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McDonald Keen Group Pty Ltd (in liq) v State of Queensland

 

[2019] QSC 94

SUPREME COURT OF QUEENSLAND

CITATION:

McDonald Keen Group Pty Ltd (in liq) v State of Queensland [2019] QSC 94

PARTIES:

MCDONALD KEEN GROUP PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) ACN 090 921 949

(plaintiff)

v

STATE OF QUEENSLAND

(defendant)

FILE NO/S:

BS No 4531 of 2014

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

10 April 2019

DELIVERED AT:

Brisbane

HEARING DATE:

17 July 2018

JUDGE:

Burns J

ORDER:

The parties are directed to bring in minutes of order within 14 days to reflect these reasons.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – SUMMARY JUDGMENT FOR DEFENDANT OR RESPONDENT: STAY OR DISMISSAL OF PROCEEDINGS – OTHER CASES AND MATTERS – where the parties were parties to a construction contract – where the contract was terminated by the defendant prior to completion due to the plaintiff entering into voluntary administration – where the plaintiff commenced a proceeding against the defendant for money allegedly owing under the contract – where the defendant brought an application for summary judgment against the plaintiff – whether the plaintiff has no real prospect of succeeding on part of its claim – whether the defendant is entitled to summary judgment with respect to that part of the plaintiff’s claim

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – COURT SUPERVISION – AMENDMENT – OUTSIDE OR INVOLVING LIMITATION PERIOD – where the plaintiff sought leave to further amend its amended claim and amended statement of claim – whether the proposed amendments  raise new causes of action after the expiration of relevant limitation periods – whether the claims arise out of the same or substantially the same cause of action for which relief had already been claimed in the proceeding – whether leave to amend should be granted

Uniform Civil Procedure Rules 1999 (Qld), r 293

Allonnor Pty Ltd v Doran [1998] QCA 372, cited

Borsato v Campbell & Ors [2006] QSC 191, followed

Chen v Australian & New Zealand Banking Group Ltd & Anor [2001] QSC 43, cited

Draney v Barry [2002] 1 Qd R 145, followed

Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232, followed

Firstmac Ltd & Ors v Hunt & Hunt (a firm) [2018] QSC 258, followed

FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340, cited

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, cited

McLachlan v Nourse & Anor [1928] SASR 230, cited

Qline Interiors Pty Ltd v Jezer Construction Group Pty Ltd [2009] 2 Qd R 566, cited

Spencer v The Commonwealth (2010) 241 CLR 118, followed

Walton Construction (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd [2012] 2 Qd R 90, cited

Westpac Banking Corporation v Hughes [2012] 1 Qd R 581, followed

COUNSEL:

G I Thomson for the plaintiff

M H Hindman QC with F Lubett for the defendant

SOLICITORS:

Mullins Lawyers for the plaintiff

King & Wood Mallesons for the defendant

  1. [1]
    There are two applications before the court. The first in time is an application brought by the defendant for summary judgment pursuant to r 293 of the Uniform Civil Procedure Rules 1999 (Qld). The other is an application by the plaintiff for leave to amend its claim and statement of claim to the extent leave is required.

Factual and procedural history

  1. [2]
    After a tender process, the plaintiff and the defendant entered into a schedule of rates contract in March 2007 for work associated with the widening of Moggill Road at Kenmore. The agreed contract sum was $15,326,521.
  2. [3]
    The contract incorporated general conditions based on AS2124-1992, but there were some changes to reflect the bargain of the parties. Relevantly, the plaintiff was required to provide primary security for the performance of its obligations under the contract equivalent to 1% of the contract sum and retention security equivalent to 4% of the contract sum in lieu of retention money being deducted by the defendant. The plaintiff complied with these obligations through the provision of insurance bonds on 14 May 2007 in the amounts of $153,265 and $613,061 respectively, a total of $766,326. 
  3. [4]
    Between 9 May 2007 and 1 April 2008, the plaintiff carried out work pursuant to the contract and submitted payment claims numbered 1 through to 12A. The defendant paid the plaintiff $7,132,940 in respect of those claims. There is no issue concerning any of those claims.
  4. [5]
    Subsequently, various external controllers were appointed in connection with the plaintiff, as follows:
  1. (a)
    On 9 May 2008, voluntary administrators;
  2. (b)
    On 16 June 2008, liquidators pursuant to a resolution of creditors;
  3. (c)
    On 11 September 2008, receivers and managers.
  1. [6]
    After the appointment of administrators to the plaintiff, on 15 May 2008, the defendant exercised rights under the contract to terminate it. That the contract was thereby validly terminated is uncontroversial. 
  2. [7]
    In either May or June 2008, a payment claim – No. 13 – was forwarded to the defendant in the sum of $1,083,226 including GST (“PC13”).  Then, on or about 9 July 2008, the liquidators appointed to the plaintiff forwarded another payment claim – No. 14 – in the sum of $1,889,774 including GST (“PC14”), although the plaintiff accepts that, because work that had already been claimed in PC13 was mistakenly incorporated in PC14, the GST inclusive amount claimed should have been only $972,721. In any event, a payment certificate under the contract was not issued with respect to either claim and neither claim was paid. Instead, following termination of the contract, the defendant took over and completed the contract works by June 2009 and, by March of the following year, had called up the proceeds of the primary security and retention security in the full amount of $766,326 to “recover the losses incurred on [the] project”.[1]
  3. [8]
    The plaintiff’s solicitors were engaged on about 7 October 2008. Between that date and the date on which the subject proceeding was commenced – 14 May 2014 – they attempted to “secure a negotiated resolution of the matter”.[2] Then, when the “sixth anniversary of termination of the contract was approaching, with possible consequences in terms of limitation periods”,[3] the proceeding was commenced and a copy of the claim and statement of claim “informally provided to the defendant”.[4] At that stage, the plaintiff’s solicitors were still marshalling the documentary evidence and it in fact became necessary for the claim to be renewed for 12 months from 14 May 2015 followed by the service of a notice of intention to proceed on 17 February 2016. The renewed claim and statement of claim were then formally served on 29 March 2016.
  4. [9]
    The plaintiff’s solicitors next retained a quantity surveyor, Mr Thompson, to assess the “fair and reasonable”[5] value of the works set out in PC13 and PC14. This was a substantial undertaking but his report was finalised by 23 January 2017 with a further schedule of calculations provided on 22 June 2017. On 10 November 2017, the plaintiff filed an application for leave to amend its claim and statement of claim and, by order of Applegarth J made on 24 November 2017, leave was granted.
  5. [10]
    The amended claim (“AC”) and amended statement of claim (“ASOC”) were filed on 6 December 2017. This was followed by the filing of a notice of intention to defend and defence on behalf of the defendant on 23 February 2018 and a reply on behalf of the plaintiff on 26 March 2018.
  6. [11]
    By the AC and ASOC, the plaintiff claims $2,822,273 (including GST) as “a debt due and owing by the defendant or as damages for breach of contract”.[6] The amount claimed is the sum of PC13 and PC14 ($2,055,947) along with the security that was called up by the defendant ($766,326). In the alternative, $2,079,422 is claimed as “compensation for the fair value of construction works performed by [the plaintiff] for the [defendant] at the direction of the [defendant]”,[7] although the amount claimed would again appear to include the security that was called up. Interest on both the principal and alternative claims is also sought together with costs. In broad terms, the plaintiff alleges in the ASOC that: (1) there is a debt due and owing to it under the contract because the defendant failed to pay PC13 and PC14; (2) the defendant breached the contract by failing to pay those amounts; and (3), in the alternative, the value of the works performed by it and which are covered by PC13 and PC14 is recoverable from the defendant on a quantum meruit.
  7. [12]
    The defendant filed the application for summary judgment on 16 March 2018. On the return date of the application, the plaintiff indicated that it intended to seek leave to amend the AC and ASOC and, partly for that reason, the application was adjourned to the civil list for further hearing. Other orders, including an order that the defendant make further disclosure, were also made on the return of the application. Then, on 18 June 2018, the plaintiff’s application for leave to amend was filed together with a supporting affidavit exhibiting the proposed further amended claim (“FAC”) and the proposed further amended statement of claim (“FASOC”).[8]

Summary judgment

  1. [13]
    By the application for summary judgment, the defendant sought judgment on the whole of the plaintiff’s claims or, alternatively, on the debt and damages claims alone. However, during the course of the hearing on 18 July 2018, the defendant abandoned paragraph 1 of its application[9] with the consequence that judgment was no longer sought with respect to the restitutionary claim but was still pursued with respect to the debt and damages claims.[10]
  2. [14]
    Rule 293 of the Uniform Civil Procedure Rules 1999 (Qld) is in these terms:

“(1) A defendant may, at any time after filing a notice of intention to defend, apply to the court under this part for judgment against the plaintiff.

(2) If the court is satisfied that -

  1. (a)
    the plaintiff has no real prospect of succeeding on all or a part of the plaintiff’s claim; and
  1. (b)
    there is no need for a trial of the claim or the part of the claim;

the court may give judgment for the defendant against the plaintiff for all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.”

  1. [15]
    The defendant contends that the plaintiff has no real prospect of succeeding on part of its claim and that there is no need for a trial of that part of the claim. If the court is satisfied as to that, then judgment may be given for the defendant but it is important to acknowledge that the discretion to summarily terminate a proceeding under r 293 UCPR should only be exercised in “the clearest of cases”.[11] Nor should summary judgment be granted where a viable cause of action arises on the material which, although pleaded in a deficient way, could be legitimately advanced by amendment of the pleadings.[12] Nonetheless, summary disposition is appropriate where the pleadings disclose no reasonable cause of action and their deficiency is incurable. That will “include the case in which there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment”.[13]
  2. [16]
    Here, there is an incurable flaw in the debt and damages claims advanced by the plaintiff, at least to the extent that those claims seek to rely on a contractual right to payment of PC13 and PC14. It is the absence of a payment certificate in the case of either payment claim, and no manner of amendment can overcome that deficiency.
  3. [17]
    As earlier stated (at [6]), it is not in dispute that the contract was validly terminated on 15 May 2008. That occurred pursuant to cl 44.11(d)(iii), a provision which entitled the defendant to terminate the contract (without giving a notice to show cause[14]) when an administrator is appointed to the plaintiff.[15]
  4. [18]
    According to the ASOC[16] as well as the affidavit evidence filed on behalf of the defendant,[17] PC13 was received by the defendant from the administrators on or about 1 June 2008. However, the plaintiff now proposes to allege in the FASOC, in the alternative, that PC13 was delivered “on or before 6 May 2008” and then amended and re-delivered “on or about 10 May 2008”, all before the contract was terminated on 15 May 2008.[18] In between, according to the FASOC, what was described as a “Superintendent Assessment” for PC13 was provided to the plaintiff by an engineer employed by the defendant, Mr Cheng, on 8 May 2008.[19] Then, after delivery of the amended PC13 on 10 May 2008, Mr Cheng sent an email to another employee of the defendant (who is alleged to have been the “Superintendent’s Representative appointed under the contract”[20]), Mr Lehfeldt, on 14 May 2008 that attached an amended “Superintendent Assessment” apparently prepared by the engineer.[21] The email requested that a graduate engineer employed by the defendant, Mr Fearnley, “review 4 minor items concerning the measure of works performed by the plaintiff”.[22] Then, on the day after the termination of the contract, Mr Fearnley sent an email to Mr Cheng and Mr Lehfeldt that attached an amended assessment for PC13 in a slightly lesser amount than the total of the amended “Superintendent Assessment” he received two days earlier.[23] The plaintiff therefore proposes to allege that the parties adopted a process for the assessment of progress claims by the Superintendent under clause 42 of the contract which included the provision of each progress claim by the plaintiff, an assessment by Mr Cheng on behalf of the defendant and the Superintendent, the provision of revised claims and assessments where appropriate and, ultimately, the provision of any such revised assessment by Mr Chen to “finance personnel” of the defendant “so that a payment certificate according with such assessment could be prepared and issued”.[24] Thus, the plaintiff wishes to allege that the assessment of PC13 had been “finalised by Mr Cheng on behalf of [the defendant] and the Superintendent” subject only to some minor adjustments[25] and, further, that by the date of termination of contract, the plaintiff “had done everything that was necessary under the assessment process and the contract in order for the Superintendent to issue a payment certificate” for PC13.[26]
  5. [19]
    Support for the proposed allegations summarised in the preceding paragraph may be derived from the fruits of further disclosure on the part of the defendant on 28 May 2018 and 14 June 2018.[27] According to the plaintiff’s solicitor, until then, the plaintiff was not in possession of the critical documents.[28] But, even if that is so, they supply no answer to the flaw in the plaintiff’s debt and damages claims. That is because the right to payment of progress claims under the contract was conditional upon the issue of a payment certificate by the Superintendent and that never occurred. The governing provision, cl 42.1, contained this:

“Subject to the provisions of the Contract, within 28 days after receipt by the Superintendent of a claim for payment or within 14 days of issue by the Superintendent of the Superintendent’s payment certificate, whichever is the earlier, the Principal shall pay to the Contractor or the Contractor shall pay to the Principal, as the case may be, an amount not less than the amount shown in the Certificate as due to the Contractor or to the Principal as the case may be.”[29] [Emphasis added]

  1. [20]
    Now, while a right to payment that has unconditionally accrued under a contract will be enforceable as a debt,[30] and such a right will not be lost even when the contract is subsequently terminated because of the default of the party entitled to payment,[31] in the absence of the issue of a payment certificate with respect to PC13 or PC14, no right to payment accrued prior to termination. That is because, as the words emphasised in the extract from cl 42.1 in the preceding paragraph make clear, the obligation is to pay “the amount shown in the Certificate”; unless there is a payment certificate in existence, the obligation to pay does not arise. Moreover, cl 42.1 is not in terms that provide for its survival after termination.[32] As such, not only did the right to make progress claims under cl 42.1 cease when the defendant exercised its contractual right to terminate the contract,[33] so too did the associated right to payment with respect to any such claims. It follows that the plaintiff cannot succeed on those parts of the debt and damages claims that depend on a contractual right to payment of PC13 and PC14.
  2. [21]
    For the plaintiff, it was submitted that the contract should be construed so as to avoid such a result. Otherwise, the defendant will receive a windfall in the form of the provision by the plaintiff of substantial works for which there is no obligation to pay. That would be “uncommercial and unjust”,[34] it was submitted. Otherwise, it was submitted that there is no provision of the contract that “expressly precludes the survival after termination of the right to make claims”,[35] that there is no “plea in the defence that the absence of a Superintendent’s payment certificate … debars the plaintiff’s contractual claims”[36], that cl 42.1 “does not expressly provide that a payment certificate under that clause is a necessary condition of the contractual right to payment”,[37] that the “right to payment will arise within 28 days of the claim or within 14 days of a certificate, whichever is the earlier”,[38] that because the amount of the payment is to be “not less than the amount shown in the Certificate as due” it is “not limited to the amount shown in any certificate”[39] and that cl 42.1 “does not directly address what is to happen if there is no certificate, other than that the time for payment will be 28 days from the claim”.[40] I am unpersuaded by these submissions. They overlook the plain terms of this aspect of the parties’ bargain reflected in cl 42.1 as well as the context in which it appears[41] and, to the extent that the construction I have adopted is contended to lead to injustice, the restitutionary claim that is advanced on behalf of the plaintiff.
  3. [22]
    Furthermore, although it is true that the absence of payment certificates is not expressly pleaded in the defence, the validity of PC13 and PC14 is certainly put in issue.[42] The plaintiff submits that is not good enough and maintains that, if and when such a matter of defence is pleaded, it “will be in a position to respond by pleading in its reply” the “matters of construction” considered above as well as, for PC13 at least, the matters now sought to be pleaded in paragraphs 12A to 12T of the FASOC including an estoppel.[43] Whilst that may be so as far as it goes, those “matters of construction” are in my view untenable and, for reasons that later appear, the plaintiff will be at liberty to pursue most of what it hopes to plead in paragraphs 12A to 12T of the FASOC. In the end, and regardless of what is pleaded in the defence, at the time of termination of the contract there was either an accrued right to payment or there was not. For the reasons I have expressed, no right to payment accrued in the case of PC13 or PC14. Any claim that depends on the existence of such a right has no real prospect of succeeding and there is no need for a trial of that part of the claim. The defendant is accordingly entitled to summary judgment to that extent.
  4. [23]
    As to the parts of the debt and damages claims that are concerned with the recovery of security that was called up by the defendant, the plaintiff conceded that they “require amendment and in part [are] not viable”.[44] They cannot stand unless they can be saved by amendment.[45]

Leave to amend

  1. [24]
    By r 375 UCPR, the court may allow a party at any stage of a proceeding to amend, relevantly, a claim or a pleading even if the effect of the amendment would be to include a cause of action arising after the proceeding was started. Rule 375 is, however, subject to r 376. That rule concerns applications for leave to amend where a relevant period of limitation, current at the date the proceeding was started, has ended. In particular, r 376(4) applies where such an amendment includes “a new cause of action”. It is in these terms:

“(4) The court may give leave to make an amendment to include a new cause of action only if—

  1. (a)
    the court considers it appropriate; and
  1. (b)
    the new cause of action arises out of the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding by the party applying for leave to make the amendment.”
  1. [25]
    Rule 377 UCPR relevantly provides that an originating process (such as a claim) may not be amended without the leave of the court, except in the case of a pleading or particular included in an originating process. Rule 378 provides that, before a request for trial date is filed, “a party may, as often as necessary” make any amendment for which leave is not required.
  2. [26]
    As to what constitutes “a new cause of action” under rule 376(4) UCPR, McMurdo J had this to say in Borsato v Campbell & Ors:[46]

“The term “cause of action” was defined in Cooke v Gill as being “every fact which is material to be proved to entitle the plaintiff to succeed”, a definition which many judgments have employed in the context of this rule or its equivalent: see e.g. Allonnor Pty Ltd v Doran per McPherson JA.  But it has not been applied literally, for otherwise any new fact to be added to a plaintiff’s case would be treated as raising a new cause of action which required leave in the context of a rule such as r 376(4).  So in Allonnor Pty Ltd v Doran for example, there is an indication of what the Court of Appeal in Thomas v State of Queensland subsequently endorsed as a “fairly broad brush comparison between the nature of the original claim and that to which it is sought to be amended”. The dividing line is between the addition of facts which involve a new cause of action and those which are simply further particulars of the cause already claimed, and its location involves a question of degree which can be argued, one way or the other, by the level of abstraction at which a plaintiff’s case is described.  Some illustrative guidance is provided by Allonnor Pty Ltd v Doran, Thomas v State of Queensland and another judgment of the Court of Appeal, Central Sawmilling No. 1 Pty Ltd & Ors v State of Queensland.”[47] [References omitted]

  1. [27]
    Subsequently, in Westpac Banking Corporation v Hughes,[48] Chesterman JA referred with approval to a number of observations made by the primary judge concerning rule 376(4), including these:

“It seems to me unlikely that the test found in this provision was intended to apply to all cases where the amendment would change the facts alleged: pleadings are primarily concerned with the allegation of material facts. For the purposes of r 376(4), it seems to me that a cause of action is not ‘new’, if it is reasonably apparent from a party’s pleadings, prior to the amendment, that the party sought to raise that cause of action. As the passage from Borsato indicates, a cause of action is not new in this context simply because not all of the material facts which must be established for the plaintiff to succeed have already been pleaded.”[49]

  1. [28]
    Where the proposed amendment raises a new cause of action that would otherwise be precluded by the statute of limitations, the question for the court will be whether, as r 376(4) prescribes, “the new cause of action arises out of the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding by the party applying for leave to make the amendment”.
  2. [29]
    When discussing the effect of the predecessor rule[50] in Allonnor Pty Ltd v Doran,[51] McPherson JA referred to the policies underlying limitation statutes. By reference to a work on civil procedure, his Honour agreed that such policies are “not threatened by an amendment that merely adds a ground of recovery or defence arising out of a transaction or occurrence already in suit”.[52] Then, in Draney v Barry,[53] Thomas JA said this:

“I do not think that ‘substantially the same facts’ should be read as tantamount to the same facts, and consider that the need to prove some additional facts is not necessarily fatal to a favourable exercise of discretion under r. 376(4). If the necessary additional facts to support the new cause of action arise out of substantially the same story as that which would have to be told to support the original cause of action, the fact that there is a changed focus with elicitation of additional details should not of itself prevent a finding that the new cause of action arises out of substantially the same facts. In short, this particular requirement should not be seen as a straitjacket.”[54]

  1. [30]
    More recently, in Firstmac Ltd & Ors v Hunt & Hunt (a firm),[55] Bond J recorded the following propositions which his Honour had “distilled from the cases”, and with which I respectfully agree:

First, a cause of action is the combination of the facts which are material to be established for the plaintiff to succeed.

Second, not every amendment which seeks to add to or alter that combination of facts should be regarded as an amendment which raises a new cause of action.

Third, if an amendment merely adds detail or particularity which it is reasonable to give to the defendant, then the amendment does not introduce a new cause of action. Similarly, if it was reasonably apparent from a party’s pleading that the party sought to raise a particular cause of action, an amendment which sought to remedy the fact that not all of the material facts which should have been pleaded for the plaintiff to succeed had already been pleaded, would not be regarded as a pleading which raised a “new” cause of action in this context. So, for example, an additional head of damage or a change to some aspect of damages might not be a new cause of action, but an alteration which completely changed the damages case such that it involved a different assessment of damages might be.

Fourth, locating the dividing line between (1) an amendment which introduces a new cause of action; and (2) an amendment which does not, may involve questions of degree and fine judgment which may not be straightforward and can turn on the level of abstraction at which a plaintiff’s case is described.

Fifth, in locating the dividing line, the pleading should not be analysed too critically, nor read pedantically, but broadly, resolving ambiguities or doubtful expressions in favour of the pleader, and allowing inferences to be drawn from incomplete facts. Nevertheless, the required analysis should be informed by an appreciation that the policies underlying the limitations statute may be inappropriately undermined by conducting the analysis at too high a level of generality.

Sixth, but an amendment to introduce a new (but statutebarred) cause of action may be permitted in the circumstances provided for in UCPR r 376(4) of which it has been authoritatively stated (footnote omitted):

“Rule 376 provides a structure within which courts may regulate such procedural applications with due regard to the interests of all parties. Subrule (4), which is directly relevant in the present context, allows a fairly wide discretion in that the court will not allow such an amendment unless it considers it “appropriate” to do so and also considers that the new cause of action arises at least substantially out of the same facts as the existing cause of action. I do not think that “substantially the same facts” should be read as tantamount to the same facts, and consider that the need to prove some additional facts is not necessarily fatal to a favourable exercise of discretion under r 376(4). If the necessary additional facts to support the new cause of action arise out of substantially the same story as that which would have to be told to support the original cause of action, the fact that there is a changed focus with elicitation of additional details should not of itself prevent a finding that the new cause of action arises out of substantially the same facts. In short, this particular requirement should not be seen as a straitjacket.”

Seventh, the observations made at [21] and [22] above, may also be made about locating the dividing line between (1) an amendment which introduces a new cause of action which arises out of the same facts or substantially the same facts as an existing cause of action, and (2) one which does not.

Eighth, the adequacy of the original pleading will always be relevant, because a plaintiff cannot be permitted to avoid the operation of the rules by pleading a hopelessly general original pleading so as to make it easier subsequently to contend that proposed amendments are either not new or arise out of substantially the same (hopelessly general) facts. In Draney v Barry, Pincus JA (with whom McMurdo P and Thomas JA agreed generally) made the following observations:

“… one cannot evade the plain intention of O 32 r 1(5), or its counterpart r 376(4), by inserting in a pleading a vague allegation raising no identifiable cause of action. Such an allegation would be liable to be struck out as not setting out the material facts … But the fact that para 12(j) was not struck out does not oblige the Court to ignore its vacuous character, when considering whether an amendment will if allowed add or substitute a “new cause of action”. That view appears, in my opinion, the proper one to take under both the new and the old Rules, but especially under the former, which require that the rules be applied so as to avoid undue technicality and to facilitate their purpose: r 5(2). The spirit of the UCP Rules would not be respected if the question whether what are in substance new causes of action should be allowed to be added out of time is made to depend upon the presence or absence in the existing pleading of an allegation of misconduct which is so vague as to be devoid of any ascertainable meaning.

Finally, applications in these contexts usually involve the exercise of a discretion and factors of delay and prejudice will be relevant, consistent with the principles in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. The discretion could arise because —

  1. (a)
    leave was not required because the cause of action was not new, but (as in this case) an application might be made to disallow the amendments pursuant to UCPR r 379; or
  1. (b)
    the amendment did involve addition of a new cause of action which arose out of substantially the same facts, in which case the question arises whether the Court should regard it as “appropriate” to grant leave.”[56] [Emphasis in original; references omitted]
  1. [31]
    Turning then to the amendments proposed by the plaintiff under the FASOC, the defendant objects to the addition of new causes of action for which the relevant limitation periods have expired. It was submitted that the explanation for the delay in seeking to plead new causes of action is wholly unsatisfactory. The points were made that the plaintiff chose to institute proceedings very close to the end of the relevant limitation period, it then delayed serving the proceedings for nearly two years and that it has only been active in seeking to progress the proceeding since late 2017. The defendant also contended that, because it is now more than ten years since the new causes of action that are sought to be pleaded arose, the general prejudice inherent in such delay tells against a grant of leave.
  2. [32]
    The plaintiff submitted that the proposed amendments do not advance new causes of action, but I cannot accept that submission. I consider the proposed claims in what follows, but each goes beyond the mere addition of facts to support the causes of action already claimed and none was “reasonably apparent from [the] pleadings prior to the amendment.[57] As such, and because none of the proposed new claims were statute-barred at the time when the proceeding was commenced (14 May 2014), the issue for determination is whether these new claims arise out of “the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding”: r 376(4) UCPR.

The new debt claim

  1. [33]
    I earlier discussed (at [18]) the alternative debt claim that is sought to be advanced under paragraph 8A of the FASOC. It seeks to rely on two earlier versions of PC13 which were delivered prior to the termination of the contract. Although I accept that this new claim arises out of substantially the same facts as the debt and damages claim contained in the ASOC, it is not appropriate to grant leave because, for the reasons already discussed (at [16]-[22]), the proposed claim is doomed to fail.

The new breach of contract claims

  1. [34]
    Paragraphs 12A to 12S of the proposed FASOC are as follows:

“12A. The matters under this heading “Superintendent’s assessment of payment claim #13” are pleaded further or alternatively to the matters in paragraphs 9 to 12 of this pleading, in support of the claim for payment for the claim 13 works the subject of payment claim #13.

12B.  Clause 23 of the General Conditions of Contract relevantly provided that the Principal under the Contract (being the Defendant acting through DMR,[58] as provided for in item 1 to Annexure Part A to the General Conditions of Contract) was to ensure that in the exercise of the functions of the Superintendent under the Contract, the Superintendent acted fairly (clause 23(a)), and arrived at a reasonable measure or value of work, quantities or time (clause 23(c)).

12C. It was a term of the Contract implied by law, or alternatively it was a legal rule of construction of the Contract, that both parties to the Contract were to co-operate in doing all things necessary to enable the other party to have the benefit of the Contract.

12D. On or before 6 May 2008, MKG[59] (by Mr Vincent Vital) delivered to DMR (by Mr Stanley Cheng and Mr Michael Lehfeldt) payment claim # 13 on account of the claim 13 works in the amount of $1,057,528.89 (incl. GST).

12E. On 8 May 2008, DMR (by Mr Cheng) provided to MKG an assessment described by Mr Cheng as “the Superintendent Assessment for your Progress Claim #13” in the amount of $87,222.00 (incl. GST).

12F. On 9 May 2008, MKG (by Mr Vital) delivered to DMR (by Mr Cheng and Mr Lehfeldt) an amended payment claim # 13 under cover of an email that commenced “Please find attached our response to your assessment”.

12G. On 9 May 2008, administrators were appointed to MKG as alleged in paragraph 3 of this pleading.

12H. On 10 May 2008, MKG delivered to DMR (by Mr Cheng and Mr Lehfeldt) an amended payment claim # 13 on account of the claim 13 works in the amount of $1,083,226.08 (incl. GST) under cover of an email that commenced “Please find attached our latest updated response to your comments…”.

12I. On 14 May 2008 at 6.17 pm, Mr Cheng sent an email to Mr Lehfeldt (that is, by internal email within DMR) attaching an amended “Superintendent Assessment” for payment claim #13 in respect of the claim 13 works in the amount of $682,766.32 (incl. GST), and the covering email:

(a) commenced “Please find attached the amended Superintendent Assessment for progress claim #13, with variation added”;

  1. (b)
    concluded by instructing that DMR graduate engineer Mr James Fearnley review 4 minor items concerning the measure of works performed by MKG and (by implication from that instruction) that he amend the assessment accordingly.

The 14 May 2008 email including the above instructions, and the attached assessment, are collectively referred to in this pleading as “Mr Cheng’s assessment”. 

12J. On 15 May 2008, DMR terminated the Contract as pleaded in paragraph 17 of this pleading.

12K. On 16 May 2008, Mr Fearnley sent by email to Mr Cheng and Mr Lehfeldt (that is, by internal email within DMR) an amended assessment for payment claim #13 in the amount of $678,367.74 (incl. GST), and the covering email said “Hi Stanley and Michael, I have made changes to the progress claim 13 doc as per Stanley’s request.”

12L. The parties to the Contract jointly and consistently adopted a process  (“the assessment process”) for the assessment of progress claims by the Superintendent under clause 42 of the General Conditions of Contract,  which included the provision of each progress claim by MKG, an assessment of the claim conducted by Mr Cheng on behalf of DMR and the Superintendent and then communicated to MKG, the provision to DMR of comments by MKG on the assessment together with a revised claim by MKG, the provision (in some cases) of further iterations of assessments, comments and claims, the finalisation by Mr Cheng of a revised assessment, and the provision of a revised assessment by Mr Cheng to finance personnel of the DMR so that a payment certificate according with such assessment could be prepared and issued.

12M. The matters pleaded in paragraphs 12D, 12E, 12F, 12H and 12I of this pleading were consistent with, and undertaken pursuant to, the assessment process pleaded in paragraph 12L of this pleading.

12N. By 15 May 2008, the assessment of payment claim # 13 under under the assessment process and the Contract had been finalised by Mr Cheng on behalf of DMR and the Superintendent, subject only to minor adjustments to be made at his request in accordance with his instructions already given, the quantum of such adjustments amounting to no more than $4,398.58 (paragraphs 12I and 12K above).

12O. By 15 May 2008, MKG had done everything that was necessary under the assessment process and the Contract in order for the Superintendent to issue a payment certificate for payment claim # 13.

12P. The Defendant terminated the Contract on 15 May 2008 with the intention and for the purpose of avoiding having to make a substantial payment to MKG on payment claim # 13, which was the subject of Mr Cheng’s  assessment (paragraphs 12I and 12N above). This intention is to be inferred from the matters pleaded in paragraphs 2A, 2B and 12B to 12O of this pleading.

12Q.  In the premises pleaded in paragraphs 12B to 12O or alternatively paragraphs 12B to 12P of this pleading, the Superintendent acted unfairly in failing to issue a payment certificate for payment claim # 13 in the amount of no less than $678,367.74 (incl. GST) (paragraph 12K above), in accordance with Mr Cheng’s assessment (paragraph 12I above), and further or alternatively acted unfairly in failing to proceed reasonably promptly so as to allow such a certificate to be issued prior to termination on 15 May 2008, and thereby the Defendant by DMR breached its obligation under the Contract pleaded in paragraph 12B of this pleading.

12R. In the premises pleaded in paragraphs 12B to 12O or alternatively paragraphs 12B to 12P of this pleading, the Defendant failed to co-operate in doing all things necessary to enable MKG to have the benefit of the Contract, by causing the Contract to be terminated on 15 May 2008 before payment was made or a payment certificate issued for payment claim # 13 in the amount of no less than $678,367.74 (incl. GST), (paragraph 12K above), in accordance with Mr Cheng’s assessment (paragraph 12I above), with the effect of depriving MKG of the benefit of payment claim # 13 and the Superintendent’s assessment thereof, and thereby the Defendant by DMR breached its obligation under the Contract pleaded in paragraph 12C of this pleading.

12S. By reason of the Defendant’s breaches of the Contract pleaded in paragraphs 12Q and 12R of this pleading, MKG suffered loss in the amount of no less than $678,367.74 (incl. GST), being the amount of the payment that it ought to have received in respect of the claim 13 works and payment claim # 13 as assessed by the Superintendent, or alternatively in the amount of $1,083,226.08 (incl. GST), being the reasonable value of the claim 13 works and payment claim # 13 as assessed under the Contract in accordance with the Superintendent’s obligation under clause 23(c) of the General Conditions of Contract.”

  1. [35]
    It will be seen that paragraphs 12Q, 12R and 12S contain allegations of breach of contract based on the facts pleaded in paragraphs 12A to 12P and 12S. These new claims are alleged to arise in connection with PC13 only and, like paragraph 8A, rely on earlier versions of that payment claim as well as the assessment process allegedly adopted by the parties to which reference has already been made (at [18]). In essence, the plaintiff seeks to allege that the defendant breached cl 23 of the contract (because the Superintendent acted unfairly in failing to issue a payment certificate in accordance with the assessment or alternatively acted unfairly in failing to proceed reasonably promptly so as to allow the payment certificate to issue prior to termination of the contract) and an implied term of the contract by failing to cooperate in doing all things necessary to enable the plaintiff to have the benefit of the contract by terminating it before a payment certificate in respect of PC13 was issued. Also, the plaintiff appears to wish to separately allege (in paragraph 12S) a breach of contract because the damages claim is not only for the amount of the defendant’s internal assessment, but includes an alternate claim based on the reasonable value of the work captured by PC13. As the defendant submitted, such a claim would seem to carry with it an implicit allegation to the effect that the internal assessment itself was in breach of the obligation under the contract to ensure that the Superintendent acted fairly.
  2. [36]
    The defendant submitted that these new claims do not arise out of the same or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding, but I cannot agree. The claims are made with respect to the same contract and the same work about which the ASOC is concerned. Although they rely on additional facts, those facts arise out of substantially the same story as that which would have to be told to support the causes of action under the ASOC if those existing causes were permitted to proceed to trial. The defendant also submitted that it would not be appropriate to allow the amendments because of the matters summarised earlier (at [31]), as well as the feature that the plaintiff had not, the defendant submitted, provided a proper explanation for failing to source the critical documents on which the new claims are based until May and June of 2018. However, the delay in this case has to my mind been satisfactorily explained and, while the sourcing of the documents could perhaps have occurred much sooner in the history of the matter, it must also be accepted that the task confronting the external controllers of the plaintiff and those advising them (including Mr Thompson) was mammoth.
  3. [37]
    In addition, it is important to keep in mind that, with the exception of the proposed paragraph 12P, the new contract claims would appear to be wholly based on documents, and should stand or fall on their contents. Paragraph 12P is the exception, concerned as it is with states of mind. Although the defendant could not point to any specific prejudice in meeting that part of the proposed pleading, it seems to me to be inevitable through the passage of time since the relevant events took place that its ability to respond to it will most likely be compromised. This is general prejudice of a real kind and the defendant should not have to meet such a serious allegation at a point which was, at the time the applications were heard, over 10 years since the contract was terminated.
  4. [38]
    The plaintiff will be granted leave to amend the ASOC in the terms of paragraphs 12A to 12O and 12Q to 12S, but not paragraph 12P. Paragraphs 12Q and 12R will in consequence require minor amendments to remove the references to paragraph 12P.

The new claims based on an estoppel or contract variation

  1. [39]
    Paragraph 12T of the proposed FASOC is in these terms:

“12T.   Further, or alternatively:

  1. (a)
    the parties jointly adopted and acted in accordance with the assessment process and assumed that it governed the assessment of claims under the Contract;
  1. (b)
    MKG will suffer detriment if that assumption is departed from with the effect that Mr Cheng’s assessment is of no effect and MKG receives no payment for payment claim # 13;
  1. (c)
    in the premises pleaded in this paragraph, the parties varied the Contract so as to incorporate the assessment process, or the Defendant is estopped from denying that this is so;
  1. (d)
    in the premises pleaded in paragraphs 12B to 12O of this pleading and in this paragraph, by 15 May 2008, in accordance with Mr Cheng’s assessment of payment claim #13, MKG unconditionally acquired a right under the Contract for a payment certificate to be issued for the claim 13 works and payment claim # 13, in an amount according with that assessment being no less than $678,367.74 (incl. GST), and/or unconditionally acquired a right under the Contract to payment of such amount;
  1. (e)
    in the premises, MKG is entitled to the said sum whether under the Contract or as damages for breach of it.”
  1. [40]
    The essential allegation under this paragraph is that the defendant is estopped from denying that the contract was varied to incorporate the assessment process in relation to PC13 and, in its varied state, the plaintiff is entitled to payment for the work covered by that payment claim, either under the contract or by way of damages in an equivalent amount. To make good that allegation, the plaintiff seeks to rely on the facts it proposes to plead in paragraphs 12B to 12O as well as 12T.
  2. [41]
    For much the same reasoning as I have just expressed, these claims arise out of substantially the same facts as the causes of action pleaded in the ASOC. The additional facts are part of the same story as that which would have to be told to support the causes of action under the ASOC. Again, these claims are based on documents, and will be determined on their contents. The delay in this case, including the delay in sourcing the critical documents, has been satisfactorily explained. It is also to be observed that much, if not all, of paragraph 12T is properly the subject of what might have been pleaded in the plaintiff’s reply had the defendant pleaded the absence of a payment certificate for PC13 in its defence.
  3. [42]
    The plaintiff will be granted leave to amend the ASOC in the terms of paragraph 12T of the FASOC.

The balance of amendments proposed under the FASOC

  1. [43]
    The balance of the amendments sought under the proposed FASOC do not appear to require the leave of the court, though some of the proposed amendments were criticised in different respects.[60] It is not the court’s role to settle pleadings, but it may fairly be observed that the amendments proposed in paragraphs 13, 20, 21, 23, 23A, 23B, 23C, 23D, 23E and 30 of the FASOC would appear to go some distance towards addressing the deficiencies in the pleading of the claims in the ASOC for recovery of security and retention moneys.

Amendments to the Claim

  1. [44]
    It was said on behalf of the plaintiff that the version of the FAC exhibited to the material contains some minor errors as to the marking up of the amendments, but that the amendments sought are accurately set out in the FASOC.[61]  Be that as it may, the relief sought will require revision in any event in light of these reasons.
  2. [45]
    The plaintiff will be granted leave to amend the AC in accordance with these reasons.

Outcome

  1. [46]
    It follows that the defendant is entitled to summary judgment on the debt and damages claims to the extent that those claims rely on a contractual right to payment and the plaintiff will be granted leave to amend the AC and the ASOC in the respects I have indicated.
  2. [47]
    The parties are directed to bring in minutes of order within 14 days to reflect these reasons.
  3. [48]
    As both parties have enjoyed partial success on the respective applications, it seems to me that the appropriate costs order will be that the costs incurred by each party with respect to the applications be its costs in the proceeding, but each party has leave to provide brief written submissions on this question within 14 days should either (or both) contend for the making of a different costs order.

Footnotes

[1]Fifth affidavit of Ryan Solomons filed on 10 July 2018, par 8 and ex RGS-4.

[2]Ibid, pars 10, 12, 14-17. And see first affidavit of Ryan Solomons filed on 10 November 2017, par 11 and ex RGS-6.

[3]Fifth affidavit of Ryan Solomons, par 13.

[4]Ibid.

[5]Affidavit of Gary Thompson filed on 20 April 2018, par 2.

[6]AC, 1; ASC, Pars 8-12, 26-28.

[7]AC, 5; ASC, Pars 29, 29A, 29B, 30(a) and 30(b).

[8]Fourth affidavit of Mr Solomons filed on 18 June 2018, exhibit RGS-1.

[9]By which it sought “judgment against the plaintiff on all of its claim”.

[10]Transcript, 1-61 – 1-62. The parts still pursued are those claims set out in pars 1, 3 and 4 of the AC.

[11]Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232, [3] citing Agar v Hyde (2000) 201 CLR 552, 575-576 [57].

[12]Chen v Australian & New Zealand Banking Group Ltd & Anor [2001] QSC 43, [1].

[13]Spencer v The Commonwealth (2010) 241 CLR 118, [22].

[14]See cl 44.4(b) and cl 44.11 A.

[15]The letter of termination is exhibit SRB-8 to the affidavit of Scott Robert Budd filed on 16 March 2018.

[16]Par 8.

[17]Affidavit of Mr Budd, par 22.

[18]FASOC, par 8A.

[19]FASOC, pars 2A and 12E.

[20]FASOC, par 2B.

[21]FASOC, par 12I.

[22]FASOC, par 12I.

[23]FASOC, par 12K.

[24]FASOC, par 12L.

[25]FASOC, par 12N.

[26]FASOC, par 12O.

[27]Fourth affidavit of Mr Solomons, par 4 and exhibits RGS-2 and RGS-3.

[28]Ibid, par 6.

[29]Exhibit SRB-3 to the affidavit of Mr Budd (pp 93-94).

[30]See McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, 476-477.

[31]See McLachlan v Nourse & Anor [1928] SASR 230, 233–234.

[32]Cf. cl 42.10, “This Clause shall survive the termination of the Contract”. See exhibit SRB-3 to the affidavit of Mr Budd (p 96). 

[33]See FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340, [179]-[191]; Qline Interiors Pty Ltd v Jezer Construction Group Pty Ltd [2009] 2 Qd R 566, [72]; Walton Construction (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd [2012] 2 Qd R 90, [38].

[34]Plaintiff's submissions on the defendant's summary judgement application, 40(a).

[35]Ibid, 40(b).

[36]Ibid, 44.

[37]Ibid, 45(a).

[38]Ibid, 45(b).

[39]Ibid, 45(c).

[40]Ibid, 45(d).

[41]See, for example, cl 42.10, discussed in footnote 32.

[42]Defence, 8(b) and 10(b).

[43]Plaintiff's submissions on the defendant's summary judgement application, 47.

[44]Ibid, 4(e), 54.

[45]As to which, see par [43].

[46][2006] QSC 191.

[47]Ibid, [8].

[48][2012] 1 Qd R 581.

[49]Ibid, [26]-[27].

[50]Rules of the Supreme Court, O 32 r 1(5).

[51][1998] QCA 372.

[52]Ibid, [8].

[53][2002] 1 Qd R 145.

[54]Ibid, [57].

[55][2018] QSC 258.

[56]Ibid, [18]-[26].

[57]Per Chesterman JA in Westpac Banking Corporation v Hughes, supra.

[58]The Department of Main Roads. See ASOC, par 1(b)(i).

[59]The plaintiff. See ASOC, par 1(a).

[60]See, for example, the discussion regarding the proposed amendments concerning security and retention and the decision of the High Court in Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (1978) 141 CLR 335 at T. 1-80, 81 and 84.

[61]Fourth affidavit of Mr Solomons, exhibit RGS-1 (p 23).

Close

Editorial Notes

  • Published Case Name:

    McDonald Keen Group Pty Ltd (in liq) v State of Queensland

  • Shortened Case Name:

    McDonald Keen Group Pty Ltd (in liq) v State of Queensland

  • MNC:

    [2019] QSC 94

  • Court:

    QSC

  • Judge(s):

    Burns J

  • Date:

    10 Apr 2019

Litigation History

Event Citation or File Date Notes
Primary Judgment [2019] QSC 94 10 Apr 2019 Defendants' application for summary judgment on part of its claim pursuant to r 293 of the Uniform Civil Procedure Rules 1999 (Qld) granted; plaintiff's application for leave to amend its statement of claim pursuant to r 375 and r 376(4) of the Uniform Civil Procedure Rules 1999 (Qld) granted in part: Burns J.
Primary Judgment [2019] QSC 172 16 Jul 2019 Form of order and costs (with directions as to a mediation): Burns J.

Appeal Status

No Status