The proposed amended cross-claim
27 As I have already mentioned, the TRT companies wish to maintain their case against Panalam as currently pleaded. The present application does not involve any alteration to that case. Accordingly, the current pleading against that company will stand without alteration.
28 In addition, the TRT companies have raised a claim for indemnity founded upon cl 22.3 of an agreement entered into between the TRT companies and old Sherrin dated 16 September 2005 (the 2005 Agreement). That claim is made in pars 10, 11 (in part) and 15 of the ACC. Justice Edelman had previously indicated to the parties that he was prepared to allow that claim to go to trial. I have not undertaken any reconsideration of that claim. In the circumstances, that claim should go to trial as indicated by his Honour.
29 The remaining claims sought to be made in the ACC are confined to claims against old Sherrin only for damages for breach of contract. The contract in question is the 2005 Agreement.
30 The TRT companies rely in particular upon cl 4.4 of the 2005 Agreement as giving rise to enforceable contractual obligations on the part of old Sherrin undertaken by it for the benefit of the TRT companies which, so it is alleged, were breached by old Sherrin in the respects outlined in the ACC.
31 Paragraph 9 of the ACC is in the following terms:
The 2005 Agreement
9. Pursuant to a written agreement between the Cross-Claimants and the First Cross-Respondent dated 16 September 2005 (the Agreement), the First Cross-Respondent expressly contracted:
a. pursuant to clause 4.4, to be responsible for all signwriting, commissioning, producing and supply of the operating manuals, design verification and all training in respect of the operation of the Travel Towers (defined in the 2005 Agreement as being truck or trailer mounted elevated work platforms);
b. further to clause 4.4, it was inferred that being responsible for the matters in 9(a) above, was an obligation on the First Cross-Respondent to ensure that:
i. the commissioning of the Travel Towers resulted in a safe and functional operating piece of plant and equipment that met the agreed design, manufacturing, purchaser and regulatory requirements for the use and operation of the Travel Towers in Australia; and/or
ii. the design verification was that the Travel Towers were in accordance with all regulatory requirements in Australia.
32 Leaving aside for the moment the cl 22.3 indemnity argument, it is in par 9 that the TRT companies specify the contractual obligations relied upon by them to support their contract case and the source of those obligations.
33 Clause 4.4 of the 2005 Agreement is in the following terms:
SE [referring to old Sherrin] is responsible for all sign writing, commissioning, producing and supply of the operating manuals, design verification and all training in respect of the operation of the Travel Towers.
34 In effect, the TRT companies contend that by cl 4.4 there was imposed on old Sherrin a contractual obligation to ensure that the commissioning of the Sherrin EWPs produced the result described in par 9b.i and further to ensure that the design verification of the Sherrin EWPs complied with all regulatory requirements in Australia. The TRT companies then contend that these obligations were breached in the present case leading to the loss claimed in the ACC, namely, the amount for which the TRT companies might be found to be liable to Sherrin Hire in respect of the claims made by Sherrin Hire in this proceeding.
35 It may immediately be observed that par 9b amounts to an allegation that, in some fashion which is completely obscure and which is not articulated (but which is "… further to cl 4.4 …") and which is said to be upon the basis that cl 4.4 provided that old Sherrin would "… be responsible …" for the commissioning and design verification of the Sherrin EWPs, old Sherrin took on additional binding contractual obligations to ensure that the "results" described in subpars i and ii of par 9b were actually achieved. This allegation is not pleaded as an allegation that, upon the true construction of cl 4.4, old Sherrin had such obligations to ensure those results. Nor is it said to be an implied term. Rather, the TRT companies appear to be contending that these additional obligations "… may be inferred …" as arising from the text of cl 4.4. Such a plea is embarrassing and not anchored in any comprehensible principle of law. There is no sound basis upon which this plea could be allowed to stand.
36 It is not for me at the moment to express any final views as to the true construction of cl 4.4 of the 2005 Agreement. However, a number of matters should be noted as matters which might, in due course, be considered as pertinent to the question of the true construction of that clause. These are:
(a) In Recitals A and B in the 2005 Agreement, reference is made to an earlier agreement dated 21 September 2004 between the same parties which, according to Recital B, was replaced and superseded entirely by the 2005 Agreement. The existence and terms of the September 2004 agreement were facts and matters known to both the TRT companies and old Sherrin in September 2005 when they entered into the 2005 Agreement.
(b) TRT is described in the 2005 Agreement as the manufacturer of the Sherrin EWPs. It is not described as the designer of those EWPs.
(c) Recital F is in the following terms:
This Agreement does not cover in detail the designs and specifications of the various Travel Towers models which TRT has agreed to manufacture and supply as such designs and specifications are subject to further discussions/agreements between the parties.
(d) There is a definition of "Specifications" in cl 2.8.
(e) Clause 3 contains the principal obligation of the TRT companies under the agreement, which is to manufacture and supply the Sherrin EWPs for the price set out in cl 10.
(f) Clause 4 is headed "Travel Tower Models". It deals with the specifications for the Sherrin EWPs and, to some extent, fleshes out the concept of "commissioning" found in cl 4.4. I have in mind, in particular, the terms of clause 4.3, which provide:
TRT will supply each Travel Tower model as a complete unit functionally tested, painted, plumbed and wired and fitted to a truck to be agreed by TRT and which SE [referring to old Sherrin] agrees to supply. TRT will paint all Travel Towers (excluding the truck) in two colours, black and white.
(g) Clause 8 deals with the designs and drawings of the Sherrin EWPs. A fair reading of cl 8 in its entirety suggests that, as between the TRT companies and old Sherrin, the responsibility for preparing or organising the preparation of designs and drawings rested with old Sherrin, subject to the possibility of TRT playing a subsidiary role in design as contemplated by cl 8.5.
(h) The price to be paid for the Sherrin EWPs did not, other than through the mechanism specified in cl 8.5, involve any payment for design work.
(i) Clause 13.3 provides that TRT gave no warranty in respect of the design of the Sherrin EWPs.
37 When all of these matters are considered, as well as the context in which the 2005 Agreement was signed, two questions concerning the construction of cl 4.4 arise.
38 First, there is a question whether cl 4.4 applies to anything other than the operating manuals.
39 Second, as I have already discussed at [35] above, there is a real question as to whether, pursuant to cl 4.4, old Sherrin undertook a binding contractual obligation of a promissory nature to do anything at all, let alone to ensure that the asserted results were actually achieved. It seems to me that it is strongly arguable that all that cl 4.4 is doing is setting out, in effect, the line of demarcation between the parties' responsibilities for various things in the development of the design, manufacture and supply of the Sherrin EWPs. I think that it is strongly arguable that the clause simply states for the benefit of the parties to the 2005 Agreement that certain matters are the responsibility of old Sherrin but does not impose a contractual obligation in the sense of a binding promise to do anything upon which TRT could rely or ultimately sue.
40 Paragraph 14 of the ACC contains the allegations of breach. Those allegations are directed to breaches of the alleged commissioning obligation and of the alleged design verification obligation.
41 In par 14a of the ACC, the pleader addresses the breaches of the alleged commissioning obligations. The TRT companies there allege that old Sherrin "… failed to ensure [that] the commissioning of the [Sherrin EWPs] resulted in a safe and functional operating piece of plant and equipment that met the agreed design, manufacturing, purchaser and regulatory requirements for the use and operation of [EWPs] in Australia". The particulars of this breach (an alleged "failure to ensure" certain outcomes) comprise a catalogue of descriptions of various defects.
42 A similar approach is taken with the allegations of breach in respect of design verification (as to which, see par 14b and the particulars provided in respect of that paragraph).
43 All of the allegations concerning the commissioning obligation are entirely new. They have not previously been made in this proceeding at all. The design verification allegations are, to some extent, related to matters raised by the TRT companies in their Defence to the Cross-Claim made against them by old Sherrin and new Sherrin in the 2011 proceeding. So, to that extent, those allegations are not entirely new, although the framework in which they are now made is entirely new.
44 In addition, the allegations made in par 14 do not descend into any detail at all as to what it was either by act or omission that old Sherrin did or did not do which constituted the breaches of the alleged contractual terms. I suspect that providing details such as that would be impossible in the present case because the true meaning of the 2005 Agreement is not that which is reflected in par 9b of the ACC. Nonetheless, details of the acts or omissions relied upon are simply not pleaded.
45 A significant problem arises when one considers par 16 of the ACC. That paragraph purports to be a pleading of the necessary causal link between the alleged breaches in par 14 and the loss which is claimed. Paragraph 16 is in the following terms:
Further, or in the alternative, to paragraph 15 above, in the premises, the First Cross-Respondent as a result of the breaches, or any of them, pleaded in paragraph 14 above, is liable to the Cross-Claimants for damages for breach of clause 4.4 of the 2005 Agreement in an amount equal to any damages or liability found to be owing by the Cross-Claimants to the Applicant upon determination of the Statement of Claim.
46 In other words, in the event that the TRT companies are found liable to Sherrin Hire for either negligent design or negligent manufacture or both in respect of the claimed defects, the TRT companies seek contractual damages for breach of cl 4.4 in the nature of an indemnity against their liability to Sherrin Hire. No facts, matters or circumstances are articulated in the ACC which would justify an allegation that the loss claimed is in any way causally linked to the breaches alleged.
47 In addition, when one thinks about it, the only circumstance in which the TRT companies' claim for damages by way of indemnity could be invoked is if the TRT companies are actually found liable to Sherrin Hire. Obviously, that will only happen if those companies breached some duty or obligation owed to Sherrin Hire in respect of the design or manufacture of the Sherrin EWPs. If the TRT companies were found liable as alleged, it seems very unlikely that the Court would uphold the present claim sought to be made by the TRT companies against old Sherrin for failing to detect, in effect, the breaches of duty committed by the TRT companies vis-à-vis Sherrin Hire. They would be seeking indemnity, in effect, against the consequences of their own breaches of duty.
48 For the above reasons, I consider that the case now sought to be made in the ACC is hopeless or close to hopeless.
49 Given that the trial of both the 2011 proceeding and this proceeding is imminent (it is currently due to commence within three to four weeks) and given that it is a joint trial, I consider that, in order to justify leave being granted to file and rely upon the ACC at this late stage, the TRT companies would need to persuade the Court that the case which they now seek to make in the ACC is not only arguable but has some prospects of success. I do not think that the TRT companies have discharged that burden.