FEDERAL COURT OF AUSTRALIA

Kingswood Aluminium Pty Ltd v Watpac Constructions (SA) Pty Ltd

[2016] FCA 259

ORDERS

ON THE INTERLOCUTORY APPLICATION OF THE APPLICANT MADE ON 3 JUNE 2015, THE COURT ORDERS THAT:

1.    Pursuant to rule 1.34 of the Federal Court Rules 2011 (the Rules), the Court dispenses with compliance with the requirements of rules 8.01 and 8.03, that is with the filing and service of an originating application in accordance with Form 15 and containing the information specified in those rules, for the purposes of instituting this proceeding.

2.    Order 1 take effect on and from 12 January 2015.

3.    To the extent necessary, the Statement of Claim filed herein on 12 January 2015 apparently in compliance with rule 8.05 do stand and be treated as the document necessary to institute this application as a proceeding in the Court.

4.    The applicant have leave to file and serve an amended Statement of Claim in terms of the document entitled Second Statement of Claim (the Second Statement of Claim) lodged with the Court and served on the respondent on 11 May 2015.

5.    The leave to amend the Statement of Claim be given nunc pro tunc to operate from the lodging of the Second Statement of Claim on 11 May 2015.

6.    The amendment of the Statement of Claim in terms of the Second Statement of Claim be effected by the lodging of the Second Statement of Claim and take effect as and from the time of lodging of that document on 11 May 2015.

7.    Further compliance with the Rules, to the extent that they may require further lodging and service of the Second Statement of Claim be dispensed with.

8.    The costs of and incidental to the interlocutory application, including the costs of the hearing on 12 June 2015, and costs thrown away by reason of the amendment of the Statement of Claim be the costs of the respondent in the cause.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT DIRECTS THAT:

1.    This application, including the applicant’s interlocutory application for an order that the application be consolidated with the application SAD 340 of 2014, be listed for directions at a time and on a date to be fixed.

2.    Having regard to the order for costs made in matter SAD 340 of 2014 in relation to an interlocutory application of the applicant in that proceeding, there be no further costs of the hearing on the separate question in this proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MANSFIELD J:

1    There are two actions which I have included in the heading to this judgment. They are between the same parties, and the facts to which each gives rise are, to a significant extent, interrelated.

2    The action SAD 340 of 2014 which “commenced” on 22 December 2014 is the immediate reason for the present issue. I shall refer to it as the first action. The action SAD 126 of 2015 will be referred to as the current action. I note there is a dispute as to the status of the first action.

3    Both actions arise in relation to disputes between a principal contractor, Watpac Constructions (SA) Pty Ltd (Watpac) and a subcontractor, Kingswood Aluminium Pty Ltd (Kingswood) arising out of Kingswood’s performance of a subcontract to Watpac made on 28 August 2013 (the Subcontract). Kingswood was to supply, install and glaze aluminium framed windows in the construction of the Ibis Hotel. To support the work, Kingswood was required by cl 31 of the Subcontract to provide in performance of the Subcontract certain bank guarantees (the Guarantees).

4    There is clearly a dispute as to whether Kingswood completed the work required of it under the Subcontract, and if it did so, in a timely manner. It appears that there is, or was, a dispute as to the amount of Kingswood’s entitlement for the work it performed under the Subcontract.

5    In the first instance, Kingswood took pre-emptive action by applying ex parte in the first action for an interim injunction to restrain Watpac from calling up two guarantees it had provided to Watpac under the Subcontract. An injunction was granted on 22 December 2014, until 13 January 2015. On the latter date the injunction lapsed, in the light of an undertaking then given by Watpac.

6    It will be necessary to refer in more detail to the status and course of the first action taken in these reasons.

7    The second action was commenced on 14 May 2015. It seeks declarations as to whether Watpac is entitled to call upon either of the guarantees, and it seeks declaratory orders in effect, that it had a reasonable time within which it could complete the work it was required to do under the Subcontract, as well as injunctive orders to restrain Watpac from calling upon the Guarantees.

8    The second action was prompted by steps taken under the dispute resolution clause in the Subcontract, cl 40.

9    Clause 40 provides that either party, in the event of a dispute, may give to the other written notice of a dispute: cl 40.1. The senior executives of both parties were then to meet and endeavour to resolve the dispute in good faith within 14 days of the submission of a notice of dispute: cl 40.2. If the dispute or difference remained unresolved for 14 days following the date of the meeting between the senior executives, either party may by notice to the other within a further 10 business days refer the dispute for expert determination: cl 40.3.

10    Clause 40.3 then addresses the process for expert determination. It deals with the means of appointment of the expert. It requires an agreement with the expert, including that the expert must issue the expert determination within 21 days of being appointed, unless the parties agree in writing to an extension of time. It deals with the way the expert may carry out the investigation before making the determination. It deals with the costs of the determination. That is uncontentious.

11    It is the next part of cl 40.3 which is critical to the current issue. It provides:

The determination of the expert:

(g)    must be in writing; and

(h)    will be final and binding except where both of the following are satisfied:

(ii)    the monetary value of the claim the subject of the expert determination exceeds $250,000; and

(ii)    a party commences court proceedings within 7 days after receiving the determination.

The Subcontractor must not refer any dispute or difference to expert determination or commence any proceedings until it has provided security for the cost of Watpac, in a form satisfactory to Watpac, in the amount of $5,000 or an amount equal to 10% of the amount claimed in the expert determination or proceedings, whichever is the greater. The security so provided shall be dealt with in accordance with any agreement of the parties or, failing agreement, the order of a court or direction of an expert appointed under the Subcontract.

12    The dispute resolution process was adopted by the parties, relevantly by a notice of dispute given by Watpac to Kingswood on 30 January 2015 concerning its claim for liquidated damages for the asserted delay by Kingswood in completing the work under the Subcontract. There was also, as noted, some dispute on the part of Kingswood about what it was entitled to, but it is not necessary to refer further to that aspect for present purposes.

13    On the dispute notified by Watpac, an expert determination was sought. The expert determination was issued at 8:00 pm on 6 May 2015 (the Determination).

THE ISSUE

14    The parties are agreed that, and the Court has ordered that, the Court should determine whether Kingswood commenced court proceedings within seven days after receiving the Determination. The consequence of an adverse resolution of that issue will mean that, pursuant to the Subcontract, the terms of the Determination are final and binding.

15    Kingswood claims that it commenced Court proceedings within seven days of receiving the Determination:

(a)    either by filing in the first action and serving a document entitled “Second Statement of Claim amended 11 May 2015” (the SSoC) on 11 May 2015;

(b)    and alternatively by commencing the second action as an originating proceeding on 14 May 2015.

16    The overall dispute between Watpac and Kingswood remains as to whether Kingswood is and remains indebted to Watpac as it claims, but if cl 40.3 in the circumstances means that the Determination is final and binding, that will in effect resolve the issues or most of them.

17    In short, the issue presently to be determined is whether the Determination made by the expert and dated 6 May 2015 is final and binding between Kingswood and Watpac. Watpac says it is. Kingswood says it is not because it (Kingswood) commenced court proceedings within seven days after receiving the Determination. That is, it says that it has activated cl 40.3(h)(ii) of the Subcontract, and so does not have to treat the Determination as final and binding. There is no dispute that the monetary claim the subject of the expert determination exceeds $250,000: cl 40.3(h)(i).

FACTS

18    For the purposes of addressing the issues, there are some further uncontested facts to note.

19    On 30 January 2015, Watpac issued a notice of dispute under cl 40.1 of the Subcontract, setting out the following matters in dispute:

(a)    whether there is a debt due by Kingswood to Watpac in respect of liquidated damages under cl 27.11(a) of the Subcontract and, if so, in what amount;

(b)    whether Kingswood is liable to indemnify Watpac against liability or loss suffered or incurred by Watpac under or in connection with the Head Contract under cl 27.11(b) of the Subcontract and, if so, in what amount;

(c)    whether Kingswood is entitled to return of the first of the Bank Guarantee under cl 5.6 of the Subcontract.

20    A meeting between senior executives of Watpac and Kingswood occurred on 12 February 2015. It did not resolve the dispute.

21    On 27 February 2015, Kingswood submitted a “final payment claim” to Watpac in which it claimed an amount of $9262. The Subcontract provided that on the expiry of 20 business days after making a payment claim, the Subcontractor releases Watpac from any entitlement in respect of the relevant claim, unless at that date the relevant entitlement is the subject of a dispute notified to Watpac in accordance with the dispute resolution clause: cl 36.10.

22    By letter dated 25 March 2015, Kingswood gave Watpac notice of dispute in relation to its entitlement to the claim Watpac had made and its own claim. Kingswood’s letter stated as follows:

We note that Watpac issued a notice of dispute on 30 January 2015 which relates to Watpac’s claim for liquidated damages. The parties met on 12 February 2015 which did not resolve that dispute. Accordingly, pursuant to cl 40.3 of the Subcontract, the parties have agreed for Nick Floreani to determine that dispute.

Given the similar issues involved, Kingswood proposes that the parties agree to also submit this dispute to Nick Floreani for determination together with the dispute the subject of Watpac’s 30 January 2015 notice.

We note that the parties are required to confer in relation to any clause 40 dispute. However, given the unsuccessful meeting held on 12 February 2015 involving Watpac’s liquidated damages claim (which remains in issue here), we propose that the parties consent to waive the contractual requirement for senior executives to meet prior the submission of this dispute to Mr Floreani for expert determination.

Such waiver will be limited to a waiver of the requirement to meet in relation to this dispute. The requirements of clause 40 of the Subcontract will in all other respects remain binding on the parties for all purposes.

23    By email sent on 8 April 2015, Watpac agreed with the proposal that Nicholas Floreani be appointed as the expert to determine the disputes the subject of both Watpac’s and Kingswood’s notices of dispute, and to dispense with the requirement of a meeting between senior executives with respect to the matters the subject of Kingswood’s notice of dispute.

24    The parties agreed with Mr Floreani to engage him as the expert to determine the disputes on the terms set out in a letter from him addressed to the parties dated 15 April 2015. The questions to be determined by Mr Floreani were set out in his letter, and the procedure to be adopted was also set out in his letter. The procedure set out in Mr Floreani’s letter of 15 April 2015 was followed. Both parties provided primary submissions to Mr Floreani on 24 April 2015, and provided reply submissions to Mr Floreani on 30 April 2015.

25    As noted, at 8:00 pm on 6 May 2015, Mr Floreani issued his Determination to both parties by sending an email attaching the Determination to their solicitors.

26    The questions addressed in the expert determination and their effect are set out in the Executive Summary. In short, the questions and answers were as follows:

Question (a.):    By what date was Kingswood required to bring the work under the subcontract to substantial completion?

Answer:    2 May 2014, in accordance with Mr Stanley’s analysis.

Question (b.)    Whether Watpac is entitled to impose liquidated damages upon Kingswood under clause 27.11(a) of the Subcontract and, if so, in what amount.

Answer:    Yes. Watpac is entitled to impose liquidated damages upon Kingswood under clause 27.11(a) of the Subcontract in the amount of $522,942.40.

Question (c.):    Whether Kingswood is liable to indemnify Watpac against liability or loss suffered or incurred by Watpac under or in connection with the Head Contract under clause 27.11(b) of the Subcontract and, if so, in what amount?

Answer:    It is unnecessary for me to answer this question.

Question (c.):    Whether Kingswood is entitled to the return of the first of the bank guarantees under clause 5.6 of the Subcontract?

Answer:    No. Watpac is entitled to have recourse to those Bank Guarantees on and from 2 June 2015.

27    That also makes clear why the current issue is so important to the parties, but in particular to Kingswood. It is appropriate, therefore, now to consider, each of Kingswood’s bases for saying it has commenced proceedings within seven days after receiving the Determination.

THE FIRST ACTION

28    The first action was initiated on 22 December 2014. It was not routinely commenced.

29    It followed an earlier action commenced in June 2014 when Kingswood had applied for an urgent application before the start of the proceedings claiming that it was entitled to the return of the Guarantees on the basis that all materials and goods have been incorporated into the works that it had performed under the Subcontract, and to prevent a call upon the guarantee. That earlier action also was based upon the claim that the Guarantees, one due for release following practical completion and the other due for release following the expiration of the defects liability period, might be called upon by Watpac without a proper foundation. An interim injunction restraining Watpac from calling upon the guarantees was granted on 30 June 2014. An agreement was reached between Watpac and Kingswood that Watpac would not call on the two guarantees available to it without giving 14 days’ notice of its intention to do so. Upon that basis, that action was discontinued on 28 July 2014 by consent, with each party bearing its own costs.

30    On 22 December 2014, Kingswood issued a payment claim to Watpac in respect of what it said were its outstanding entitlements under the Subcontract. On the same day, it made an urgent application before the start of proceedings for an interim injunction restraining Watpac from calling upon the guarantees, as it had concerns that Watpac might do so, presumably in response to that notice.

31    Consequently, on 13 January 2015, the first action (apart from the costs issues) on the Court file comprised:

(1)    the urgent application before the start of a proceeding, under r 7.01 of the Federal Court Rules 2011 (the Rules) filed on 22 December 2014;

(2)    the supporting affidavit of Stephen Millar filed on 22 December 2014;

(3)    the supporting affidavit of Simon Bergamin, filed on 22 December 2014;

(4)    the outline of argument of Kingswood, also dated 22 December 2014;

(5)    the Order made on 22 December 2014, recording the undertaking to commence proceedings and of course the usual undertaking as to damages;

(6)    the affidavit of service of the Order, made by Erica Salna on 23 December 2014;

and immediately before the next hearing date;

(7)    the notice of address for service of Watpac;

(8)    the affidavit of Jason Prentice filed on 12 January 2015; and

(9)    the Statement of Claim filed on 12 January 2015.

32    An interim injunction was granted on 22 December 2014 on the urgent application. In accordance with the normal procedure, that was on the basis that Kingswood undertook to commence proceedings formally by 12 January 2015, and the matter was adjourned to 13 January 2015. On 12 January 2015, Kingswood filed a Statement of Claim in that proceeding. It did not file an originating application at the same time.

33    The apparently unduly long period between the grant of the interim injunction and the first return date, by which Watpac would have an opportunity to address it, was partly by reason of the events happening over the Christmas period and partly ameliorated, of course, by Watpac having liberty to apply on short notice in that interim period.

34    When the matter came on for hearing on 13 January 2015, counsel for Watpac gave an undertaking that the guarantees would not be called upon without notice being given to Kingswood. In view of the undertaking, Kingswood agreed not to pursue the extension of the injunction granted on 22 December 2014 beyond 13 January 2015. Watpac sought costs of and incidental to the urgent application, and a timetable was set for the exchange of affidavits and submissions on that issue. At the same time, liberty to apply was given to both parties.

35    The exchange of submissions in relation to costs duly took place. On 17 March 2015, the Court made a decision in relation to that application: Kingswood Aluminium Pty Ltd v Watpac Constructions (SA) Pty Ltd [2015] FCA 237.

36    As noted above, on the basis of an undertaking then given by Watpac on 13 January 2015, the injunction lapsed and, subsequently, the costs issue was resolved. On that date, the parties did not apparently contemplate a need to take further steps in the first action.

37    It is necessary to note that, on 9 February 2015, Watpac filed and served a Defence to the Statement of Claim.

38    Following the costs judgment on 17 March 2015, the matter was listed for further directions on 1 May 2015. By consent of the parties, that directions hearing was then further adjourned without attendance to 2 June 2015.

39    As noted, the dispute resolution process between Kingswood and Watpac as to the amount to which Kingswood was entitled under the Subcontract for completion of the works and as to Watpac’s claim for damages for delay was proceeding.

40    Rule 7.01(1) of the Federal Court Rules 2011 (Cth) (Rules) provides that, if a matter is urgent, a person who intends to start a proceeding may apply to the Court, without notice, as if that person had started the proceeding and the application had been made in the proceeding for an order granting an injunction. Rule 7.01(2) requires such an application to be in accordance with Form 12 and to be accompanied by a supporting affidavit. Rule 7.01(3) requires the prospective applicant to give an undertaking to the Court to start a proceeding in relation to the subject matter of the application within 14 days after the application has been determined.

41    It is not suggested that the first action, based upon the application made on 22 December 2014, did not comply with r 7.01. Pursuant to the Court’s general powers, the prescribed time of 14 days was extended to 13 January 2015.

42    It is also plain enough that the procedure available under r 7.01 does not itself commence the proceeding. That must be commenced in accordance with the undertaking.

43    The next relevant step taken by Kingswood was the filing of a Statement of Claim on 12 January 2015. I do not accept that there is any lacuna in the Rules concerning the interaction of rr 7 and 8. Rule 8 prescribes how that proceeding is to be started. Compliance with r 8, therefore, was the expectation of the Court based upon the undertaking, and strictly speaking, the expectation was not fulfilled.

44    Rule 8.01 requires an originating application in accordance with Form 15, including the details specified. The Statement of Claim, when filed on 12 January 2015, did not comply with Form 15. Nevertheless, it is plain that the information required by r 8.01 and 8.03 was either provided in the Statement of Claim or was clearly known to Watpac through the affidavits referred to. The Statement of Claim was filed in accordance with r 8.05(1)(a). That is, it was part of the compliance with r 8 to commence a proceeding. It was duly served upon Watpac. It was not suggested by Watpac that it did not have the information which an originating application compliant with rr 8.01 and 8.03 would have contained.

45    No issue was taken as to the status of the first action or the Statement of Claim at the hearing on 13 January 2015. The next relevant document filed in the first action is the SSoC filed and served on 11 May 2015. On the same date, an email was sent by solicitors for Kingswood to solicitors for Watpac asserting, on behalf of Kingswood, that it considered that it had, by the SSoC, commenced proceedings to dispute the Determination of Mr Floreani, and of course within the period allowed by cl 40.3(h) of the Subcontract.

46    A defence was filed by Watpac, and no issue was taken then or indeed subsequently as to the status of that proceeding until the present issues arose.

47    In the first action, Kingswood by interlocutory application of 3 June 2015 has applied for orders:

(1)    declaring that the first action is not invalid by reason of the failure to file an originating application (Form 15) as required by r 8.01 of the Rules;

(2)    alternatively, leave to file an originating application, with leave granted nunc pro tunc as and from 12 January 2012;

(3)    leave to file the SSoC; and

(4)    an order that leave to file the SSoC be granted nunc pro tunc to operate from 11 May 2015.

That is supported by the affidavit of Thomas Grace of 4 June 2015, which acknowledged that it was the error of the solicitors for Kingswood that the originating application was not filed on 12 January 2015.

48    In those circumstances, I do not think it is appropriate simply to determine that the first action was not in existence at material times including in May 2015. I am disposed in the circumstances to make an order in the interests of justice in accordance with rr 1.32 and 1.35 that the Court should dispense with compliance with the requirement of r 8.01 in respect of Kingswood’s failure to file a Form 15 by 12 January 2015, and to make an order with respect to that irregularity to operate then as now, that is to take effect from 12 January 2015. It is a solicitor’s error for which there is no reason why its consequences should be visited on Kingswood.

49    There is no basis for Watpac to say it has been prejudiced by the making of any such order. It does not say it has proceeded on a certain basis assuming that that proceeding did not exist or has not properly been commenced. Indeed its conduct of that proceeding indicates to the contrary. It did not raise that concern on 13 January 2015, or when it filed the Defence, or at any time prior to the Determination.

50    I accordingly make that order. Consequently, the first action was in existence as a proceeding in the Court at the time of the “filing” of the Statement of Claim, and relevantly for present purposes on 11 May 2015.

51    Accordingly, on Kingswood’s interlocutory application in the first proceeding, I make orders, then as now, effective from 12 January 2015, that the irregularity in the commencement of the proceeding by reason of the failure of the applicant to file a Form 15, be cured by dispensing with compliance with the Rules to the extent that they require the filing and service of an originating application in addition to the Statement of Claim.

52    I think that is an appropriate, and clearly available, exercise of the discretion under those Rules, particularly having regard to the observations of the Full Court of this court in Johnston v Vintage Developments Pty Ltd [2006] FCAFC 171 at [23] and [27] (Johnston). The Full Court there referred with approval to the well-established principle that the object of the Courts is to decide the rights of the parties and not to punish them for mistakes they may make in the conduct of their cases: Klopper v Smith (1884) 26 ChD 700 at 710 per Bowen LJ.

53    It is desirable to refer briefly to the authorities to which my attention was drawn by counsel.

54    Turagadamudamu v PMP Ltd (2009) 75 NSWLR 397 concerned the application of the Limitations Act 1969 (NSW). Section 18A prescribed a three year limitation period from the cause of action accruing, with a discretionary extension power of up to a further five years under s 60A, to bring a claim for damages for personal injury based on negligence or breach of duty. The Uniform Civil Procedure Rules (NSW) required any claim to be brought by statement of claim. A notice of motion to extend the time, to which was annexed a proposed statement of claim, and which was instituted just before the eight year period but only heard some months after that period had expired, was held not to be the commencement of an action for damages for personal injuries before the expiration of the eight year period. The Court of Appeal in that regard followed its earlier decision in Windsurf Holdings Pty Ltd v Leonard [2009] NSWCA 6 (but see Sackville AJA at [112]-[113] where his Honour said he would have reached a contrary conclusion but for earlier decisions). The Court of Appeal then concluded that s 60C of the Limitation Act 1969 (NSW) prevented the Court from making an order nunc pro tunc on the notice of motion, so that in effect the order would operate as made first within the eight years and the annexed statement of claim could be treated as the institution of proceedings. That is clearly different from the present circumstances, as there is no relevant statutory provision preventing the exercise of such a power. It is a discretionary power, to be exercised with caution. In this instance, for the reasons set out above, in my view, it is appropriate to have exercised it. The starting point here, that there was no proceeding in the Court by the application for urgent relief on 22 December 2014, does not mean that that discretionary power could not be exercised in relation to the statement of claim filed on 12 January 2012.

55    In Hartley Poynton Ltd v Ali (2005) 11 VF 568, Ormiston J (with whom Buchanan and Eames JJ agreed) undertook what he called at [75] a “tedious exercise” reviewing those cases where orders “nunc pro tunc” had been made. The circumstances of the case were quite unique. The Court of Appeal’s decision was that the backdating of a judgment to the date it was reserved (there, the relevant nunc pro tunc order) was not permitted by the Administration and Probate Act 1958 (Vic): see at [91]. That Act permitted an estate of a deceased person to continue the conduct of proceedings and to maintain the causes of action of the deceased person, but not so as to recover any exemplary damages. The deceased person, whose claim was successful, died between judgment being reserved and judgment being delivered. The judgment could not be backdated so as to maintain the entitlement to exemplary damages which the trial judge could otherwise have awarded. For the same reason as applied to the case referred to in the preceding paragraph, that is there being no statutory proscription in this matter, I do not consider that it applies to the present circumstances.

56    I note Fernance v Nominal Defendant (1989) 17 NSWLR 710, simply to make the same observation. It also affirmed that the power of the Court to amend a proceeding, relevantly by the addition of a further defendant after the expiration of a limitation period, should be exercised having regard to the fact that the proposed claim against the putative defendant is statute barred: see per Gleeson CJ at 717-718 and 720. As I have indicated above, there is no statutory provision precluding, or relevant to, the exercise of the power by an appropriately expressed order to regularize the first action, particularly where both parties appear to have treated it as regular. I have treated the status of the SSoC filed on 11 May 2015 in the first action as a separate and distinct step, requiring separate consideration.

57    Counsel for Watpac also noted the observations of the Full Court in Johnston at [16]-[17]. The Full Court there exercised the power to make an order nunc pro tunc, albeit (as counsel for Watpac said) in the particular circumstances referred to in those paragraphs. In my view, those observations do not confine the circumstances in which that power may properly be exercised. The exercise of the discretion itself, which I consider is available in the first action, also is to be exercised having regard to the provisions in s 37M of the Federal Court of Australia Act 1976 (Cth).

THE STATUS OF THE SECOND STATEMENT OF CLAIM

58    There was no order under r 16.31 of the Rules made on 13 January 2015 or subsequently that the first action should continue on the pleadings. The effect of the orders made in the first action, referred to in the preceding section of these reasons, have the consequence that, if there was any doubt about the status of the first proceeding, it has been in existence from 12 January 2015. On that basis, the Statement of Claim was also required by r 8.03. In fact, it was filed on 12 January 2015.

59    Under r 16.31, in Div 16.3 dealing with the progress of pleadings, because the Statement of Claim “supported” the originating application, the defence of Watpac was required to be filed within the 28 day period specified by r 16.32. That appears to have been accepted as an obligation by Watpac. It filed its defence on 3 February 2015.

60    Any reply was then required to be filed and served within a further 14 days: r 16.33. Of course, given the arrangements between the parties, the time for any reply (or, if the defence had not been filed, for any defence) would appropriately have been extended. In any event, filing a reply is in the discretion of the applicant.

61    In my view, the formal position under the Rules is that the pleadings had closed for the purposes of Div 16.5 – Amendment of Pleadings – on 17 February 2015, that is 14 days after the defence. It follows that, unless that state of affairs were to be changed by some order of the Court, Kingswood required leave under r 16.53 to file and serve the SSoC. Clearly to date it has not been given that leave. It did not seek that leave until the present issue emerged following the Determination and Watpac’s assertion that, in any event, it has no status as no leave to amend the Statement of Claim was given.

62    Indeed, Kingswood appears to have accepted that it needs an order for leave to file and serve the SSoC, backdated to operate from 11 May 2015 (the date on which it was “filed” in fact). That is, it seeks leave to file the SSoC, then as now. Otherwise, it would not operate on the date which would (it is argued) qualify the SSoC as “the commencement of court proceedings” within seven days of the Determination.

63    There are, in my view, three steps required to address that issue. First, should an order be made now for leave to file and serve the SSoC? Second, if so, should that order be made to operate from 11 May 2015? Third, and related to the first and second issues, is whether the order should be made in the particular circumstances where, in any event, Kingswood did not comply fully with the requirements of cl 40(3) of the Subcontract because it did not pay the required security for costs before “filing” the SSoC.

64    In my view, subject to the arguments based upon futility, either because such an order could achieve nothing because it is too late, or based upon the failure to pay the security deposit (which is considered separately), it is clear that the Court, if leave to amend the Statement of Claim in the first action had been sought in early May 2015 by the filing and service of the SSoC, that leave would have been given. There is no reason why it would not have been given. Case management principles, including the avoidance of wasted costs and delay, would point to that leave being given, rather than to the refusal to give that leave and to force Kingswood to commence a separate proceeding in the Court: see eg Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at [30] and [95]. As was said in that case at [14], to permit that amendment would ensure that the real questions in the proceedings are properly agitated and it would avoid the multiplicity of proceedings. I note that r 16.51, but for the defence, would have permitted the SSoC to have been filed, including pleading a fact or matter that had occurred or arisen since the commencement of the proceeding. I note also that it has not been argued on behalf of Watpac that such leave could not and would not have been given because the particular need for the amendment concerned or arose from the Determination rather than directly from enforceability of the guarantee or from the dispute between Watpac and Kingswood about Kingswood’s liability to Watpac under the Subcontract. That liability was and remains the primary dispute between the parties.

65    Indeed, r 16.53 is intended to ensure that discretion is subject to, and gives effect to, the over-arching purpose set out in s 37M of the Federal Court of Australia Act 1976 (Cth) to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see eg Suzlon Energy Ltd v Bangad (2011) 196 FCR 259 at [18].

66    I note also that r 8.21 of the Rules permits or enables the Court to give leave to amend an originating application for any reason, including to avoid the multiplicity of proceedings or to add or substitute a new foundation in law for a claim for relief arising out of substantially the same facts as those already the foundation of the claim before the Court.

67    Putting aside the two matters to which I have referred, there is no evidence that injustice would have been caused to Watpac by exercising a discretion to permit that amendment. None was suggested. In Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at [21]-[22], it was said that the Court’s general approach is that leave to amend should be granted unless the proposed amendment would be futile, such as where the claim sought to be added is unlikely to succeed or the amendments, if allowed, are likely to be struck out later in any event.

68    Having taken that provisional step, I also am satisfied that it is appropriate to give that leave then as now. That is, to give that leave and to direct that the leave operate as and from the “filing” of the SSoC so that it is taken to have been filed on 11 May 2015. That was the date upon which Watpac was served with the SSoC. The evidence shows that it knew from that date perfectly clearly that Kingwood was attempting by that procedure to commence a proceeding to dispute its liability to Watpac, despite the Determination. It was a notice within time, and within the structure contemplated by cl 40(3) of the Subcontract.

69    It is not to the point to say that giving that leave, now as then, would cause prejudice to Watpac because it is an application which, by such an order, might constitute a proceeding to challenge the determination within time whereas, if that order were not made, the application would not be within time. That is really circuitous. It misses the point that that was the purpose, and the understood purpose, of the SSoC. That purpose was confirmed by communication on the same date by solicitors from Kingswood to solicitors for Watpac. The fact that Watpac did not respond to those communications by asserting that it did not accept that the SSoC did, or could as “filed”, constitute the commencement of a proceeding as referred to in cl 40.3(h)(ii) of the Subcontract in the remaining two days up to 13 May 2015, when (Watpac says) the seven day prescribed period expired does not itself demonstrated or show such prejudice.

70    There remain two questions to be addressed.

71    The first is whether the SSoC is a form of court proceeding within cl 40(3) of the Subcontract. So far as I can discern, that has been accepted by Watpac. In my view, that is the correct position to take. In practical terms, it amounted to taking a procedural step apparently within time, and within the first action, to make and maintain the claim that Watpac is not entitled to access the guarantees to support its asserted claim because its asserted claim against Kingswood is disputed.

72    There remains, therefore, the question of whether the failure to provide the security for costs prescribed by cl 40.3, namely $5000 or an amount equal to 10% of the amount payable pursuant to the Determination, means that the granting of leave now as then would serve no purpose because, in any event, the failure to provide that security means that the leave to file the SSoC would not have been given because the claim would be likely to have been unsuccessful. That is a matter which was addressed relatively briefly in submissions, no doubt because it is a short matter of construction of cl 40.3(h) of the Subcontract and there is not a great deal that can be said on the point. The Kingswood position is that the obligation to provide security, if not satisfied, is not such as to invalidate any proceeding otherwise commenced in accordance with cl 40.3(h)(ii).

73    I note that security for those costs has now been provided.

74    In my view, the proper reading of cl 40.3 is that it is not a condition precedent to the exercise of the contractual requirement or a pre-condition to commencing court proceedings, or indeed to the entitlement to give a notice of dispute or difference under cl 40.3 so as to refer the dispute or difference to expert determination. There are four reasons why I take that view. The first is that the obligation to provide the security is referred to compendiously as relating both to the referral of a dispute or difference to expert determination and to the commencement of proceedings. It is not specifically an obligation which arises only at or before commencing any proceedings. Where the parties have otherwise followed the dispute resolution process in cl 40, to the point of exchanging or giving a notice of dispute under cl 40.3, if at that point, it was a specific condition precedent that the security for costs should be provided, that would have been more clearly expressed. Secondly, the clause does not specifically provide for that obligation to arise only at the point of commencing proceedings. That right has existed, either as a condition precedent to the determination (so that the determination itself was not valid) or is a right to which Watpac was entitled to exercise but chose not to exercise although it could have done so at any time. The third reason is simply that, if the provision of security for costs “in a form satisfactory to Watpac” was required before commencing proceedings and after the expert determination, having regard to the seven day period expressed in cl 40.3(h)(ii), that would provide to Watpac the opportunity even towards the end of that seven day period to contest the adequacy of the form of security offered and lead to discussions or negotiations, and perhaps even a dispute, which might enable Watpac to frustrate the entitlement to commence court proceedings within the prescribed time. That is not to say that Watpac might act unconscionably. But it is unlikely, judged objectively, that it was intended that the seven day period might to a not insignificant degree be taken up by negotiation with Watpac about a satisfactory form of security, or was intended to give Watpac a leverage in that period when negotiations about the amount payable may also be occurring. Finally, as a clearly textual indication, the contrast between the section of cl 40.3 dealing with the security and the explicit reference in cl 40.3(h) to the two conditions which must exist if the expert determination is not to be final is quite evident. The finality of the expert determination is prescribed except where two specified conditions are met. It would have been easy to add a third condition about payment of the security at that point and as a subpara (iii) if that had been intended.

75    For those reasons, the orders which I propose to make are that the SSoC “filed” as an amendment to the Statement of Claim should be given effect by giving Kingswood leave to amend the Statement of Claim by filing and serving the SSoC as an amended statement of claim, ordering that the amendment take effect as and from 11 May 2015, and dispensing with further compliance with the Rules by not requiring further filing and serving of that document.

76    The orders indicated will be made on Kingswood’s interlocutory application of 3 June 2015.

77    The effect of those orders is that Kingswood has commenced court proceedings as contemplated by cl 40.3(h)(ii) and within the time allowed.

THE CURRENT ACTION

78    I will deal with the second contention of Kingswood in case I am in error in the orders I make in the first action.

79    The short point about the current action, instituted on 14 May 2015, is whether it was instituted within seven days after receiving the Determination.

80    As noted, the Determination was issued and received electronically at 8 pm on 6 May 2015. If it is that date upon which the notice of the determination is taken to have been given, the current action is outside the time allowed by cl 40.3(h)(ii) of the Subcontract.

81    Kingswood says that the notice of the Determination should be taken to have been received on the following day, that is 7 May 2015, because it was given after working hours on 6 May 2015. If it was received, or taken to be received, on 7 May 2015 under the terms of the Subcontract, the current action in any event would be within the time allowed, and would serve the purpose it was intended to serve.

82    It is a matter of determining the intention of the parties to the Subcontract. It is correct that cl 40 of the Subcontract does not specifically address the particular issue. It requires the determination of the expert to be in writing. It does not say how the expert determination is to be provided. Watpac says that, in the absence of a specific provision on that issue in cl 40 itself, it was received electronically at 8:00 pm on 6 May 2015. There is no dispute about that as a fact. The issue is the date of receipt for the purposes of the Subcontract.

83    Clause 6 of the Subcontract details with notices generally. Clause 6.1 refers to the method of service of notices to be given or served under, or in connection with, the Subcontract (except notices under cl 6.2 or cl 6.3). It provides that notices must be in writing and may be sent either physically (post, facsimile or delivery) or electronically.

84    Clause 6.2 is headed “Specific notices issued by a subcontractor”. It prescribes the form of notices to be given by a subcontractor to Watpac under or in connection with the enumerated clauses, including cl 40. They must be in writing and must be sent in a particular way (by post or by hand delivery). It does not allow service by facsimile or electronically. Clause 6.2 adds that, for the avoidance of doubt, any notice to be given or served by Watpac may be given or served in the more general way of giving notices. In other words, the more confined means of giving notice to Watpac under cl 6.2 does not apply when Watpac is giving notice to a subcontractor. Clause 6.3 deals with “Security of Payment Act Notices by the Subcontractor”.

85    Clause 6.4 deals with the timing of notices. It relevantly says that any notice given in accordance with cl 6 is taken to have been effected, in the case of an electronic service, immediately but it adds:

… if the [electronic] transmission is received after 4:00 pm on any day, or on a day that is not a Business Day, it will be taken to have been received on the next Business Day.

86    Clearly, the Subcontract addressed the means by which notices should be served. Clause 6.2 imposes specific obligations upon a subcontractor to Watpac, and cl 6.1 allows a wider range of means of service by Watpac upon a subcontractor. The reference in cl 6.2 to cl 40, clearly indicates that service of notices under cl 40 was in contemplation. The Subcontract can, of course, only bind the parties to it. No circumstance was identified where a subcontractor might be giving a notice under the Subcontract to other than Watpac.

87    There is no other means specified in the Subcontract by which the expert determination is to be issued or given or stipulating when it is to be “received”. It is not a matter dealt with in the agreement with the expert of 15 April 2015. That stipulates the preferred means of the expert receiving material by email. It notes the obligation to issue the Determination within 21 days unless that date has been extended.

88    In those circumstances, in my view cl 6.4 is intended by the parties to address circumstances such as the present, that is where the expert determination has been received after 4 pm on any day. As between Watpac and Kingswood, it has been agreed that the giving of that notice, in that circumstance, will be taken to have been received on the next business day, that is 7 May 2014. There is an obvious and sensible reason why that should have been contemplated by the parties, given the tight timeframe within which cl 40.3(h)(ii) permits the institution of court proceedings. It is the same reason as the proviso in cl 6.4 exists at all. Under the Subcontract, the receipt of the Determination triggered the provision of seven days to commence court proceedings. Clause 40 in the Subcontract is referred to in cl 6.2, so it is also within the contemplation of cl 6 generally. There is no reason to treat the receipt of the Determination other than a notice given under or in connection with the Subcontract.

89    For that reason, in any event, in my view the current action has been instituted within the seven day period prescribed in cl 40.3(h)(ii). I do not propose to make a formal declaration on that issue because the orders to be made on the first action mean that Kingswood has commenced proceedings by the SSoC within the time allowed. To the extent appropriate in due course, the trial judge in the consolidated action or the first action (or the current action) may consider it appropriate to do so.

CONCLUSION

90    For those reasons, the orders made will mean that the Determination is not final and binding.

91    It is now, therefore, up to the parties to determine whether the current action or the first action should be the more convenient vehicle to address the issues between them.

92    I have not addressed the interlocutory application of Kingswood that the two actions be consolidated. That would appear to be an appropriate course. Then directions would be given, to the extent necessary (if not agreed) for the refinement of the real issues and the path to this resolution.

93    In my view, the costs of the interlocutory application of 3 June 2013 in the first action, including all the costs of preparation for the hearing, and the hearing concerning both actions on 12 June 2015, should be the costs of Watpac in the cause (if the actions are consolidated) or in the first action (if they are not). It is the failure properly to institute the first action which primarily gave rise to the present issues. That is despite the fact that I have concluded that the current action does amount to the commencement of court proceedings within seven days of the receipt of the Determination. I have expressed the view that the costs should be Watpac’s costs in the cause because, whilst it was entitled to act as it did, it could also have very easily identified the issue about the status of the first action earlier, and in that event there is no apparent reason why Kingswood would not then have instituted the current action, rather than adopted the course of “filing” the SSoC in the first action at all.

94    For the purposes of addressing the further conduct of both actions, they will be listed for further directions on a date and time to be fixed, in the proximate future.

Associate:

Dated:    16 March 2016