Poonindie Pty Ltd trading as Ted Wilson and Sons (TWS) v Eurobodalla Shire Council

The Plaintiff, to which I shall refer as “TWS”, entered into a contract with the First Defendant (the “Council”) for the construction of works at Bodalla Sewage Treatment Plant (the “Contract”): CB 1-93. The Contract is in the form of a Government Works Contract (GC21 Ed 2) dated 10 January 2017.

The Contract contains provisions dealing with expert determination of disputes: see CB 43-45, 76-77.

On 20 March 2018, a letter of instruction (CB 143-162) was sent to Mr Neil Turner, an engineer, appointing him as the expert (the “Expert”) pursuant to the Contract to determine the following disputes arising out of the Contract:

On 20 July 2018, Mr Turner provided his determination (the “Expert Determination”): CB 475-520. He answered the questions posed favourably to the Council in respect of the Road Issue and Liners Issue, and adversely to the Council in respect of the Flanges Issue and Pump Issue.

TWS brought proceedings in the Technology and Construction List of this Division seeking declarations in relation to the validity of Mr Turner’s Expert Determination, and as to the issues relevant to the Roads Issue. The Council is the First Defendant and opposes the relief sought. Mr Turner is the Second Defendant and, as is common in these situations, he has filed a submitting appearance.

An order was made by Ball J for Separate Questions to be determined on the basis of the Statement of Agreed Facts and Documents.

The questions posed for separate determination are:

TWS contends that the Expert had no jurisdiction or authority from the Contract to determine the Liners Issue (or the Pump and Flanges Issues) by reason of the terms of cls 69-71 in conjunction with the Expert Determination Procedure (the “EDP”) referred to in cl 71, which is annexed as sch 5 to the Contract.

Clauses 68, 69.3 and 70 make it clear that the dispute resolution procedure set out in cls 69 and 70 must be followed before an “Issue” (an “Issue”) can be referred for Expert Determination. Clause 71 is in the following terms:

The EDP (sch 5 of the Contract) is in the following terms:

“Issue” is defined in cl 79 (CB 51) as: “Any issue, dispute or difference raised by either party under clause 69”.

Also of some relevance is cl 63, which deals with set off:

TWS maintains that cross claims that are not connected with the subject matter of the Issue advanced by the moving party, and that have not been through the procedure specified in cl 69, cannot be advanced before the Expert and that, by reason of cl 71.6, the Expert had no jurisdiction to deal with the additional disputes.

The Council’s principal response to that contention is that it attempts to read into the Contract restrictions that are not found in it and which are inconsistent with what is there. Mr Robertson’s case is neatly summarised by him as: “‘any’ in cl 71.6 means ‘any’.” The Council’s alternative argument is that if, contrary to its principal argument, there are restrictions of the type advanced by TWS, the parties reached agreement on 20 March 2018 through an exchange of emails that the three additional disputes would be referred to Mr Turner as part of the one determination. The emails are short and I shall set out the substance of them. The first from Mr Verma representing the Council to Mr Mark Wilson, the Senior Executive of TWS, sent on 17 March 2018 (CB 135), is in the following terms:

Mr Wilson’s response of 20 March 2018 (CB 140) is in the following terms:

On 20 March 2018 the Council sent a letter of engagement to Mr Turner: see CB 143-162.

TWS disputes that the exchange of emails between the Council and TWS (between 17 and 20 March 2018 - “the March Exchange”) gave rise to a binding agreement. A number of matters relevant to that issue are agitated in the submissions of both Mr Robertson and Mr Neggo.

I shall endeavour to summarise Mr Neggo’s contentions in relation to Question 1:

I should note that in relation to [18](1) and (5) above, Mr Robertson offered no challenge to the principles enunciated.

In relation to Electricity Generation (supra), the majority (French CJ, Hayne, Crennan and Kiefel JJ) at [35] reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract:

It should also be noted that, as the Expert came to deal with the issues, he approached the matter on the basis that TWS was the proponent or claimant on the Road Issue (i.e. it was the Issue within the meaning of cls 69-71 of the Contract) and that the additional disputes were cross claims ventilated by the Council. The letter of engagement (CB 143-145) did not frame the questions in that way but, rather, referred to them as the four “Issues”. At one point during oral argument Mr Neggo sought to raise as a further contention that the additional disputes were not correctly characterised as cross claims but were really Issues advanced by the Council. However, he expressly abandoned his attempt to introduce this as a further issue at the hearing (see T17.18-20) and I proceed upon the basis that the Liners, Pump and Flanges Issues were correctly treated by the Expert as cross claims brought by the Council.

Mr Robertson’s arguments can be summarised thus:

I accept Mr Robertson’s submissions in relation to the construction of the Contract. There is no reason to restrict the words in cl 71.6 by words that are not found in it (Miwa supra), and see also Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5; Smith v Cooke [1891] AC 297 at 299 per Lord Halsbury LC; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310, 313-314 per Kirby P. The technical words should be given their normal technical meaning: Brett v Barr Smith (supra). It has been accepted for a very long time that a cross claim does not have to bear any relationship to the claims put forward by the plaintiff or applicant: see Gray v Webb (1882) 21 Ch D 802; and see Civil Procedure Act 2005 (NSW) s 22 and Supreme Court Act 1970 (NSW) s 78 (since repealed). There is no reason not to treat the parties as importing into their agreement the usual technical (legal) meaning of “cross claim”. The width of the phrase “cross claim” gains further support from the very wide definition of “set off” in cl 63, since it permits set off of amounts due even under other contracts, i.e. there is no requirement that the set off have any relationship with the Issue.

Whilst it is clear that the Contract requires that the processes set out for an Issue must be followed, it does not seem unlikely or odd that the parties would accept that once an Issue is to go to an expert for determination (i.e. the threshold for a form of litigation has been passed) that the other party (i.e. the party defending the claim) should be free to raise whatever claim or dispute it wishes to raise. I accept that parties to a contract might agree upon a different regime but there is nothing inherently problematic about them adopting the approach for which the Council contends, particularly since that is what is permitted in our Court system.

Mr Robertson claimed that there was an elasticity in Mr Neggo’s submissions concerning the supposed content of the phrase “cross claim” in cl 71.6. In para 30 of his written submissions, Mr Neggo described a valid cross claim as one with a “factual legal overlap”. In oral submissions Mr Neggo said (at T26.3-5):

It seemed to follow on Mr Neggo’s case that there would be almost no work for the words “cross claim” to do at all (see T6.40-43 and T25.50 – T26.7), although he appeared to resile from that at T53.23-28.

It will be observed that the EDP does not set out any specific procedure for how cross claims are to be determined, save insofar as they respond to an Issue, but cl 71.8 clearly envisages that “matters” will be determined by the Expert and some meaning has to be given to the right of the recipient of a claim to raise cross claims as well as set off and defence, and I agree that it would be most impracticable if the Expert could not award the cross claimant appropriate relief where it raises an issue.

TWS claims that to permit the other party to raise all sorts of issues unconnected with the dispute that it seeks to have determined is likely to cause procedural unfairness. The Expert can extend the time for a response by the claimant, so if there were to be multiple issues leading to the need for greater time on the part of the claimant, then that could be accommodated. Incidentally, whilst this is not pertinent to the construction issue, there is no suggestion in this particular case that the claimant was not fully appraised of the additional disputes that the Council wanted to ventilate - it was the subject of the email from Council to TWS and TWS’ email of 19 March 2018 detailing responses on those disputes: see CB 136-139.

It follows that the Expert was entitled to deal with the additional disputes by reason of the terms of the Contract, and the Expert Determination is not therefore void.

Before considering the Council’s alternative argument, I need to explain a feature of this case that produces a rather surprising consequence identified by Mr Robertson at T41-43 and T44.25, namely that determination of the Separate Questions has no present utility. TWS and the Council are agreed that, notwithstanding the contractual restrictions on disputes progressing to the Court in respect of matters the subject of expert determination (see cl 71.8), those restrictions do not apply here. Thus, the Council accepts that TWS is not precluded from advancing its claims in respect of the Road Issue and the Liners Issue, even if the Expert’s Determination was valid. The Council is precluded from challenging the findings adverse to it on the Flange and Pump Issues because it did not commence litigation within the 56 days specified in cl 71.9. Nor is TWS precluded from challenging the validity of the Council’s termination of the Contract. The assertion by TWS that the Expert Determination is invalid undermines the two results favourable to TWS and is not required for TWS to progress to a Court hearing on the two issues on which it failed.

I asked Mr Neggo why there was any need to determine whether the Expert Determination was void, since if it was not void then TWS has succeeded on two of the Issues and is not precluded from now litigating the Liner Issue (and Road Issue), and it would only be if the Council wished to contest the Flange and Pump conclusions that those would need to be re-ventilated, but if the determination on the three additional disputes was held void then they would all need to be the subject of a new expert determination. The only explanation of any substance related to past uncertainty as to whether the Council would agree that both matters on which TWS was unsuccessful could be heard in this Court: see T56-58, T59.25 – T60.37, T62.39, T63.49, T66.10-11 and T68.2-5. Mr Robertson confirmed that the Council did not contend otherwise: T44.13-26, T60.1-12 and T66.15.

I am conscious of the desirability of the Court determining all matters in issue between the parties, but having regard to my conclusion in respect of the terms of the Contract and the absence of practical utility of this separate determination, I shall endeavour to express my views on the Council’s alternative argument briefly.

In my view, the March Exchange evidences an agreement between two commercial parties that the Expert could determine the Road Issue and the additional disputes in the one hearing. I think that the context provides sufficient evidence of an intention to create a binding contract, since not only were emails exchanged on a matter of importance but this was at a time where, to Mr Wilson’s knowledge, the Council was in the process of retaining and instructing the Expert. I do not accept that, by making reference to a letter yet to be sent to the Council by someone else in the TWS organisation, the Senior Executive for TWS (Mr Mark Wilson) was qualifying or limiting TWS’ agreement as expressed in his email of 20 March 2019. The only portion of that letter which could constitute a qualification is cl 15 (CB 137), but it is opaque to say the least and I think it is insufficient to undermine the consensus reflected in the exchange of emails between 17 and 20 March 2019.

This leaves the question of certainty or completeness. TWS’ argument is that the March Exchange between Mr Verma and Mr Wilson left open important matters and could not be viewed as complete.

Correspondence soon after the acceptance by TWS on 20 March 2018 highlights that the question of how the additional disputes were to be dealt with at the Determination had not been agreed. I have earlier referred to the fact that the letter of engagement referred to all disputes as “the four Issues”. The lack of agreement on the question as to how the additional disputes were to be characterised (i.e. as Issues or cross claims) is demonstrated by Mr Verma’s email (CB 168) in which he said: “We must agree that TWS would be the Claimant for all the four Issues …”, and the correspondence at CB171 – 173. However, the attack on the Expert Determination is not on the procedure followed but the asserted lack of jurisdiction. What was agreed by the March Exchange was that the Expert could be engaged to determine the additional disputes in the one determination together with the Road Issue. The procedure to be adopted was a matter that could be either covered by the EDP, by fresh agreement or, in the absence of such, determined by the Expert: see Fletcher Construction Australia Ltd v MPN Group Pty Ltd (Unreported, NSWSC, Rolfe J, 14 July 1997) at 20-23.

It follows that even if the Contract did not provide for a determination on the additional disputes there was, by the March Exchange, a later agreement by the parties to the same effect.

In view of my conclusions, the answer to:

The answer to Question 3 is that prayer 1 of the Summons should be dismissed. The Defendant sought an order that the Plaintiff pay the Defendant’s costs of the Separate Questions if the Defendant was successful in resisting the Plaintiff’s contentions. Mr Neggo did not resist that contention. The Plaintiff, having failed on the Separate Questions, should pay the Defendant’s costs of this hearing.