G&S Engineering Services Pty Ltd v MACH Energy Australia Pty Ltd (No 12) [2024] NSWSC 552 (10 May 2024)

Last Updated: 10 May 2024

Supreme Court New South Wales

Case Name:	G&S Engineering Services Pty Ltd v MACH Energy Australia Pty Ltd (No 12)
Medium Neutral Citation:	[2024] NSWSC 552
Hearing Date(s):	8 May 2024
Decision Date:	10 May 2024
Jurisdiction:	Equity - Technology and Construction List
Before:	Stevenson J
Decision:	Defendants/Cross-Claimants given leave to file and serve Fourth Further Amended Cross-Claim List Statement; parties to confer and agree on proposed revised directions needed to ready matter for trial
Catchwords:	CIVIL PROCEDURE – pleadings – amendment – late application for amendment – where cross-claimants allege that but for cross-defendants’ alleged misleading or deceptive conduct it would have engaged alternative contractor to construct coal handling plant in accordance with number of counter factual circumstances – where cross-defendants’ experts identified factual operational matters that would allegedly also occur in the counterfactual circumstances – where cross-defendants amended their Cross-Claim Response to reflect these matters – where cross-claimants seek to amend Cross-Claim List Statement to meet that claim – where cross-claimants’ current case might fail absent such amendment – where trial date imminent – whether directions can be made to ensure cross-defendants not prejudiced
Legislation Cited:	Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law
Cases Cited:	G&S Engineering Services Pty Ltd v MACH Energy Australia Pty Ltd (No 6) [2022] NSWSC 628
Category:	Procedural rulings
Parties:	G&S Engineering Services Pty Ltd (First Plaintiff/First Cross-Defendant) DRA Pacific Pty Ltd (Second Plaintiff/Second Cross-Defendant) DRA Group Holdings (Pty) Ltd (Third Cross-Defendant) DRA Global Limited (Fourth Cross-Defendant) MACH Energy Australia Pty Ltd (First Defendant/First Cross-Claimant) MACH Mount Pleasant Operations Pty Ltd (Second Defendant/Second Cross-Claimant) J.C.D. Australia Pty Ltd (Third Defendant/Third Cross-Claimant)
Representation:	Counsel: M Lyons / D Johnson (Plaintiffs/Cross-Defendants/Respondents) N Kidd SC / M Doyle (Defendants/Cross-Claimants/Applicants) Solicitors: HFW Australia (Plaintiffs/Cross-Defendants/Respondents) Corrs Chambers Westgarth (Defendants/Cross-Claimants/Applicants)
File Number(s):	2019/71358

JUDGMENT

1. The background to this matter is set out in the earlier judgments of the Court, including my judgment of 17 May 2022.^[1]
2. This is the Court’s 12th and my 10th interlocutory judgment in the proceedings.
3. On 23 June 2023, I set these proceedings down for hearing before me for eight weeks commencing on 19 August 2024.
4. The proceedings relate to a contract made in March 2017 (the “Contract”), pursuant to which the defendants/cross-claimants (“MACH”) contracted with the plaintiffs/cross-defendants (“CDJV”) to design, construct, and commission a coal handling and processing plant and train load-out facility (the “Plant”) at Mount Pleasant in the Hunter Valley.
5. I am now dealing with an application by MACH, made by Notice of Motion filed on 29 April 2024, although foreshadowed at an earlier directions hearing on 15 April 2024, seeking leave to file and serve a Fourth Further Amended Cross-Claim List Statement, which would introduce an alternative case. MACH contends that this alternative case is responsive to expert evidence served last year by CDJV and to an amendment made in November 2023 by CDJV to its Cross-Claim Response.
6. I have decided to grant MACH such leave. This will necessarily result in significant adjustments to the current directions in relation to the forthcoming hearing.
7. During construction of the Plant, disputes arose between MACH and CDJV. Those disputes were resolved by entry into a Settlement and Variation Agreement on 20 April 2018. Amongst other things, the Settlement and Variation Agreement compromised various claims made by CDJV against MACH, provided for payment of further monies to CDJV, and amended the Dates for Practical Completion under the Contract such that the Plant was to reach Practical Completion by 20 December 2018.
8. Delays ensued and MACH replaced CDJV with an alternative contractor to complete the construction of the Plant. The Plant ultimately achieved Practical Completion in November 2019.
9. In these proceedings, CDJV claims some $15 million from MACH for various entitlements under the Contract.
10. MACH contends that it was induced to enter into the Settlement and Variation Agreement by representations, said to be misleading or deceptive for the purpose of s 18 of the Australian Consumer Law.^[2]
11. MACH’s case, as currently articulated in its Third Further Amended Cross-Claim List Statement, is that but for CDJV’s alleged misleading or deceptive conduct:

(a) it would not have entered the Settlement and Variation Agreement;

(b) in one of four alternative counterfactual circumstances it would have engaged an alternative contractor to complete some or alternatively all of the work necessary to design and construct the Plant;

(c) this would have caused Practical Completion to occur earlier than the actual date of November 2019;

(d) the Plant would then have been complete and capable of producing coal product to the maximum designed output specified in the Contract; and

(e) it has suffered loss ranging from $675 million to $698 million (depending on which counterfactual is adopted).^[3]

12. It can thus be seen that CDJV’s claim, as significant as it is, is dwarfed by MACH’s cross-claim.
13. Until the events to which I refer below occurred, CDJV’s response to MACH’s claim included that:

(a) the Plant was only capable of producing the maximum designed output specified in the Contract if particular outputs referrable to identified Separable Portions of the Plant were achieved not only from Practical Completion, but also from Functional Completion; and

(b) Functional Completion for each Separable Portion could only occur after successful Performance Testing of each Separable Portion, which would take approximately three months to complete from the date of Practical Completion.^[4]

14. An issue thus was whether the Plant was capable of producing these outputs from Practical Completion, as MACH contends, or from Functional Completion, likely to be three months later, as CDJV contended.
15. In April and May 2023, in support of this case, MACH served reports from its coal processing expert, Mr Rodney Lamb, its mine planning expert, Mr Ian Alexander, and its financial accounting expert, Mr Greg Meredith.
16. Between September and November 2023, CDJV served responsive reports from its coal processing expert, Mr Darren Mathewson, its mine planning expert, Mr Adriaan Benson, and its financial accounting expert, Mr Brian Wood.
17. Mr Mathewson opined that MACH would not have been able to produce coal product in the quantities and at the times set out in Mr Lamb’s and Mr Alexander’s reports because of various issues affecting the available capacity and feed rate of the Plant. Mr Mathewson opined that these matters affected the actual operation of the Plant operation, and would also have affected the Plant’s operation in the counterfactual circumstances the subject of MACH’s claim. Similarly, Mr Benson opined that mining operations would not have been carried out in accordance with MACH’s counterfactual mining plan, as the rate of mining was in fact restricted by various matters which would also affect the rate of mining in the counterfactual circumstances the subject of MACH’s claim.
18. On 15 November 2023, CDJV amended their Cross-Claim Response to incorporate these matters, and to abandon the matters set out at [13].
19. As Mr Lyons, who appeared with Mr Johnson for CDJV, submitted:

“Mr Mathewson’s report and the amended List Response did not advance a positive case as to how the [Plant] would in fact operate in the counterfactuals. Rather, the case pleaded by [CDJV] and expert evidence in support is destructive of the [Plant] performance hypothesis pleaded by [MACH].” (Emphasis in original.)

20. In March 2024, MACH served responsive reports from each of Mr Lamb, Mr Alexander, and Mr Meredith.
21. The combined effect of these reports is said by MACH to develop modelling of coal production and processing and loss cash flows taking into account the impact of the matters said by CDJV’s experts to reflect the actual production at the Plant, and which matters CDJV contends would also affect its hypothetical production in the various counterfactual circumstances posited by MACH.
22. The amendments that MACH seeks to make to its Cross-Claim List Statement seek to give effect to these opinions. In substance, by the proposed amendments, MACH seeks to contend that if the issues identified by CDJV’s experts as affecting actual coal production at the Plant would also have affected coal production in the counterfactual circumstances, it would nonetheless have suffered loss ranging from $263 million to $319 million; again, depending on what counterfactual scenario is adopted.
23. Mr Kidd SC, who appeared with Mr Doyle for MACH accepted that its proposed amended case is a true alternative to MACH’s presently pleaded case, and that the alternative cases are inconsistent with each other.
24. Mr Kidd also accepted that, as matters are presently pleaded, were CDJV to establish the case propounded by its experts and since incorporated into its Cross-Claim Response last November, MACH’s cross-claim would fail.
25. Thus, Mr Kidd and I had this exchange:

“HIS HONOUR: Just so I am clear, so you accept that MACH would fail ... on its presently pleaded case, if what I call the Mathewson thesis is accepted.

KIDD: I think that seems to be the likely outcome.”

26. Mr Lyons submitted that MACH had not offered an adequate explanation for its application, at this late stage, to amend its Cross-Claim List Statement in the manner I have described.
27. In my opinion, what I have set out above provides an adequate explanation for MACH’s application to amend. Mr Lyons accepted that, whatever else may be said about the effect of the amendments by CDJV to its Cross-Claim Response in November 2023, those amendments did introduce, for the first time, a contention that various aspects of production at the Plant which actually occurred would also affect the hypothetical production from the Plant in the counterfactuals for which MACH contends. It is obvious why MACH seeks to respond as it has.
28. Mr Lyons also submitted that the proposed amended case is, in any event, bound to fail. This submission, put very briefly by Mr Lyons in writing and orally, focussed on the manner in which Mr Lamb’s and Mr Alexander’s reply reports responded to the matters identified in Mr Mathewson’s and Mr Benson’s reports concerning the Plant’s operation in the actual, and in MACH’s counterfactual, circumstances.
29. These are not matters that I consider I should investigate in the context of this application. They would involve detailed consideration of the expert reports far beyond the scope of a pleading amendment application and are matters that must be left for the trial.
30. I see the real question before me as being one of case management, the question being whether, at this very late stage, MACH’s proposed amended case can be accommodated in a way that allows CDJV a fair opportunity to respond to it.
31. In that regard, in their submissions in chief, Mr Kidd and Mr Doyle proposed a series of detailed directions for the service of responsive reports from CDJV’s expert witnesses, Messrs Mathewson, Benson and Wood, and for the engagement of conclaves between those experts and MACH’s experts, Messrs Lamb, Alexander and Meredith.
32. At my suggestion, the parties prepared a Redfern Schedule setting out the detailed directions suggested by MACH with responses from CDJV and a rejoinder from MACH. I am very grateful to the parties for the alacrity with which they produced that document.
33. What emerges is that Messrs Mathewson and Benson can produce responsive reports in time for them to conclave with Messrs Lamb and Alexander and to produce a joint report prior to the hearing.
34. Mr Wood is unable to produce a responsive report until mid-August 2024, with the result that it will not be possible for him to conclave with and produce a joint report with Mr Meredith until several weeks after the trial commences on 19 August 2024.
35. However, as Mr Kidd submitted, the matters that will be the subject of Messrs Wood’s and Meredith’s evidence, namely matters of quantification, would typically be dealt with near the conclusion of the evidence. It should not be difficult for opening submissions, and the matter generally, to proceed reserving such matters for later consideration. Nor should there be any insurmountable difficulty with the lay evidence proceeding before the outcome of Messrs Wood’s and Meredith’s conclave is known. I am told there will be 44 lay witnesses called, including witnesses dealing with CDJV’s claim under the Contract and MACH’s misleading or deceptive conduct case. Accepting that it may be that not all those witnesses will be required for cross-examination, it will take many hearing days to deal with those witnesses. Further, although neither party is now able to identify any lay witness who might need to be recalled for further cross-examination once the Wood/Meredith conclave has concluded and their joint report is to hand, there is agreement in principle that, if necessary, this could be done.
36. Following production of the Redfern Schedule to which I have referred, I circulated a proposed future timetable, which is set out in substance below:

Coal processing experts

(1) By 5 June 2024, the Plaintiffs/Cross-Defendants will serve on the Defendants/Cross-Claimants any rejoinder expert report of Mr Darren Mathewson.

(2) By 5 July 2024, Mr Rodney Lamb and Mr Darren Mathewson are to confer and produce a joint expert report.

Mine planning experts

(1) By 7 June 2024, the Plaintiffs/Cross-Defendants will serve on the Defendants/Cross-Claimants any rejoinder expert report of Mr Adriaan Benson’s report.

(2) By 5 July 2024, Mr Ian Alexander and Mr Adriaan Benson are to confer and produce a joint expert report.

Financial accounting experts

(1) By 16 August 2024, the Plaintiffs/Cross-Defendants will serve on the Defendants/Cross-Claimants any rejoinder expert report of Mr Brian Wood.

(2) By 13 September 2024, Mr Greg Meredith and Mr Brian Wood are to confer and produce a joint expert report.

Further orders

(1) By 2 August 2024, the parties are to:

(a) file and serve written opening submissions; and

(b) file and deliver a Court Book which includes witness statements and experts statements, but not annexures and exhibits to those statements.

(2) By 9 August, the parties are to:

(a) file and deliver a Court Book which includes all other documents to be relied on at hearing, including exhibits and annexures to witness statements;

(b) file a joint statement of objections to lay witnesses; and

(c) provide a trial plan.

(3) By 23 August, the parties are to file a joint statement of objections to expert witnesses.

(4) Order that both parties be free to confer with their experts, other than in relation to their joint reports, but including as to the agenda for any conclave.

(5) Order that both parties have liberty to seek orders requiring the other to recall, for further cross-examination, any witness whose evidence has otherwise been concluded prior to the circulation of the joint expert report of Mr Greg Meredith and Mr Brian Wood.

37. Subject to hearing from the parties as to matters of detail, I propose to make orders granting MACH leave to amend its Cross-Claim List Statement as proposed, and to make directions to this effect. The directions should also make provision for filing and service by CDJV of an amended cross-claim response to the Amended Cross-Claim List Statement.
38. The parties should now confer and agree on the orders needed to give effect to these reasons.

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^[1] G&S Engineering Services Pty Ltd v MACH Energy Australia Pty Ltd (No 6) [2022] NSWSC 628.
^[2] Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law.
^[3] By its proposed Fourth Further Amended Cross-Claim, MACH contends that it has in fact suffered loss ranging from $718 million to $743 million.
^[4] See [C10(b)-(c)] and [C68(c)(ii)] of CDJV’s then Third Further Amended Cross-Claim Response.