Plaintiff v Defendant

1 This judgment concerns a number of questions which arose in this proceeding which were ordered to be tried separately by Habersberger J pursuant to RSC r47.04. They involve issues both of law and fact.

2 In June 1996 Anaconda Nickel Limited (which is now known as Minara Resources Limited and will be referred to in this judgment as "Minara") engaged Fluor Daniel Proprietary Ltd (which is now known as Fluor Australia Pty Ltd and will be referred to in this judgment as "Fluor") as a contractor to provide engineering, procurement, construction and management services for the design, construction, and commissioning of an ore treatment facility at Murrin Murrin, in Western Australia. Murrin Murrin is about 300 kilometres north of Kalgoorlie. The ore to be treated was laterite, an ore which contains nickel and cobalt. This contract is referred to in this judgment as the EPCM contract.

3 The project was a very large one costing in the order of $900m. Although Fluor was initially engaged pursuant to the EPCM contract it was always contemplated by the parties that the project would eventually be undertaken pursuant to a contract whereby Fluor would take the entire risk of producing the facility for a fixed price - a so-called 'turn-key contract.' It was also contemplated that because of the size of the project and the necessity to raise a large amount of capital Minara would obtain a partner to undertake the venture jointly with it. However, as the ore treatment facility was being built to take advantage of an expected increase in nickel prices in the late 1990s it was essential to commence work as soon as possible, particularly in respect of those components for which there would be a long lead time. Accordingly, by a written agreement dated 21 February 1997 ( but effective from 20 June 1996), Minara contracted with ASC Engineering Pty Ltd (referred to herein as "ASCE") to design, manufacture and supply four acid leach autoclaves for use on the project. These autoclaves were to be used in a process by which the laterite is mixed with acid under high temperature and pressure to dissolve the nickel and cobalt contained in it. The contract for the autoclaves was a relatively large component of the total works.

4 After the EPCM contract had been let to Fluor and ASCE had been contracted to supply the autoclaves a joint venture was formed between a wholly owned subsidiary of Minara called Murrin Murrin Holdings Pty Ltd and a wholly owned subsidiary of a Swiss company (Glencore International AG), Glenmurrin Pty Ltd, to undertake the construction and operation of the facility. Minara retained a majority interest in the venture through its subsidiary Murrin Murrin Holdings Pty Ltd, having a 60% interest as against Glenmurrin Pty Ltd's 40%. Another wholly owned subsidiary of Minara, Murrin Murrin Operations Pty Ltd (referred to in this judgment as MMO) was appointed the manager of the joint venture. In that capacity it acted as the agent of each of the joint venturers and of the joint venture.

5 At about the time the joint venture was formalised MMO, on behalf of the joint venture, entered into an engineering procurement and construction contract (the EPC contract) with Fluor in respect of the facility. In general terms this contract provided for Fluor to deliver the entire facility to the joint venture for a fee of $50m, it bearing the construction and associated financial risks of doing so.

6 The EPC contract was preceded by two informal pre-contractual documents, one entitled "Heads of Agreement" and the other a "Memorandum of Understanding". These documents and the EPC contract itself, which is dated 21 August 1997, all contemplate Fluor's assuming sole responsibility for the project, which included all work done, or to be done, in respect of it.

7 Each of the pre-contractual documents referred to contemplated that the EPC contract would provide for MMO to procure the novation of all contracts already in existence relating to the facility to Fluor or, if that was not possible, for the benefit of all such contracts to be assigned to Fluor. It appears to have been intended that, pursuant to the EPC contract, Fluor would take responsibility for the performance of all such contracts (including past performance), at least to the extent that the benefit of such contracts passed to it. The Heads of Agreement contemplated that Fluor's responsibility was to be limited to the extent that the EPC contract resulted in effective assignments so that Fluor could sue and recover compensation in respect of any contractor's default were the contract not able to be novated. The Memorandum of Understanding expressed a not dissimilar expectation.

8 The contracts to which the provisions as to novation or assignment were to apply included the contract between Minara and ASCE for the manufacture and supply of the four autoclaves. This contract, and a number of others, were eventually referred to in the EPC contract as "Early Works Contracts" or EWCs, presumably because they were in existence (and probably being performed) before the contractual arrangements by which the project was to be undertaken by Fluor were finalised.

9 When the EPC contract was finally executed as a deed on 21 August 1997 between MMO as agent for the joint venture and Fluor it contained the following provisions relating to the EWCs: -

Promptly after the Award Date (or such later time as the Owner may direct), the Contractor shall execute a Deed of Novation in respect of each Early Works Contract.

If the Owner notifies the Contractor that a Deed of Novation cannot be executed in respect of an Early Works Contract, unless prohibited from doing so, the Owner or Anaconda Nickel NL, as the case may be (the "Assignor"), will irrevocably assign to the Contractor in accordance with this Clause the benefit of the Early Works Contract.

(a) If the Assignor is unable to assign the benefit of any Early Works Contract pursuant to Clause 2.7, the Assignor hereby appoints the Contractor as its agent to perform and observe the Assignor's obligations under the Early Works Contract, as if the Contractor were named in the Early Works Contract instead of the Assignor.

(b) If paragraph (a) applies the Assignor shall, at the request of the Contractor, do everything reasonably necessary (including the execution of documents) to assist the Contractor in commencing and prosecuting proceedings against an Early Works Contractor for a breach of an Early Works Contract, and in particular, shall:

(i) permit the Contractor to bring those proceedings in the name of the Assignor, and

(ii) provide the contractor with reasonable evidence, information and assistance in relation to those proceedings,

(iii) keep the Assignor fully informed of the progress of, and consult with the Assignor in relation to, those proceedings;

(iv) not incur or admit any liability on the part of the Assignor in those proceedings without the prior consent of the Assignor; and

(v) indemnify the Assignor against all legal and other costs, losses, damages or claims incurred or suffered by the Assignor in respect of those proceedings, except to the extent to which the cost, loss, damage or claim is attributable to the negligent act or omission of the Assignor.

(c) The Contractor shall be entitled to any moneys recovered against an Early Works Contractor pursuant to this Clause 2.8.

2.9 Responsibility for work carried out by Early Works Contractors

(a) The Contractor assumes responsibility to the Owner from the Award Date for the proper performance of all the work carried out by each Early Works Contractor under an Early Works Contract prior to and following the Award Date.

(i) bears the risk of any Defects in the Facility which may arise (whether directly or indirectly) as a result of any work carried out by the Early Works Contractor; and

(ii) indemnifies the Owner against any liability which the Owner may have to an Early Works Contractor where an assignment occurs pursuant to Clause 2.7 or an appointment of agent occurs under Clause 2.8,

whether this work or liability occurred or arose prior to, or after, the date of execution of a Deed of Novation, or any assignment pursuant to Clause 2.7 or an appointment of an agent under Clause 2.8.

(c) The Contractor has no entitlement to any sums in addition to the Contract Price or to any extensions of time to any Date of Mechanical Completion or otherwise to make any Claim, solely because of the assumption by the Contractor of the obligations set out in paragraphs 2.9(a) and 2.9(b) and accepts the entire risk of the work to be performed under the Early Works Contract on the basis that it forms part of the Project Works.

(d) The Contractor shall require that each Early Works Contractor complies with its obligations under its Early Works Contract, provided that nothing contained in Clauses 2.7 and 2.8 shall require the Contractor to assume any greater obligation or liability pursuant to the terms of this Contract than the Early Works Contractor assumed to the Owner. However, nothing in this paragraph lessens or otherwise modifies the Contractor's obligations to pay liquidated damages pursuant to Clause 13.7.

10 In these provisions the "Owner" was MMO, as agent for the joint venture, the "Contractor" was Fluor and the "Assignor" was MMO or Minara as the case required, even though Minara was not a signatory to the EPC contract.

11 The EPC contract also contained the following clauses:-

(a) This Contract constitutes the entire agreement and understanding between the parties and will take effect according to its tenor despite:

(i) any prior agreement in conflict or at variance with the Contract;

(ii) any correspondence or other documents relating to the subject matter of the Contract which may have passed between the parties prior to the execution of the Contract and which are not included in the Contract; or

(iii) any agreements or representations made or dated prior hereto.

(e) The parties' rights, liabilities and responsibilities with respect to the Project Works shall to the extent permitted by Law, be exclusively set forth in this Contract.

12 Thus, in its final and binding form, the EPC contract provided that Fluor should, if possible, become the contracting party in respect of the early works contracts, including that relating to the provision of the four autoclaves. If that was not possible (because of a lack of consent to novation by the other contracting party) then the benefit of the EWC was to be assigned to Fluor unless that course was prohibited by the EWC itself. In the latter case Clause 2.8 of the EPC contract provided for Fluor to be appointed the agent of MMO or Minara to perform each of their obligations under the EWC and to enforce, in their name and with their assistance, the obligations of the EWC contractor. Clause 2.8(c) specifically entitled Fluor to the proceeds of any action for damages against any EWC contractor for breach of an EWC. The EPC contract contemplated that Fluor would, in effect, succeed Minara and/or MMO, as agent for the joint venture, as the contracting party in respect of all the EWCs, a situation consistent with its undertaking the total obligation to deliver the ore treatment facility to the joint venture for the agreed fee of $50 million. In the events which occurred neither novation nor assignment of the ASCE works contract was possible.

13 In due course ASCE manufactured the four autoclaves at its plant in South Australia and delivered them to the ore treatment facility in Western Australia in purported discharge of its obligations to do so under its EWC. It was soon discovered, however, that there were defects in the autoclaves which rendered them, to a greater or lesser extent, unable to perform their functions as required in the treatment of the lateritic ore. The consequence of this failure of the autoclaves was a successful claim by MMO against Fluor under the EPC contract for compensation. MMO was awarded some $3.5m at arbitration in respect of its claim.

14 Following MMO's successful claim against it, Fluor brought this proceeding against ASCE for damages to compensate it for the losses it incurred as a result of ASCE's alleged breach of contract in supplying the four autoclaves to the ore treatment facility in a defective condition. It claims an entitlement to damages, either as the beneficiary of a trust by which Minara held the benefit of the ASCE early works contract for it, or alternatively because ASCE is liable to it in negligence. In the further alternative it claims to be entitled to contribution from ASCE by virtue of s 23B of the Wrongs Act 1958. Its claims are framed in this way because of its never having itself become a party to or an assignee of the ASCE early works contract and its never having sought to avail itself of Clause 2.8 of the EPC contract, to require Minara to enforce the EWC on its behalf. It has joined Minara as a defendant in the proceeding for conformity, it being the alleged trustee of the trust of which it claims to be the beneficiary.

15 On 24 February 2006 Habersberger J ordered a separate trial of three questions relevant to ASCE's liability to Fluor if it was in breach of its obligations (contractual or otherwise) with respect to the design and manufacture of the autoclaves. Those questions, as they finally came before this Court, are:-

1. Does the Second Defendant ("Minara") hold the benefit of the ASC Contract on trust for the Plaintiff ("Fluor") as alleged in paragraph 20 of the amended statement of claim dated 22 August 2005?
2. If the answer to 1 is yes, and on the assumptions that:

(a) the First Defendant ("ASCE") breached the ASC Contract as alleged in paragraph 27 of the amended statement of claim; and

(i) Became liable to Murrin Murrin Operations Pty Ltd ("MMO") (as agent for Murrin Murrin Holdings Pty Ltd ("Murrin Murrin") and Glenmurrin Pty Ltd ("Glenmurrin")) as alleged in the particulars subjoined to paragraph 28 of the amended statement of claim ("the MMO liability"); and

(ii) Incurred the costs as alleged in the particulars (a)-(e) subjoined to paragraph 28 of the amended statement of claim (Fluor's direct losses"),

is Fluor entitled to recover all or any part of the MMO liability and Fluor's direct losses from ASCE as alleged in paragraph 28 of the amended statement of claim?

(a) Fluor is liable to Murrin Murrin and Glenmurrin as alleged in paragraph 37 of the amended statement of claim;

(b) Minara intended that Murrin Murrin and Glenmurrin would have the benefit of the contractual promises of the ASCE pursuant to the ASC Contract as alleged in paragraph 38 of the statement of claim; and

(c) Murrin Murrin and Glenmurrin suffered loss and damage as alleged in paragraph 40 of the amended statement of claim,

does s 23B of the Wrongs Act 1958 (Vic) govern such rights to contribution as Fluor may have against ASCE in respect of Fluor's liability to Murrin Murrin and Glenmurrin?

Does Minara hold the benefit of the ASCE Early Works Contract on trust for Fluor?

16 Fluor alleges that it is the beneficiary of an express trust created by Minara, as trustee, of the benefit of ASCE's contract to provide the four autoclaves. Thus, it argues, it is entitled to enforce that contract against ASCE by action in its own name provided its trustee, Minara, has refused to do so and is joined as a defendant for conformity. It relied upon Vandepitte v Preferred Accident Insurance Corporation of New York,[1] Harmer v Armstrong,[2] and Birmingham v Renfrew.[3]

17 There was little dispute between the parties as to the law concerning the creation of an express trust. The plaintiff referred to Trident General Insurance Co Limited v McNiece Brothers Pty Ltd [4] and Wilson v Darling Island Stevedoring and Lighterage Co Limited.[5] It argued that the fact that the contract between Minara and ASCE was already in existence at the time the trust was created was immaterial. The creation of the trust depended upon the intention of the promissee in relation to the original contract, not the promissor. Thus, it is Minara's intention that is relevant not that of ASCE. Reference was also made to Les Affréteurs Réuins Société Anonyme v Leopold Walford (London) Limited,[6] Vanderpitte[7] and Birmingham.[8]

18 ASCE referred to Jacobs Law of Trusts in Australia[9] which contains the following statement:

A court cannot hold that an express trust exists unless it is satisfied that there was the intention to create such a trust. The question will be whether there is language or conduct which shows a sufficiently clear intention to create such a trust.

19 Accordingly the parties are essentially ad idem as to the test to be applied to the facts to determine whether a trust has indeed been created by Minara of the promises which ASCE was required to perform under its early works contract for the provision of the four autoclaves. The law may be conveniently summarised in a further quote from Jacobs:[10]

The overall question is whether in the circumstances of the case, and on the true construction of what was said and written, a sufficient intention to create a trust has been manifested. It is not necessary that the creator of the trust should know that the particular relationship intended to be created is in law a trust. A trust will be created, whether or not the creator thereof is precisely aware of so doing, provided that in substance the creator intends that his or her actions should have the legal effect of creating the relationship which is known in law as a trust. If the language is such that an intention to create such a legal effect is manifested, then a trust will be created whether the words 'trust' or 'trustee' are used, or not. On the other hand the use of those words will not necessarily manifest an intention to create a trust if it appears that there was no intention to create a relationship properly so described.

20 The question as to whether or not a trust exists in this case will be determined by the application of these principles to the facts as they are found to be.

21 Fluor's case is that the benefit of the EWC contract between Minara and ASCE for the construction of the four autoclaves was and is held by Minara on trust for it. The trust arose, so Fluor's argument goes, because Minara was unable to effect novation or assignment of its EWC contract with ASCE to Fluor when it intended Fluor to have the benefit of that contract as part of the consideration for its accepting full responsibility for delivery of the ore treatment facility. Fluor says that it is able to enforce the contract as beneficiary of that trust because Minara has declined or failed to do so. Fluor argued that the trust arose because it was Minara's intention, at all relevant times, that it, Fluor, should have the benefit of the ASCE early works contract. Minara made clear that intention, submitted Fluor, by transferring its interest in the project to the Murrin Murrin/Glenmurrin joint venture in which it held a controlling interest and by arranging the appointment of MMO, another of Minara's subsidiaries, as manager and agent of the joint venture. The creation of the joint venture itself was, Fluor said, predicated upon its entering an EPC contract with Fluor to deliver the facility at a fixed price at its risk.

22 In support of its contention that Minara made its intentions clear with respect to the early works contracts, Fluor relies upon statements made in the course of seeking overseas finance for the project. These statements, which appear in a document entitled "Private Placement Memorandum", dated 12 August 1997 produced by Minara and "Offering Memorandum", dated 22 August 1997 produced by Murrin Murrin each confirm that Fluor will take full responsibility for delivery of the project including those parts of it the subject of early works contracts.

23 The Private Placement Memorandum issued by Minara (under its original name of Anaconda Nickel Limited) sought to place 23.85 million ordinary shares at $3.70 per share. It described the Murrin Murrin project, the joint venture and Fluor's part or proposed part in the construction of the facility. It particularly emphasised the fact that Fluor was to take the full construction risk of the project whilst warning the proposed investors in Minara, to whom the memorandum was directed, that it could give no assurance that Fluor would meet its obligations under the EPC contract or that the EPC contract would necessarily cover additional costs which may be incurred by Minara as a result of construction delays. The part of the Private Placement Memorandum relied upon by Fluor is on p 20 of that document and is in the following terms:

There are a number of existing contracts between MMO and third parties which Fluor Daniel will either novate, i.e. perform all the obligations of MMO thereunder, or enter into arrangements the effect of which is novation. Fluor Daniel is responsible to MMO for the work completed pursuant to those contracts even if such work was performed prior to entering into the EPC contract. MMO would be responsible, however, for certain work by third parties to the extent the cause of such work could not have been interrupted (sic) by a prudent contractor.

24 The second document relied upon by Fluor, the Offering Memorandum, sought to raise US$420m for Murrin Murrin Holdings Pty Ltd. This was to be achieved by the issue of two series of notes, one at 9⅜% for US$340m and the second at a floating rate to raise US$80m. This memorandum also described the Murrin Murrin project and Fluor's anticipated part in it in similar terms to the Private Placement Memorandum which Minara had issued. The passages in that document which, argued Fluor, expressed the intention that the benefit of the early works contracts was to be held on trust for it appear on pp 64 and 81 respectively. The first passage, on p 64, is in the following terms:

As of the date of this Offering Memorandum, all major turn-key and long lead time sub-contracts have been awarded. There are a number of existing contracts between MMO and third parties which Fluor Daniel will either novate, i.e. perform all the obligations of MMO thereunder, or enter into arrangements the effect of which is novation. However, Fluor Daniel will not be responsible for certain contracts necessary to the project, including among others, pre-stripping, operating supply contracts and the delivery of natural gas. Although the Company does not anticipate any difficulty in obtaining such contracts, there can be no assurance that such contracts will be readily available on commercially reasonable terms.

25 The second passage, on p 81, is in the following terms:

There are a number of existing contracts between MMO and third parties which Fluor Daniel will either novate, i.e. perform all the obligations of MMO thereunder, or enter into arrangements the effect of which is novation. Fluor Daniel is responsible to MMO for the work completed pursuant to those contracts even if such work was performed prior to entering into the EPC contract. However, Fluor Daniel shall have no greater obligation pursuant to the EPC contract than, to the extent to which it is relevant it assumes under a novated contract. MMO would be responsible, however, for certain work by third parties to the extent the cause of such work could not have been interrupted (sic) by a prudent contractor.

26 It was submitted by counsel for Fluor that the word "interrupted" where it appears in each of the two documents relied upon should be read as "anticipated" and that that would be how the document would be read by those to whom it was addressed. For present purposes, at least, this argument may be accepted.

27 Fluor points also to the evidence of Stephen Dennis who was the General Manager, (Operations) of MMO at the relevant time to the effect that the intention of Murrin Murrin Holdings Pty Ltd in publishing the statement in the Offering Memorandum quoted above was to explain that the early works contracts, including those entered into by Minara, would be "transferred" to Fluor. Fluor points also to what it submits as the clear intent of the two pre-contractual documents already referred to, namely that Fluor would, in one way or another, succeed to the benefit of the early works contracts. It argued that Minara's manifest intention should be given effect to by this Court, by its recognising that the benefit of the ASCE early works contract was held on trust by Minara for it.

28 Stephen Dennis supported Fluor's contention that because it, as EPC contractor, took responsibility for the delivery of the whole project, including those parts constructed pursuant to early works contracts, it was intended by all parties that it would be able to enforce performance of these EWCs. He said that an outcome which required Fluor to deliver the whole project without being able to enforce compliance with the EWCs was not contemplated or intended.

29 The EPC contract, and specifically the provisions of Clauses 2.6 - 2.9, points unequivocally, argued Fluor, to an intention by Minara that it have the benefit of the EWCs to enable it to perform its obligation pursuant to the EPC contract. Fluor also relied upon the conduct of all parties, including Minara, subsequent to the signing of the EPC contract, as evidence of its intention that Fluor should be able to enforce the EWCs including that with ASCE for the provision of the autoclaves.

30 Although the only signatories to the EPC contract were MMO (as agent for the joint venture) and Fluor it purports to impose certain obligations upon Minara directly. For example, by Clause 2.7 Minara is required to irrevocably assign to Fluor the benefit of any EWC to which it was a party which was unable to be the subject of novation in Fluor's favour. Fluor argued that the express reference in Clause 2.7 to Minara, although not a signatory to the contract, confirmed its intention to hold the benefit of the ASCE early works contract on trust for Fluor because the EPC Contract was entered into by MMO (a wholly-owned subsidiary of Minara) as agent for Murrin Murrin, another wholly-owned subsidiary of Minara which, through it, retained a 60% interest in the joint venture and hence the whole project. That Minara was not a signatory to the EPC agreement was not to the point, submitted Fluor: it clearly acknowledged the effect of Clause 2.7, because both its wholly owned subsidiaries did and it is inconceivable that it was not fully aware of the benefit conferred upon Fluor by that clause which imposed obligations on it, Minara.

31 ASCE submitted that although a trust may be created by an expression of intention by one party to hold specified property on trust for another, no such expression by Minara can be pointed to in this case, nor can any conduct of Minara be characterised as demonstrating a sufficiently clear intention to create such a trust. ASCE pointed to the authorities which emphasised the necessity for a clear expression of intention or equivalent conduct evincing such an intention for a trust to be created. It submitted that no such expression of intention by Minara existed here. It also argued that even if there was a trust created, Fluor had, by various subsequent actions, disclaimed that trust. It referred to a specific bundle of documents, mostly letters, in support of this contention but, having regard to the conclusion I have reached as to the creation of the trust, there is no need to consider these documents further.

32 Having regard to all of the circumstances in which this rather complex matter was negotiated and eventually resulted in a contract between MMO and Fluor there is certainly evidence that it was Minara's intention that Fluor should have the benefit of the ASCE early works contract. Its acquiescence in the conduct of its subsidiary MMO in executing the EPC Contract on behalf of the joint venture containing Clauses 2.6 - 2.9, the statement by it and Murrin Murrin in the financial memoranda to the effect that EWCs (at least those entered into by MMO) would be novated to Fluor and the whole structure of the project, whereby Fluor took ultimate responsibility for it, all support this contention. The question remains, however, whether there has been a sufficiently clear expression of intention by Minara, not just that Fluor should have the benefit of the relevant early works contract, but that the mechanism for achieving that result included Minara's acceptance of the duties and responsibilities of a trustee with respect to that benefit for Fluor. It is only if the expression relied upon manifests an intention to create the relationship of trustee and beneficiary, by whatever language used, that that relationship will be brought into existence.

33 Fluor relied upon the terms of the EPC contract between it and Minara's subsidiary, MMO, as evidence of Minara's intention. Accepting that, in the circumstances, the terms of that contract did represent Minara's intention, the problem for Fluor would appear to be the extensive nature of the provisions contained in clauses 2.6 to 2.9; particularly, perhaps, the provisions of clause 2.8. Fluor's assent to clause 2.8 necessarily implied its acceptance of a procedure for the enforcement of Minara's legal contractual rights against ASCE which would deliver to it the equivalent of that which was always intended by the parties, namely novation of the EWCs in its favour. That Fluor never availed itself of this provision is not to the point. The fact is that it could have done so.

34 Clause 2.8 of the EPC contract, in so far as it could apply to the ASCE early works contract, had the effect of appointing Fluor as Minara's agent to carry out its obligations to ASCE under that contract and of permitting Fluor to use its (Minara's) name to bring proceedings for damages against ASCE if that company was in breach. Further, it was entitled to retain any damages so recovered. Even though Minara was not a signatory to the EPC contract, having regard to its representations as to the relationship between it and Fluor with respect to the early works contracts generally, it is difficult to see how it could escape being bound to facilitate Fluor's taking advantage of clause 2.8 and thus being able to hold ASCE to its obligations. But that clause says nothing which would lead to the conclusion that Minara intended itself to be a trustee of the benefits of the ASCE early works contract for Fluor. At the highest, it had to co-operate with Fluor in suing ASCE if necessary. Any right which Fluor had to compel Minara's co-operation in bringing such a proceeding against ASCE would lie in contract or, perhaps, estoppel, not in trust. The language of the clause does not lead to the conclusion that it was intended to create a trust. There is no intention expressed by Minara that Fluor should enjoy any proprietary rights with respect to ASCE's obligations under the early works contract - merely that Minara would co-operate with Fluor by permitting it to use its name to sue ASCE in the event of a default and would provide any other necessary assistance to enable Fluor to bring a successful claim.

35 At the time the EPC contract was being negotiated, solicitors for Fluor wrote to solicitors for MMO adverting to the existence of early works contracts to which MMO was a party. They suggested, on Fluor's behalf, that: "It may be that MMO can hold the benefit of the contract on behalf of Fluor (Daniel)". However, notwithstanding that the potential problem for Fluor of an early works contract which was unable to be novated or assigned was recognised, it was content to accept the benefit of the mechanism provided by clause 2.8 of the EPC contract to protect its position. Fluor, Minara and MMO chose the mechanism provided by clause 2.8. That mechanism, which resembles a right of subrogation, does not involve Minara becoming a trustee of the benefit of the ASCE early works contract for Fluor. Nothing in it or any other parts of the EPC contract warrants a conclusion that proprietary as distinct from contractual rights were to be conferred upon Fluor. Further, clause 18.7 of the EPC contract strongly suggests that unless the trust contended for by Fluor could be found within the EPC contract itself it does not exist. This is so notwithstanding that Minara was not a signatory to the EPC contract. It was part of Fluor's case that Minara was well aware of the terms of the EPC contract. It cannot now contend that the effect of that agreement is other than set out in its terms. In the circumstances the conditions necessary for the existence of the trust contended for by Fluor have not been established.

36 Finally, it is necessary to briefly comment on the position of Minara in this proceeding. It appeared and was prepared to consent to a declaration whereby it was declared to be a trustee of the benefit of the ASCE early works contract for Fluor. This consent was proffered pursuant to a term of a release dated 7 May 2004 between it and Fluor (and a number of other parties) concerning certain matters arising out of earlier litigation in which they had been involved. However, as no relationship of trustee and beneficiary has been established by Fluor on the facts of this case, Minara's now willingness to co-operate with Fluor in its present predicament is of no consequence. A trust cannot be retrospectively created by Minara's acquiesecence in a declaration to the effect that a trust existed if it did not.

If "yes" to question 1 is Fluor entitled to recover all or any part of the MMO liability and its direct losses from ASCE?

38 Question 1 having being answered in the negative this question does not arise.

Does s 23B Wrongs Act 1958 (Vic) govern any contribution rights Fluor may have against ASCE?

39 Fluor's claim against ASCE in this proceeding includes, in the alternative, a claim for contribution from ASCE to its liability to MMO under the EPC contract arising out of the delivery by ASCE of the defective autoclaves. Its claim is expressed to be pursuant to s23B of the Wrongs Act 1958 (Vic) which confers a right to contribution: -

...from any other person liable in respect of the same damage (whether jointly with the first mentioned person or otherwise).

Section 23A of the Act provides that contribution between wrongdoers is available whatever the basis of each of their liabilities to the person who has suffered damage might be - tort, breach of contract, breach of trust or otherwise. In this respect the statute follows the form of a UK statute which, in Australia, is unique to Victoria. Contribution statutes in other Australian jurisdictions confine rights to contribution between tortfeasors. Thus, were the Western Australian statute, for example, to apply to this case, Fluor would have no case for contribution against ASCE as its liability to the joint venture arises out of the EPC contract, not from any tort committed by it against the joint venture or either of the entities comprising it.

40 Fluor's Second Further Amended Statement of Claim alleges that it is liable to the joint venture as found at arbitration because the autoclaves delivered by ASCE were defective. It also pleads that Minara held the benefit of the ASCE early works contract to build the autoclaves on trust for the joint venture (an alternative claim to its primary position that it, Fluor, is the beneficiary of that trust) and that the loss and damage suffered by the joint venture in respect of the defective autoclaves arose from a breach of that early works contract. Thus, it alleges, ASCE is liable to the joint venture for the same loss and damages as it is. Fluor's contention is that it is entitled to invoke s 23B of the Wrongs Act 1958 (Vic) to obtain contribution from ASCE in respect of the damages it must pay (or has paid) to MMO as agent for Murrin Murrin and Glenmurrin (the joint venture).

41 ASCE argues that any contribution claim brought by Fluor must be determined by application of the law of Western Australia, namely the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA)) and not the Wrongs Act 1958 (Vic). If this argument succeeded it would lead to a determination that Fluor's claim was incompetent for the reasons already referred to.

42 ASCE contends that there is no nexus between the facts giving rise to Fluor's claim and the State of Victoria. The EPC contract (under which Fluor is liable to the joint venture) contains a choice of law clause nominating the law of Western Australia as the law by which the contract was to be governed and almost all the facts relating to the case occurred in that state. Those that did not occur in Western Australia occurred in South Australia. None occurred in Victoria. Thus, argues ASCE, Fluor is engaged in blatant forum shopping, seeking a remedy which would be unavailable if the law appropriate to its claim was applied by the Court or if its claim was brought in a more appropriate forum.

43 ASCE sought to characterise the claim for contribution by Fluor as restitutionary in nature so that it ought to be governed by the law of the place having the closest connection to the facts out of which the obligation to contribute arises. It referred to Sweedman v. Transport Accident Commission[11].

44 Fluor contends that at common law there is no settled choice of law rule governing claims for contribution but, in any event, the choice of law question is answered with respect to a claim in a Victorian court by s 23B(6) of the Wrongs Act 1958 (Vic). This section, it submits, enacts a statutory choice of law rule by prescribing that Victorian law will always be applied to a claim for contribution brought in a Victorian court. That is so whatever law the court may have to apply to determine questions concerning the underlying liability of the parties upon which the claim for contribution is based. The relevant provisions are in the following terms:-

(1) Subject to the following provisions of this section, a person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with the first mentioned person or otherwise),

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(6) References in this section to a person's liability in respect of any damage are references to any such liability which has been or could be established in an action brought against that person in Victoria by or on behalf of the person who suffered the damage and it is immaterial whether any issue arising in any such action was or would be determined (in accordance with the rules of private international law) by reference to the law of a place outside of Victoria.

45 Fluor's argument is that the only prerequisite for an award of contribution pursuant to s 23B(1) is that the underlying claim is able to be established in an action in Victoria. If this prerequisite is met it is immaterial whether, by application of the common law choice of law rules, any issue in the proceeding is or would be determined by the application of foreign law. The important feature of the provision, argues Fluor, is that it applies to any claim for contribution brought in a Victorian Court. Fluor submits that its argument is strengthened by the inclusion of a provision in s 24 of the Act which, for the purposes of assessing contribution, recognises the possibility of an assessment of damages being reduced for contributory negligence in accordance with the law of a place outside Victoria.

46 Section 23B(6) has not been the subject of direct judicial decision in Australia although it was referred to in Alexander v Perpetual Trustees WA Ltd [12] where Gleeson CJ, Gummow and Hayne JJ noticed s 23B (6) but held that it did not affect the factual situation with which they were concerned. In doing so they referred to John Pfeiffer Pty Ltd v Rogerson[13] whilst noting that there were no relevant differences between the law of the two States by which underlying liability would be determined on the facts they were dealing with. They said nothing which could support any argument to the effect that s 23B (6) contained a statutory choice of law rule as contended for by Fluor. Nor did Kirby J[14] who referred to s 23B (6) in terms of its provision of a right to contribution not only where liability for the same damage had been established in more than one wrongdoer but where liability could be established in an action...brought in Victoria'[15] (emphasis added).

47 Fluor referred to a number of English decisions on the equivalent section in the Civil Liability (Contribution) Act 1978 (UK) in support of its argument. In R A Lister and Co. Limited v E.G. Thomson (Shipping) Limited; The Benarty (No.2)[16], Hobhouse J characterised the section as providing a cause of action which enabled a party to claim contribution, provided the legal process by which contribution was claimed could be properly served outside the jurisdiction. There does not appear to have been any question before the Court as to whether, the necessary prerequisites having been met, the claimant for contribution would be entitled to succeed. The foreign law element is discussed in his Lordship's judgment, not as being relevant to the establishment of a right to contribution but as being relevant only to the question of whether the underlying liability upon which contribution would depend could be established in a UK court. The decision does not address the issue here, namely by what law Fluor's claim is to be determined. It seems to assume the primacy of UK law because it is the law of the forum.

48 In Virgo Steamship Co S.A. v Skaarup Shipping Corp; The Kapitan Georgis[17] Hirst J approved Hobhouse J's analysis in Lister and emphasised the limited role the foreign law element played in determining liability to contribution under the Act. He considered that the Act created a cause of action itself, not limited to liabilities incurred in the UK. The section equivalent to s 23B (6) merely enabled a claimant to prove the existence of foreign liabilities in order to establish his right to contribution in the UK.

49 A similar result was reached by Chadwick J in Arab Monetary Fund v. Hashim (No.9)[18]. In that case his Lordship considered that the only question to be answered in relation to the contribution claim was whether under the rules of law applicable in an English court, which included the provisions of the Act, the contribution claim would succeed. In other words, given the existence of the statutory cause of action, no question as to whether the claim should be determined according to English law or some foreign law needed to be answered. The Court should apply the statute to the exclusion of any possible foreign competing law because it was a UK Court bound by a UK statute. This was essentially the argument relied upon by Fluor in this case.

50 None of the cases relied upon by Fluor considered the question as to whether the UK statute could ever be displaced by a foreign statute concerned with the question of contribution between wrongdoers liable for the same damage. That is to say none of them addressed the issue as to whether there is a logically anterior choice of law question to be determined. But the unqualified application of the principles expounded by these English cases in the context of the Australian legal system would mean that any Australian State or territory could legislate to provide remedies which would be available to any litigant who sued in the courts of the legislating polity regardless of whether the factual circumstances of the case or other governing factors had any geographical or other connection with the territory of that polity.

51 Fluor's argument means that that is what the Victorian Parliament has done by enacting s 23B of the Wrongs Act 1958. If its argument is correct all a claimant for contribution has to do is to resort to a Victorian court to obtain the benefit of considerably wider rights to contribution which are available under Victorian law than those which would be available elsewhere, including in the jurisdiction in which all the factual elements of the cause of action for contribution may have occurred and even in circumstances where the parties have, themselves, stipulated the law which they wish to govern their rights inter se. No connection with Victoria would need to be established.

52 Fluor's argument ignores the High Court decision of John Pfeiffer Pty Ltd v Rogerson[19] where the majority judgment[20] made it clear that the choice of law rules for Australia are provided by the common law adapted to the Australian Constitution. Their Honours considered that these rules should provide certainty and uniformity of outcome no matter where in the Australian federation a matter is litigated and whether it is litigated in federal or non-federal jurisdiction. Although Pfeiffer was concerned with tort liability, its principle is wide enough to encompass liability to contribution as that right is understood in the statutes of the various Australian jurisdictions. It could not be suggested that contribution concerns only procedural rights so as to give primacy to the law of the forum. The principle in Pfeiffer is as much applicable to such a claim as to a claim in tort. This is so whether a claim to contribution can be characterised as restitutionary or defined by reference to the character of the underlying liabilities upon which it is based or can be described in some other way.[21]

53 The acceptance of Fluor's argument with respect to question 3 would mean that a remedy provided by the statute law of any state or territory in Australia would be available to any litigant in respect of any fact situation to which the remedy could be applied, wherever it occurred, by the simple process of commencing a proceeding in that jurisdiction. Absent some qualifying feature, not only would such a principle encourage forum shopping to the detriment of the whole Australian legal system it would be antipathetic to the federal compact itself, with obvious consequences for state sovereignty and the integrity of individual state legal systems.

54 Consistently with Pfeiffer, the unique Victorian remedy of contribution should be available to and in respect of wrongdoers, regardless of the juridical source of their wrongdoing, only in those cases to which, by the application of appropriate common law choice of law rules, Victorian law should be applied.

55 In this case, whether Fluor's claim for contribution is characterised as being restitutionary or delictual or characterised by reference to the juridical nature of its wrongdoing or that of ASCE no matter what common law choice of law rule was invoked the law of Victoria would never be the appropriate law to be applied. The case has no factual connection whatsoever to Victoria. In all probability the appropriate law would be that of Western Australia but there is no need to determine that question at this point. It is sufficient to determine that the appropriate law to be applied is not the law of Victoria.

56 Fluor's argument that s 23B(6) of the Wrongs Act 1958 is itself a statutory provision which overrides the common law choice of law rules must be rejected. The function of that provision is merely facultative. It permits a claim to be brought under Victorian law even where the underlying liability, in tort, breach of contract, breach of trust or otherwise, falls to be judicially determined according to the law (written or unwritten) of a jurisdiction outside of Victoria. It is not difficult to imagine a situation where choice of law rules which relate to a contribution claim (whatever they might be in a particular case) would dictate the application of Victorian law even where the wrongdoing of one or other or even both of the parties involved fell to be determined according to the law of another jurisdiction. Were the facts of this case to be geographically rearranged it may well be that the appropriate rules of private international law would dictate that Victorian law should be applied. As the facts stand however no possibly applicable common law rules of private international law would have that effect.

57 Similarly, Fluor's argument with respect to s 24(2A) of the Act must also be rejected. This section merely ensures that the determination by a Victorian court concerned with a contribution claim of an underlying liability according to the law of a jurisdiction other than Victoria which recognises apportionment of damages for contributory negligence would take contributory negligence into account in determining contribution. For example, where an underlying liability of one of the parties was a liability in tort according to the law of a foreign jurisdiction which recognised the apportionment of damages for contributory negligence in tort, a Victorian court determining contribution would have to take contributory negligence into account when determining the existence and extent of the underlying liability upon which the claim for contribution would depend. Once s 23B(6) is seen as a facultative provision enabling foreign law to be applied to determine underlying liability where Victorian law is the appropriate law to be applied to the claim for contribution, no difficulty is encountered by applying s24(2A) according to its terms.

59 The Court answers the three questions posed by the order of Habersberger J as follows:-

60 It is appropriate that the costs of this reference pursuant to RSC r47.04 be reserved and that otherwise the proceeding be further dealt with as agreed by the parties.

[1] [1933] AC 70, 79 ( Lord Wright).

[2] [1934] 1 Ch 65, 84 (Lord Hanworth MR).

[3] [1937] HCA 52; (1937) 57 CLR 666, 686 ( Dixon J).

[4] [1988] HCA 44; (1988) 165 CLR 107.

[5] [1956] HCA 8; (1956) 95 CLR 43.

[6] [1919] AC 801.

[7] [1933] AC 70.

[8] (1937) 57 CLR 686.

[9] J.D. Heydon and M.J. Leeming, Jacobs Law of Trusts in Australia (7th ed, 2006) [501].

[11] (2006) HCA 8

[12] [2004] HCA 7; (2004) 216 CLR 109, 116.

[13] [2000] HCA 36; (2000) 203 CLR 503.

[15] Ibid at 155. Callinan J (with whom McHugh J agreed) made a similar comment.

[16] [1987] 3 All ER 1032.

[18] HC (ChD) unreported; Times Newspaper 10 November 1994.

[19] [2000] HCA 36; (2000) 203 CLR 503.

[20] Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ at 528.

[21] The authors of the latest edition of Conflict of Laws in Australia, PE Nygh and M Davies ( 7th edition, 2002) suggest that the principles in Pfeiffer should be applied to claims for contribution, by analogy with a claim in tort. Para [22.22].