Westkon Precast Concrete Pty Ltd v Multiplex Constructions Pty Ltd [2004] VSC 37

Supreme Court of Victoria|2004-02-17|Before: HABERSBERGER J

PRACTICE AND PROCEDURE - Appeal from dismissal by Master of application for determination of certain preliminary questions - Whether simply question of construction of indemnity clause in sub-contract or whether factual issues were involved in that determination - Proceeding one of several resulting from collapse of partly built dome causing death and injury to employees of sub-contractor - Contractor's losses not yet ascertained or quantified - Application premature - Procedure for determination of all outstanding proceedings to be considered together at the one directions hearing - Supreme Court (General Civil Procedure) Rules 1996 r.47.04.

In order to understand the context in which the issue of preliminary questions arises, it is necessary to set out some of the complicated background to this dispute. In 1997, Multiplex was the principal contractor for the construction of the Broadmeadows Health Service Facility ("the hospital"). The plaintiff/first defendant by counterclaim, Westkon Precast Concrete Pty Ltd (ACN 006 813 789) ("Westkon"), entered into a sub-contract agreement with Multiplex in July 1997 ("the sub-contract") to construct and install certain precast concrete panels at the hospital, including a concrete dome over the entrance foyer to the hospital. The second defendant by counterclaim, GMR Australia Pty Ltd (In Liquidation) (ACN 057 493 464) ("GMR"), was the engineer retained by Westkon.

On 7 October 1997, during the installation of the 16 concrete segments or panels making up the dome, one of the props supporting one of the panels gave way and the unsupported panel, which weighed approximately four tonnes, collapsed killing a Mr Amadeu Bodas and seriously injuring a Mr Fernando Tavares Coutinho.[1] Both of these men were employed by Westkon.

In this proceeding, Westkon sued Multiplex for monies owing under the sub-contract. Multiplex counterclaimed against Westkon alleging that Westkon had breached its contractual obligations to carry out the works in a safe, proper, competent and workmanlike manner (clause 4(a) of the sub-contract), and to protect and fully indemnify Multiplex against all loss or damage in respect of personal injury or death or damage to property "arising out of or in the course of or caused by breach or performance of this Agreement or by the execution of the Works ..." (clause 7(a) of the sub-contract). By an amendment to its counterclaim Multiplex also pleaded that Westkon had breached its contractual obligations to indemnify and hold Multiplex "harmless against all claims and risks required to be insured under this Agreement" (clause 9(c) of the sub-contact). Multiplex also pleaded that Westkon had breached its duty of care to Multiplex to carry out the works in a safe, proper, competent and workmanlike manner with reasonable care and skill.

Multiplex alleged that, as a consequence of Westkon's breaches, it had suffered significant loss which it claimed would exceed $2.075 million. The amounts which Multiplex said it had become liable to pay, or might become liable to pay, included the following:

(a) the costs of reconstruction of the dome;

(b) the legal costs incurred by it in defending a Victorian Workcover Authority ("VWA") prosecution under the Occupational Health and Safety Act 1985, which resulted in Multiplex being fined;

(c) the contribution made by it to the settlement of a common law claim by Mrs Bodas, the widow of the deceased worker and to her legal costs;

(d) the legal costs incurred by it in respect of the coronial inquest into the death of Mr Bodas;

(e) its joint and several liability, together with Westkon and GMR, to pay Mrs Bodas the sum of $100,000 and her two sons the sum of $50,000 each, being the amount of compensation awarded by the Magistrates' Court in respect of their claims under s.85B of the Sentencing Act 1991;

(f) its joint and several liability, together with Westkon and GMR, to pay Mrs Tavares the sum of $100,000 and her two infant sons the sum of $25,000 each, being the amount of compensation awarded by the Magistrates' Court in respect of their claims under s.85B of the Sentencing Act;

(g) the legal costs incurred by it in respect of the Sentencing Act claims;

(h) any amounts which VWA recovered against it pursuant to VWA's claims under s.138 of the Accident Compensation Act 1985 that Multiplex was liable to contribute to the amount of compensation paid by VWA in respect of the death of Mr Bodas and the injury to Mr Tavares to the degree to which the death and injury were attributable to the act, default or negligence of Multiplex, and associated legal costs;

(i) any amount payable pursuant to the common law claim by Mr Tavares and associated legal costs; and

(j) any amount payable pursuant to Mr Tavares' claim under s.85B of the Sentencing Act.

Items (a) to (g) were described by Multiplex in their proposed set of questions as "Crystallised losses" and items (h) to (j) as "Losses which have not yet crystallised".

Since I reserved my decision on this appeal, the appeals by Multiplex and Westkon against the awards of compensation under s.85B of the Sentencing Act have been heard and determined. The amounts ordered to be paid by Multiplex and Westkon to the members of the Bodas family and the Tavares family were increased by a total of $150,000. Thus, the minimum claim by Multiplex against Westkon now stands at $2.225 million.

In addition to this proceeding, there are now three other related proceedings in this Court. They are the two s.138 proceedings by VWA against Multiplex, in which Westkon has been joined as a third party, and Mr Tavares' common law claim against Westkon, which has joined Multiplex and GMR as third parties.

In this proceeding, Westkon successfully applied to have GMR added as the second defendant to Multiplex's counterclaim in order to attract the operation of s.131 of the Building Act 1993. Westkon alleges that the accident at the hospital was caused and/or contributed to by the negligence of Multiplex and/or GMR.

This proceeding was originally fixed for trial on 18 April 2002. An application substantially similar to the one before the Master was made to Pagone J on 28 March 2002. His Honour dismissed the application without hearing argument from counsel for the plaintiff. It is apparent from the transcript that Pagone J was influenced by the proximity of the trial date.

On 12 April 2002, the trial date of 18 April 2002 was vacated. The following paragraph was contained in the "Other Matters" part of the order made by Master Kings on that day:

"It is to be noted that the parties agree that the trial of this proceeding should not be listed prior to the determination of the proceedings and/or any one of them referred to in paragraph 23 of the Defendant's proposed amended defence and counterclaim dated 3 April 2002 and/or until further order."

The other proceedings referred to were the two s.138 proceedings by VWA, Mr Tavares' common law claim, the claims under the Sentencing Act and the coronial proceedings.

On 24 March 2003, Mr Iain West, the Deputy State Coroner, delivered his findings in respect of the investigation into the death of Mr Bodas. He found that the death was caused by the failure of Westkon to supply a 4.5 ton prop to support the panel, as stipulated in the specifications. The Coroner found that Multiplex and GMR were entitled to rely on Westkon to supply a prop in accordance with the specifications.

The questions which Multiplex sought to have determined as a preliminary issue pursuant to r.47.04 of the Supreme Court Rules were as follows:

"Preliminary Question Number 1 Does the sub-contractor's indemnity contained in clause 7(a) of the sub-contract agreement between Multiplex and Westkon dated 21 July 1997 ('the sub-contract') bind Westkon and require Westkon to indemnify Multiplex? Preliminary Question Number 2 Does the 'hold harmless' provision contained in clause 9(c) of the sub-contract bind Westkon and require Westkon to hold Multiplex harmless? Preliminary Question Number 3 If the answer to Preliminary Question Number 1 is yes, to what extent is Westkon obliged to indemnify Multiplex in respect of losses sustained by Multiplex by reason of the collapse of part of the dome at Broadmeadows Hospital on 7 October 1997 ('the losses'), which are more particularly identified below. A - Crystallised losses

(ii) Multiplex' legal costs associated with VWA Prosecution

(iv) Payment of one half of Mrs Bodas' legal costs associated with Bodas Common Law Claim

(v) Multiplex' legal costs associated with the inquest into the death of Mr Bodas

(vi) Sentencing Act Claims joint and several award by Bodas family

(vii) Sentencing Act Claim joint and several Award by Tavares family (other than Mr Tavares)

(viii) Multiplex' legal costs associated with the Bodas/Tavares Sentencing Act Claims

(ix) VWA S.138 Recovery Claim - Bodas

(x) VWA S.138 Recovery Claim - In respect of Ms Tavares

(xii) Mr Tavares' Sentencing Act Claim

Preliminary Question Number 4 If the answer to Preliminary Question Number 2 is yes, to what extent is Westkon obliged to hold Multiplex harmless in respect of the losses identified in Preliminary Question 3? Preliminary Question Number 5 What is the applicability and, if applicable, the effect of Section 131 Building Act upon the liability of Westkon to Multiplex under the sub-contract indemnity and 'hold harmless' provisions referred to in Preliminary Questions Numbers 1 and 2?"

Dr Neal of counsel, who appeared for Multiplex, submitted that the issue of whether Multiplex was entitled to an indemnity from Westkon arose in one form or another in all of the outstanding legal proceedings, not just this proceeding, and that his client needed to know where it stood in relation to this matter. Dr Neal submitted:

"The indemnity clause and the insurance clause are clauses which are inserted into these types of contracts to deal with exactly this sort of situation. They are intended to deal with the situation by putting one party in charge of the proceedings by way [of] insurance and to stop the squabbling between the head contractor and the sub-contractor. And if Multiplex is right about the indemnity clauses, that is what will happen in this litigation. The parties will have removed one of the areas of great uncertainty. The prospect of settling the action will increase, and a simplification of what is already a very complex maze of litigation will be effected and hopefully that will help to break the logjam which is causing this litigation to stall. ... In other words, Multiplex, if it knew where it stood in relation to the indemnities, could proceed with a great deal more confidence in this litigation to say, 'Well, look, we are indemnified, we understand that. We take a back seat.' Westkon knows that they're in the position of insurer, and they then conduct the settlement negotiations accordingly."

Dr Neal referred me to two cases involving indemnity clauses which he submitted showed that Multiplex would succeed in its claim that Westkon was obliged to indemnify it and hold it harmless against all of the losses said to result from the collapse of the dome. These cases were Brambles Ltd v Wail[2], a decision of the Court of Appeal (Winneke P, Charles and Batt JJA), and Burke v Pentax Pty Ltd and Anor, a decision of his Honour Judge Walmsley SC in the District Court of New South Wales on 23 May 2003. I understand that the latter decision was cited because it involved a successful claim by Multiplex against a sub-contractor under the same clause 7(a).

Dr Neal further submitted that a favourable resolution of the issue of Multiplex's right to indemnity from Westkon would save the parties a considerable amount of time and expense in that the issue of whether Multiplex contributed to the death of Mr Bodas and the injury to Mr Tavares would not have to be litigated. He pointed out that this issue had involved eight hearing days before the Coroner and could be expected to consume at least the same amount of court time at the hearing of this proceeding. All of this evidence would be rendered unnecessary, he submitted, if the determination of the preliminary questions resulted in a finding that Westkon was bound to indemnify and hold Multiplex harmless in respect of the losses suffered by Multiplex.

Mr Margetts of counsel, who appeared for Westkon, submitted that at the present time the preliminary questions put forward by Multiplex did not achieve any useful purpose. He submitted that proposed questions 1 and 2 did not advance the matter because Westkon admitted that clauses 7(a) and 9(c) were express terms of the sub-contract. He further submitted that proposed questions 3, 4 and 5 were not suitable for preliminary determination because they were not simply questions of law. Evidence would have to be called by Multiplex to establish whether "the losses" fell within the qualifying criteria. That is, whether the payments made by Multiplex arose "out of or in the course of or [was] caused by breach or performance of this Agreement or by the execution of the Works ...", which Westkon denied. This was not an appropriate inquiry when many of the amounts listed in proposed question 3 were still not ascertained or quantified. Mr Margetts argued that question 5 also could not be sensibly dealt with before it had been determined by the Court what amounts fell within the indemnity. It was submitted that to order preliminary questions now would probably involve the parties in going over some, if not all, factual matters twice - once at the preliminary question stage and again at the trial of Westkon's claim and Multiplex's counterclaim.

Dr Neal responded to this argument by submitting that proposed questions 1 and 2 could be deleted and that proposed questions 3 and 4 could be amended to ask whether certain categories of claims (such as Mr Tavares' common law claim, the Sentencing Act claims and the VWA s.138 claims) were within the indemnity. Mr Margetts submitted that such an approach would be better dealt with by Multiplex, for example, seeking to strike out Westkon's third party notice against Multiplex in the proceeding involving Mr Tavares' common law claim, if Multiplex believed that the indemnity and/or hold harmless clauses in the sub-contract applied to it. Whether or not this course was adopted was for Multiplex to consider. Similarly, Mr Margetts submitted that if s.131 of the Building Act was not applicable because of the indemnity and/or hold harmless clauses, then Multiplex could apply to strike out any reference to that section in Westkon's defence to counterclaim.

It was also submitted by Mr Margetts that some of the amounts listed by Multiplex in preliminary question 3 were hypothetical. For example, VWA may not succeed in establishing that Multiplex is liable to contribute to the compensation paid by VWA in respect of the death of Mr Bodas and the injury to Mr Tavares because there was no fault or negligence on the part of Multiplex. Thus, time would have been wasted in determining whether or not the category of the VWA s.138 claims were within the indemnity, only to find that VWA did not succeed in establishing any liability on the part of Multiplex.

Mr Margetts further submitted that overall the appropriate course to follow was to allow the other matters to proceed to finality by settlement or determination. The quantum of Multiplex's counterclaim would then have been ascertained and this proceeding could go to trial. He drew my attention to the fact that all four outstanding proceedings in this Court had been listed to come before Master Kings together for directions, including directions concerning the order in which they would be heard by the Court. This step followed from Master Kings deciding that the application for preliminary questions should be dismissed because in part it was "premature". She stated that there would be a directions hearing "in order that the proceedings can be prepared for trial in a timely fashion". However, that hearing had been adjourned pending the outcome of this appeal.

Rule 47.04 of the Supreme Court Rules provides:-

"The Court may order that - (a) any question in a proceeding be tried before, at or after the trial of the proceeding, and may state the question or give directions as to the manner in which it shall be stated; (b) different questions be tried at different times or places or by different modes of trial."

The Full Court in Dunstan v Simmie & Co Pty Ltd[3] discussed r.47.04. Young CJ and Jenkinson J, with McInerney J's concurrence, said:

"Nevertheless it remains true that it is a power to be exercised with great caution. It is not desirable to circumscribe the exercise of the discretion to make an order under the power and it is perhaps particularly desirable that the power should be invoked in building cases so long as there are appropriate issues to be isolated. Nevertheless, although every case must depend upon its own facts, it will as a general rule only be appropriate to order that a preliminary issue be isolated for determination before trial where the determination of the issue in favour of the plaintiff or the defendant will put an end to the action or where there is a clear line of demarcation between issues and the determination of one issue in isolation from the other issues in the case is likely to save inconvenience and expense ..."[4]

That passage was quoted with approval by the Full Court (Young CJ, McGarvie and Nicholson JJ) in Verwayen v Commonwealth[5]. Their Honours further observed that:

"It must ... be very rare for it to be appropriate to order that a preliminary issue be isolated for determination before trial."[6]

In that case, an appeal was allowed against the order of the judge at first instance directing that certain issues of fact and law be heard before the trial of the action and further that these issues be tried upon affidavit. Nevertheless, it is worth noting that the Court went on to say that:

"It does not necessarily follow, however, that there should be no trial of preliminary issues in the case. For instance, the question whether the Limitation of Actions Act 1958, applies to the defendant, another question raised by the plaintiff's reply, is a pure question of law. The question whether the defendant waived the defence of the Statute of Limitations might be determined before other issues in the trial. But these are matters for the trial judge and we do not intend by anything we say to fetter the exercise of his discretion."[7]

I was also referred to the judgment of Brooking J, as his Honour then was, in Jacobson v Ross[8], in which he said that "precision is essential in the statement of any question ordered to be tried under r.47.04".[9] According to his Honour, the need for precision was "in the statement both of the question to be decided and of the facts on which it is to be decided."[10]

JD Phillips J, as his Honour then was, agreed with Brooking J that the appeal should be allowed. His Honour continued:

"By the same token, it must be remembered that his Honour, in acting under r.47.04, simply embraced a step urged upon him by the defendants and which even the plaintiffs conceded, if it could properly be taken, might shorten the trial significantly. Any invitation to such a step, particularly in litigation promising such length and complexity as this, obviously merited consideration and what I have said in relation to the particular circumstances of this case must not be taken to imply that the use of r.47.04 may not in other cases be fully justified. Indeed, given the way in which some cases are being conducted these days, with a proliferation of points, both good and bad, r.47.04 may often prove a useful tool in the hands of a trial judge to advance the resolution of the litigation and, as the House of Lords pointed out in Ashmore, the trial judge, particularly if he has had control of the proceeding in its interlocutory stages, may well be 'in a far better position to deal with these matters than any appellate Court can be': per Lord Roskill (at 448), and see also 450-1 per Lord Templeman. Nonetheless, in this case there were, I think, insuperable difficulties in the way of successfully involving r.47.04 so early in the trial, difficulties flowing, in the first place, from the plaintiff's own pleading and, in the second place, from the defendant's somewhat incomplete proposal by reference to r.47.04."[11]

The third member of the Full Court, Smith J, agreed that the appeal should be allowed, although he disagreed with the majority view that the question should not have been posed or answered. In respect of the use of r.47.04 his Honour said:

"Courts are now expected to take an active role in the management of long and complex litigation and this requires trial judges to respond positively to reasonable proposals from parties which may expedite such litigation. It is also important that when such attempts are reviewed by the Full Court, the Full Court should not fetter unnecessarily the powers and discretions of trial judges. It is also important that, within proper limits, it should support such attempts at case management. I note that stronger sentiments have been expressed by the House of Lords in Ashmore v. Corporation of Lloyds [1992] 1 WLR 446. The current climate is very different from that which prevailed at the time of Dunstan v Simmie & Co Pty Ltd [1978] VicRp 62; [1978] VR 669. There is a need for a degree of innovation and flexibility if courts are to meet the legitimate expectations of litigants that come before it, particularly those in long cases. I note that the Court of Appeal in New South Wales has viewed its equivalent of r.47.04 as a rule contemplating a 'high degree of flexibility'. It relied upon the language of the New South Wales rule which stated that the decision that has been separated can be determined 'before, at or after any trial or further trial': American Home Assurance Co v Ampol Refineries Ltd (1987) 10 NSWLR 13 at p. 18. This is not to say, however, that great care is not needed in dealing with the trial of separate questions and issues. We have, I think, all experienced some or all of the dangers and risks inherent in such a course. The difficulties include: * the need to formulate the question with precision; * if it is proposed to proceed on the basis of agreed or assumed facts, the need to ensure that all relevant facts are stated and stated with precision. Neither task is helped where the pleadings are not satisfactory. If evidence is taken * problems may arise for the judge continuing with the matter or any related matter if he or she has made an adverse finding about the credibility of a witness; * there is the risk of the hearing expanding beyond its anticipated length because of the desire on the part of the parties to lead evidence on facts relevant to the issues but not foreseen; An underlying concern is that trying a preliminary issue may adversely affect the prospects of settlement of the litigation: see also Tilling v Whiteman [1980] AC 1. Difficult judgments have to be made. At times risks will have to be taken if the court is to handle the increasing percentage of lengthy civil matters which are coming before it."[12]

In Tepko Pty Ltd v Water Board[13], Kirby and Callinan JJ, who dissented on the question of whether or not the Water Board owed a duty of care to the plaintiff, relevantly said:

"... we should not leave this case without making four comments. Both Mason P and Fitzgerald JA were critical of the course of limiting the issues to be tried that the primary judge adopted. In Perre v Apand Pty Ltd attention was drawn to difficulties that can be caused when that course is adopted. In light of the experience in this case, what was there said should be restated with emphasis. The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap. The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the court's rather than the parties', interests. Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question."[14] [Footnotes omitted]

The Court has power to order that questions of fact or law, or mixed questions of fact or law, be determined as a preliminary matter. However, in Utiger v Brown[15], Gillard J said:

"As a general proposition, the procedure should not be used except in clear and straightforward cases where a simple question can be identified in relation to facts which are not really disputed and the decision could have a substantial effect upon the outcome of the proceeding."[16]

A slightly different approach is illustrated by the decision of the English Court of Appeal in Gold v Patman and Fotheringham Ltd[17], to which Dr Neal referred me. There, the defendants were successful in their appeal but were deprived of half of their costs of the trial. Hodson LJ said that there had been "an opportunity for the defendants to take a clear-cut point of law which depended on the construction of the document."[18] Romer LJ and Sellers LJ agreed. The former added that he wished "litigants would take advantage of the facilities which are afforded of having a preliminary point of law decided."[19]

I consider that there is much to be said for adopting the procedure provided for by r.47.04 because of the potential saving to the parties of considerable time and expense. However, it is not clear to me that such a procedure will necessarily avoid the question of Multiplex's responsibility for the collapse of the dome having to be litigated. As far as I am aware there is no suggestion that VWA will abandon its claims if Westkon is held liable to indemnify Multiplex in respect of them. Thus, I would have thought that the two s.138 proceedings by VWA will involve the question of whether Multiplex contributed to the death of Mr Bodas and the injury to Mr Tavares regardless of the answers to any preliminary questions. I would also have thought that, for obvious reasons, Multiplex would have a real interest in defending such a claim itself, even if it had been found to be entitled to be indemnified by Westkon.

Further, there are difficulties in following the course sought by Multiplex, at this stage. I am not satisfied that the preliminary questions would only raise questions of law, and the disputed factual issues could result in the determination of the preliminary questions being not as useful as Multiplex has submitted. There is also a risk that following the suggested procedure at this stage may prolong, rather than shorten, not only this proceeding but the other outstanding related matters in this Court. The possibility of appeal of the preliminary issues was referred to by both Pagone J and Master Kings in concluding that the respective applications made to them should be dismissed. In my opinion, refusing the application for an order for preliminary questions at this stage does not impede the early resolution of the other outstanding related matters, if that is considered to be the appropriate course to follow. Indeed, it should assist that result by not delaying their resolution pending the determination of the preliminary questions and any appeal therefrom.

Therefore, it seems to me that the application is premature. Multiplex could renew this application, if so advised, once all the amounts sought by Multiplex from Westkon have been ascertained or quantified, which would at least remove the hypothetical nature of some of the amounts in respect of which indemnity is claimed.

It seems to me that the search for a solution to the "logjam" in the "maze of litigation" referred to by Dr Neal is best advanced at the directions hearing in all of the outstanding proceedings ordered by the Master in her reasons for rejecting Multiplex's application. At such a hearing, all of the parties involved in these proceedings can have their say as to how they should proceed to final hearings. A number of possible courses could be followed in an attempt to avoid having to litigate the same issues more than once. For example, it might be suggested that the determination of the third party claim by Westkon against Multiplex in Mr Tavares' proceeding and Multiplex's third party claims against Westkon in the two s.138 proceedings by VWA should not proceed at the same time as the primary claim in each of these proceedings. Thus, if Mr Tavares' claim is resolved either by settlement or determination, then the determination of the question whether Westkon can recover any contribution from Multiplex in respect of that amount can await the determination of the question of Westkon's liability to indemnify and/or hold Multiplex harmless in respect of all of the various amounts paid by Multiplex as a result of the collapse of the dome. Similarly, if VWA failed to establish that Multiplex was relevantly at fault then its third party claims need not proceed and the unrecovered amount of the costs of defending those claims which Multiplex would no doubt seek to recover from Westkon would have been quantified. These and other matters will no doubt be considered by the parties and their advisers when the directions hearing of all of the outstanding related matters comes before the Master.

For all of the above reasons, I consider that the appeal should be dismissed with costs.

[1] In the hearing of the appeal, the Master's reasons and the Coroner's decision, this injured employee and his family were referred to using the surname Tavares. However, in the reasons of his Honour, Judge Howie, in respect of the appeals from orders made under s.85B of the Sentencing Act 1991 referred to below, the employee and his family are described by the names used in the above text. In order to make sense of the documents quoted in my reasons, I will continue to refer to Mr Tavares and the members of his family by that surname.

At a glance

Court

Decision date

Before

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Judgment (78 paragraphs)

Parties

Cases Cited (3)