 which requires, as a precondition to an increase in the contract price, not a significant change in the workload, but a change in the scope of the Services Agreement. I will not allow paragraph 18 in its present form.
"23. The Defendant directed a Variation on or about 1 February 2002 and a written copy of that Variation was provided in writing by the Defendant by letter dated 28 February 2002 ('the Variation')."
The particulars refer to Schedule 5 which in essence states that the letter concerns "the Defendant's relocation and migration project". The substance od the letter nowhere appears. What was the precise direction is not disclosed and no details otherwise of the content of the letter are provided. The Schedule then goes on to set out what the direction involved, most, if not all, of which appears to be unrelated to the Services which Ipex says it was to provide under the Services Agreement, namely to respond to Helpdesk calls.
44 On a formal level, I will not accept paragraph 23 which appears to draw a distinction, both in the paragraph and in the particulars, between the variation and the content of the letter.
45 Paragraph 24 alleges that Ipex provided Services "in compliance with the Variation" which are particularised in Schedule 6. This schedule shows that there were Services of an unspecified kind provided in response to Helpdesk calls. It would seem that Ipex was not required to give effect to the relocation and the migration. The particulars given must show what services were provided as a consequence of the variation. I will not accept the paragraph as particularised.
46 Paragraph 25 alleges that "the nature, extent and/or content of the Services provided by [Ipex] increased in accordance with the variation". Schedule 7 is said to contain the particulars of this. The relevant information which this Schedule contains is only that the number of Helpdesk calls increased dramatically in February 2002 and following. The unstated assumption is that this was a consequence of the relocation and migration. This is surprising; the increase in February Helpdesk calls appears to pre-date the instruction of 28 February.
47 It is said on behalf of MWC that, since this is a claim under cl. 15(c) of the Services Agreement, the plea should set out in paragraph 25 the facts which are relied upon as amounting to an increase in "the nature, extent or content of the Services", for this is a pre-condition to the asserted entitlement to the increase in the Service Fee. I agree. I will not accept the paragraph.
48 Paragraph 26 then makes a claim for $6.6M which is said to represent a reasonable amount by which to increase the service fee as a consequence of the variation. Schedule 8 sets out the calculation which is again a theoretical claim rather than a claim based on any evaluation of specific extra work which was brought about by the variation. This claim suffers from the difficulties which I have identified in paragraph [23] above and from a further difficulty. Although it is expressed to be in the alternative to the claims based on an excess of work caused by the increased number of Helpdesk calls over 433 per month, the claim uses this same rate of calls as a benchmark. No attempt is made to relate the amount of extra FTEs to the variation. I will not allow it.
Ipex ITG Pty Ltd
Melbourne Water Corporation [2005] VSC 78
(1964) 112 CLR 125