Protec Pacific Pty Ltd v WMC

1 By a summons dated 19 January 2007 the second defendant by counterclaim, Steuler Industriewerke GmbH ("Steuler"), sought leave now for then to amend its defence to the counterclaim brought by the defendant/plaintiff by counterclaim, WMC (Olympic Dam Corporation) Pty Ltd ("WMC") so as to rely on the version of its amended defence filed and served on 20 December 2006. WMC had previously sought, by a summons dated 9 November 2006, an order striking out certain paragraphs of an earlier version of Steuler's defence. Following discussions between the parties, agreement was reached on a number of the matters in dispute between the parties. The only issue remaining for my determination is whether the amendment should be refused because, whereas Steuler once pleaded that certain things had been done or agreed by the plaintiff/first defendant by counterclaim, Protec Pacific Pty Ltd ("Protec"), it now sought to plead that in some cases they had been done or agreed by Protec Pacific (NSW) Pty Ltd ("Protec NSW") and in other cases by one or other of the Protec Pacific companies. WMC opposed leave being given to Steuler to rely on this new part of the pleading on the ground that it would be prejudiced by the late amendments in that it would now be statute barred from joining Protec NSW as a defendant to the counterclaim.

2 The issue about which Protec Pacific company had played what role arose in the following way. It appears from the material before me that Protec Pacific was a corrosion protection business which in 1997 was operated through two companies, Protec Pacific (Tas) Pty Ltd and Protec Pacific (NSW) Pty Ltd. Between 6 October 1982 and 5 July 1993 that Protec was known as Protec Pacific Pty Ltd, from 6 July 1993 to 4 May 1998 it was known as Protec Pacific (Tas) Pty Ltd and on 5 May 1998 it changed its name back to Protec Pacific Pty Ltd. The principal place of business of Protec between 1 March 1991 and 30 December 1997 was in Burnie in Tasmania. On 31 December 1997 it changed its principal place of business to an address in Fairy Meadow in New South Wales, the registered office and principal place of business of Protec NSW. That company had been registered on 15 July 1993.

3 Steuler is a German company which carries on the business of manufacturing, designing, supplying and installing high-density polyethylene ("HDPE") lining products and systems which are marketed under the trade name Bekaplast. In April 1997 Steuler entered into a co-operation agreement with "Protec Pacific, Wear & Corrosion Control Specialists", by which Steuler appointed that entity as its sole and exclusive distributor for Steuler products in Australia and New Zealand. The agreement did not specify which Protec company was the party to the contract. It was signed by Mr Howard Smith, the managing director of both companies, for "Protec Pacific" and the common seal of Protec NSW appeared next to his signature.

4 In early 1997 Protec Pacific, by which I mean one or other or both Protec companies, prepared a tender proposal for the supply and installation of Bekaplast linings in the concrete tanks and ponds forming part of the copper and uranium solvent extraction area at WMC's mine at Roxby Downs in South Australia. This tender was part of WMC's Olympic Dam expansion project. Steuler assisted Protec Pacific in the preparation of the tender. By a facsimile dated 16 July 1997 WMC confirmed its verbal advice that it had awarded the contract to Protec NSW and issued a purchase order to it. That company, in turn, issued a purchase order to Steuler dated 15 July 1997. It also issued a number of other documents to Steuler between July and October 1997. In some Steuler shipping documents dated May and June 1998 Protec NSW was referred to, although the more common description was simply "Protec Pacific".

5 Around March or April 1998 WMC split its July 1997 contract into a purchase order covering the design, fabrication, testing, packaging and shipping of the lining and a contract for the on-site installation and testing of the lining. A revised purchase order dated 10 April 1998 was issued to Protec NSW. The on-site service agreement dated 13 June 1998 was made between WMC and "Protec Pacific Pty Ltd (ACN 060 386 807)". By then, that was again the name of Protec, but the ACN was that of Protec NSW. By a facsimile dated 15 June 1998 Mr Smith wrote to WMC confirming acceptance of the award of the contract by "Protect Pacific Pty Ltd". It was signed by Mr Smith "for and on behalf of Protec Pacific Pty Ltd". Nevertheless, it was said that all of the payments by WMC were made to Protec NSW and were banked by that company.

6 Protec Pacific commenced work on the WMC site in June 1998. There were problems with the installation work, including buckling of lining materials and liquid leaking from welded joints in the lining. In October 1998 Steuler provided a team of welders to assist with the installation. Following a dispute with WMC Protec Pacific left the site. Subsequently, WMC removed and replaced the lining with a different material.

7 On 12 November 1999 Mr Smith and Steuler entered into two written agreements. The first agreement was a sharesale agreement whereby Mr Smith agreed to sell, or grant options to sell, to Steuler 50% of his shares in Protec, although subsequently Steuler only purchased 12.5% of the shares. Mr Smith also agreed that he would arrange for Mr Michael Steuler, the managing director of Steuler, to be appointed a director of Protec; that he would delete the reference to "Protec" in the name of Protec NSW and not seek to incorporate any other company utilising the name "Protec"; and that any plant and equipment used by Protec in its business and which had in the past been owned by Protec NSW would be transferred to Protec for the sum of one dollar. Further, the parties acknowledged that "all trading activities of the business will be operated by Protec Pacific Pty Ltd and have been effectively since 1 July 1998." The second agreement was a shareholders agreement which provided, among other things, that unless otherwise agreed Protec would exclusively work with Steuler in Australia and New Zealand and that Steuler would exclusively use Protec for the installation of all of its products in those countries and that Mr Smith and Steuler would each be entitled to appoint one director to the Board of Protec.

8 According to an affidavit by Mr Smith the negotiations, which resulted in the two agreements being executed in November 1999, had commenced in about January 1998. He said that the agreement was that Steuler would purchase a stake in Protec's business effective from 1 July 1998, so that it could receive dividends from that financial year.

9 It can be seen, therefore, that there is some confusion surrounding which Protec Pacific company entered into the relevant agreements with WMC and Steuler in 1997 and 1998. However, for the reasons given below, it is not necessary to decide this question or the question of what effect the two November 1999 agreements had on this issue.

10 What is clear is that, for whatever reason, Protec acted on the basis that it was the company which had contracted with WMC because on 19 June 2000 Protec issued a generally endorsed writ seeking payment by WMC of over $2.1 million for work performed on the site of the Olympic Dam expansion project. Protec's statement of claim was delivered in August 2000. It pleaded that the debt was owing pursuant to two agreements with WMC made respectively on or about 31 March and 13 June 1998. WMC delivered its defence in September 2000, in which it admitted that it had entered into an agreement with Protec in June 1998, although its scope and effect was disputed. WMC also counterclaimed against Protec for damages for breach of the June 1998 agreement. Thus, WMC also accepted that its contractual arrangements had been with Protec.

11 On 18 December 2001 WMC joined Steuler as the second defendant by counterclaim by filing and serving its third amended defence and counterclaim on Steuler pursuant to the leave granted by the Court that day. Steuler filed its notice of appearance on 9 January 2002. On 31 May 2002 the Court ordered that WMC have leave to file and serve its fourth amended defence and counterclaim. By agreement between the parties' solicitors, Steuler's defence had been delayed pending delivery of this new pleading. On 10 July 2002 Steuler filed its defence to WMC's latest counterclaim. Steuler's pleading consisted largely of denials and not pleading to paragraphs said to make no material allegations of fact against it. One presently relevant part of the defence was that, although it denied the allegation that Protec and Steuler had both prepared a tender or proposal to WMC by a letter dated 27 April 1997 "in conjunction with one another" and were its "joint authors", Steuler admitted that it provided information to Protec by a number of communications between them in March and April 1997.[1]

12 On 29 July 2004 WMC filed its second amended defence and fifth amended counterclaim against Protec and second amended counterclaim against Steuler pursuant to an order made on 11 June 2004. Relevantly, WMC pleaded that Protec and Steuler had engaged in misleading and deceptive conduct contrary to s.52 of the Trade Practices Act 1974 ("the TPA") by making numerous false express and implied representations about the goods and their businesses in April, May and July 1997, and by making false post-contractual representations between about July 1998 and April 1999. Further or alternatively, WMC pleaded that Protec and Steuler contravened s.53 of the TPA and further or alternatively that Steuler had contravened s.75B of the TPA by aiding and abetting Protec to breach s.52 and s.53 of the TPA. WMC also pleaded a case in negligent misstatement against both Protec and Steuler. WMC's damages were said to exceed $22 million.

13 Steuler filed its defence to the second amended counterclaim against it on 8 December 2004. This was a substantive pleading which contained a number of positive allegations by Steuler of the role played by Protec, such as:

(a) that Steuler had provided to Protec certain lists, which Protec chose to forward to WMC in April 1997;[2]

(b) that one of the representations allegedly made by Protec on its own behalf and on behalf of Steuler was substantially true and correct and that the wording used by Protec substantially aligned with that used in an identified Steuler advertising brochure;[3]

(c) that Protec submitted its tender or proposal to WMC on 27 April 1997 on its own behalf and not on behalf of Steuler;[4]

(d) that WMC awarded the contract to Protec in July 1997;[5]

(e) that Steuler's relationship with Protec was at all material times one of purchaser and seller, pursuant to the terms of an agreement executed by Steuler in March 1997 and Protec in April 1997;[6]

(f) that in May 1997 Steuler represented to WMC that a Steuler supervisor would be available, if requested by Protec, to instruct the installation team;[7] and

(g) that if there were defects and/or damaged areas and/or failures in the Bekaplast lining system, the causes included defective welding by Protec.[8]

14 On 5 June 2006 WMC filed its second amended defence and sixth amended counterclaim against Protec and third amended counterclaim against Steuler. This pleading included a claim that Steuler breached its duty to WMC to exercise reasonable care and skill in the supervision of the installation of the lining system. On 7 July 2006 Steuler delivered its defence to this version of the counterclaim. Since then the parties have been in dispute about various aspects of the content of Steuler's pleading. However, it was not until 20 December 2006, when Steuler served the latest version of its amended defence to the third amended counterclaim by WMC, that the issue about the role of Protec NSW was raised by it pleading that it was "Protec NSW" alone, or "Protec or Protec NSW", which was involved. Thus, in respect of the seven examples of positive allegations by Steuler of the role of Protec referred to in paragraph 13 above, Steuler now sought to plead that it was "Protec NSW" alone involved in the allegations set out in sub-paragraphs (a) and (c) to (e) and "Protec or Protec NSW" in sub-paragraphs (b), (f) and (g).[9]

15 According to an affidavit by Mr Steuler, the issue about Protec NSW only surfaced as a result of investigations made following an application by Protec in June 2006 seeking leave to serve out of time another writ, number 5724 of 2004, in which Protec sued Steuler for damages for the loss caused to Protec as a result of negligent misstatements made to Protec as to the fitness for purpose of lining materials manufactured by Steuler. That application was subsequently dismissed by Hansen J.[10]

16 I turn then to consider whether or not Steuler should be permitted to raise the issue about Protec NSW in its amended defence. Counsel for Steuler submitted that at this stage of the proceeding, still well before the hearing, there was no reason not to follow the usual course of allowing a party to amend its pleading so long as the other side did not suffer any prejudice which could not be compensated for by an order for costs.[11] They put the argument two ways.

17 First, counsel for Steuler submitted that WMC was not correct in claiming that it would suffer prejudice as a result of these late amendments. They submitted that any claim by WMC against Protec NSW under the TPA was already statute barred before Steuler was joined as a defendant by counterclaim. Counsel argued that any loss allegedly suffered by WMC occurred when it entered into the agreements on or about 31 March and 13 June 1998.[12] At that time, there was a three year limitation period laid down by s.82(2) of the TPA. Thus, it was submitted, any cause of action which WMC had against Protec NSW was statute barred before 26 July 2001. The relevance of that date is that it was the day on which the relevant part of the Trade Practices Amendment Act (No. 1) 2001 commenced.[13] Item 20 of Schedule 1 to that Act amended s.82(2) by substituting a six year limitation period in place of the three year period. Item 21(1) provided that item 20 applied in relation to conduct engaged in on or after the commencement of that item. Item 21(2) provided that item 20 also applied in relation to conduct engaged in before the commencement of that item, but only if the period that related to the conduct and applied under s.82(2) before the commencement of that item, had not ended when that item commenced. Counsel for Steuler submitted that item 21(2) was only relevant where the conduct in question, such as the making of false representations, was ongoing at the time of the commencement of item 20, namely 26 July 2001. That was not the case here. Alternatively, they argued that, even if item 21(2) was referring to a situation where the limitation period in respect of earlier conduct had not ended, which was the construction advanced by counsel for WMC, the transitional provision still did not apply as the three year period from about June 1998[14] had expired before 26 July 2001. It seems to me that the wording of item 21(2) makes it clear that it is the limitation period, and not the offending conduct, which must not have ended by 26 July 2001 for the new limitation period to apply.[15] Nevertheless, Steuler's alternative submission remains.

18 Secondly, counsel for Steuler submitted that, given Steuler's consistent denials, WMC was always going to have to prove as against Steuler that it entered into the alleged agreements with Protec. If WMC failed to prove that it entered into these agreements with Protec, then all of the related claims must fail. Accordingly, counsel submitted, the amendments introducing Protec NSW did not prejudice WMC in any relevant sense because, based upon the pleadings as they existed, WMC was always going to have to prove that it was induced by the alleged representations to enter into the agreements with Protec.

19 As previously stated, WMC opposed the Protec NSW amendment on the ground that it would be prejudiced by no longer being able to join Protec NSW. First, counsel for WMC submitted that Steuler had allowed the proceeding to go forward on the basis that Protec was the correct party. It had in effect joined with Protec and WMC in conducting the litigation on this basis. Counsel submitted that Steuler should not now be permitted to resile from that position to assert that it was Protec NSW which was the appropriate Protec Pacific party. They referred to the judgment of Jordan CJ in Horton v Jones (No. 2) in which the learned Chief Justice said:

The Court has refused to allow a defendant to amend by adding as a new ground of defence a contention that a different person should be sued, if the plaintiff, through the absence of that ground, has allowed the time to go by within which he could have sued the other person.[16]

20 Counsel submitted that it was not simply a matter of the positive allegations about Protec pleaded by Steuler in its December 2004 defence. There was also one positive allegation about Protec in Steuler's July 2002 defence. Moreover, it was submitted, in accordance with the pleading rules and the requirement of truth in pleading, if Steuler had wanted to raise the Protec NSW issue at that time it was not sufficient merely to deny the relevant allegations. Further, it was submitted that not pleading to paragraphs said to make no material allegations of fact against it, meant that the allegations were admitted.[17]

21 In respect of the argument about the appropriate limitation period for the TPA claims, counsel for WMC submitted that its causes of action did not accrue until about January 1999, at the earliest, and about August 1999, at the latest, when it actually suffered its claimed loss and damage.[18] Thus, it was submitted that the three year limitation period had not expired before 26 July 2001. By the 2001 amendment, therefore, the limitation period became six years which expired sometime in 2005. Thus, if Steuler had raised the issue about Protec NSW in either its July 2002 defence or its December 2004 defence, it was argued, WMC could have joined Protec NSW, but it could not do so in December 2006 when the issue was raised for the first time by Steuler.

22 It was also submitted by counsel for WMC that a similar analysis applied to the other causes of action pleaded by WMC against Protec and Steuler which had six year limitation periods. Any such claim against Protec NSW was statute barred sometime in 2005, well before the issue was raised by Steuler for the first time in December 2006.

23 Counsel for WMC also submitted that WMC would be similarly prejudiced by Steuler being permitted to add Protec NSW as another wrongdoer into that part of its defence referring to s.72 of the Development Act 1993 of South Australia. That section apportions responsibility for defective building work between the persons who have by their acts or defaults caused loss or damage to another.

24 Dealing first with the general proposition that WMC will be prejudiced by the late amendment to raise the Protec NSW issue, I consider that WMC has established that it will suffer relevant prejudice. In my opinion, the history of this proceeding shows that Steuler was quite content to proceed on the basis that it was Protec, and not Protec NSW, which was the relevant Protec Pacific company which contracted with WMC and Steuler in respect of the Olympic Dam expansion project. It only sought to assert the contrary proposition after Protec applied for leave to serve out of time its separate claim against Steuler. As Steuler was indirectly involved in the negotiations with WMC in 1997 and 1998 and directly involved in the restructuring of the Protec Pacific business in 1998 and 1999, it cannot claim that it was unaware of the existence of, or the role played by, Protec NSW. Despite its prior involvement it now seeks, in effect, to withdraw the admission that the 1997 and 1998 contractual arrangements were between Protec and WMC and between Protec and Steuler, as had been previously pleaded by Protec, WMC and Steuler itself. I see no reason, therefore, to allow Steuler to substitute "Protec NSW" for "Protec" or to add "Protec NSW" as an alternative to "Protec" in the pleading of its amended defence.

25 Insofar as the dispute turned on the competing arguments as to when the causes of action under the TPA accrued and when they became statute barred, it is neither necessary nor appropriate for me to decide on this interlocutory application which argument is correct. If, as Steuler maintains, it is a three year limitation period commencing at the latest in June 1998 and which was not extended by the 2001 Act, then Steuler's own limitation defence must succeed because it was not joined until December 2001. Accordingly, it suffers no prejudice if it is not given leave to plead the Protec NSW issue in its amended defence. But if, as WMC argued, the cause of action did not accrue until January 1999, at the earliest, and the limitation period was extended by the 2001 Act into a six year period, then WMC suffers prejudice by the raising of this issue after the expiration of the six year period sometime in 2005.

26 In respect of the reliance by Steuler on the Development Act 1993, it seems to me that neither party is prejudiced whatever the outcome of this application. Whether it is Protec or Protec NSW or both of the Protec companies which were involved, Steuler is only liable for such amount as may be just and equitable having regard to the extent to which the acts or defaults of Steuler contributed to the loss and damage alleged by WMC. If, for example, the finding was that Steuler was liable for 50% of the loss and damage, it does not matter to it whether the other party liable is Protec or Protec NSW or both of them. Equally, Steuler is not prejudiced by the absence of Protec NSW because neither Protec nor WMC could seek to shift all of the liability on to Steuler by arguing that it was Protec NSW and not Protec which was responsible. Apart from anything else, the South Australian Act does not require that the entity alleged to have contributed to the building owner's loss or damage be a party to the proceeding.

27 The application by Steuler for leave now for then to amend its defence to WMC's counterclaim so as to rely on the version of its amended defence filed and served on 20 December 2006 is therefore refused. I will, however, give Steuler leave, in effect, to amend its defence to WMC's counterclaim by filing and serving a defence substantially in the form of its defence dated 20 December 2006 and the form of paragraph 60 subsequently agreed between Steuler and WMC, but with all references in those documents to "Protec NSW" deleted.

28 I will hear counsel on the precise form of the orders and on the question of costs.

[1] Steuler's defence dated 10 July 2002, paragraph 9.

[2] Steuler's defence dated 8 December 2004, paragraph 5(3).

[3] Paragraph 5(6)(e).

[4] Paragraph 11(1) and (2).

[5] Paragraph 8(5) and (6).

[6] Paragraph 11(9).

[7] Paragraph 14(4).

[8] Paragraph 25(6).

[9] Steuler's defence dated 19 December 2006, paragraphs 5(3), 5(6)(e), 11(1) and (2), 8(5) and (6), 11(9), 14(4) and 25(16) and (23).

[10] Protec Pacific Pty Ltd v Steuler Industriewerke GmbH [2007] VSC 93.

[11] Clarapede & Co v Commercial Union Association (1883) 32 WR 262; Joint Coal Board v Adelaide Steamship Co Ltd [1965] NSWLR 143. See also r.36.01 of the Supreme Court (General Civil Procedure) Rules 2005.

[12] Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1988) ATPR 40,853 at 49,195 per Pincus J.

[13] Section 2(1) of the Trade Practices Amendment Act (No. 1) 2001 provided that the relevant part of that Act commenced on 28 days after the day on which it received the Royal Assent, which was on 28 June 2001.

[14] In its second amended defence and sixth amended counterclaim against Protec and third amended counterclaim against Steuler, WMC admitted in paragraph 10 that there was an agreement in writing "made 13 June 1998" between WMC and Protec. However, in paragraph 53(c) it pleaded that WMC entered into that agreement "on or about 16 June 1998". In the particulars to paragraph 10 it was said that the June 1998 Agreement was signed on behalf of WMC and dated 14 June 1998 and signed on behalf of Protec and dated 21 July 1998.

[15] See the Explanatory Memorandum for the Trade Practices Amendment Bill (No.1) 2000, paragraph 44.

[16] (1939) 39 SR (NSW) 305 at 314. See also Steward v North Metropolitan Tramways Co (1886) 16 QBD 556; Joint Coal Board v Adelaide Steamship Co Ltd [1965] NSWLR 143; Wilson v Grimwade [1995] VicRp 80; [1995] 2 VR 628 and Commonwealth v Verwayen (1990) 170 CLR 394.

[17] See r.13.12(1) of the Supreme Court (General Civil Procedure) Rules 2005.

[18] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514; Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388.