Supreme Court New South Wales

• Medium Neutral Citation: RCR Resolve FM v Serco Australia [2014] NSWSC 1477
• Hearing dates: 24/10/2014
• Decision date: 24 October 2014
• Jurisdiction: Equity Division - Commercial List
• Before: McDougall J

Decision

Order that proceedings be transferred from the District Court to the Supreme Court and heard together with these proceedings.

• Catchwords: PROCEDURE - application seeking transfer of District Court Proceedings to Supreme Court - where two sets of proceedings in different courts - where two sets of proceedings deal with same factual and legal issue - where separate proceedings would mean that the same issue would be determined by different judges in different courts - whether transfer of proceedings is likely to delay hearing; PROCEDURE - application for consolidation of proceedings - where District Court proceedings on same factual issues transferred to Supreme Court - whether any benefit to reconstituting two sets of proceedings and repleading claims - whether sufficient to hear cases together with evidence in one to be evidence in both; PROCEDURE - costs - whether costs should follow the event - where respondent took the risk as to costs in opposing the motion - where warning given that costs would be sought if motion was opposed
• Cases Cited: A Goninan & Co v Atlas Steels [2003] NSWSC 956
• Category: Procedural and other rulings
• Parties: RCR Resolve FM Pty Ltd (Plaintiff); Serco Australia Pty Limited (Defendant)
• Representation: Counsel: TJ Breakspear (Plaintiff); A d'Arville (Defendant); R C Gration (Respondent); Solicitors: Allen & Overy (Plaintiff); Baker & McKenzie (Defendant)
• File Number(s): 2014/229168

Decision under appeal

• File Number(s): 2014/229168

Judgment (ex tempore - revised 24 october 2014)

1 HIS HONOUR: The plaintiff (Resolve) provided maintenance services for the defendant (Serco) at what are euphemistically known as "immigration facilities" around Australia. One of those facilities was the Villawood Immigration Detention Centre (Villawood). In respect of Villawood, Resolve subcontracted its maintenance obligations, or some of them (the full scope of work under the subcontract is a matter of dispute) to a company known as Broadlex Services Pty Ltd (Broadlex).

2 In this Court, Resolve sues Serco to recover what it says are amounts owing under the contract between them. One of those claims relates to additional services that Resolve said it supplied, because the "assets" at the various "facilities" where it provided services exceeded the number for which, on the proper construction of their contract, it was required to deal with. The amount claimed for that is, in round figures, $6.3 million.

3 In addition, Resolve says that it has issued some $1.4 million (again in round figures) of invoices that are due and payable but that have not been paid.

4 By way of defence to that claim, Serco raises a number of issues. One of those issues is that it claims to be entitled to "abate" amounts that otherwise may be owing to Resolve because its head contractor, the Commonwealth of Australia, has "abated" amounts owing to Serco. That is said to have happened because, between March and September 2012, Serco, and therefore Resolve, failed to meet "key performance indicators" in respect of the services provided at Villawood. The total amount claimed in respect of this asserted abatement is, in round figures, $266,000.

5 In the meantime, Broadlex commenced proceedings against Resolve in the District Court. It says in substance that it is entitled to be paid, in round figures, $265,000 for unpaid invoices for services rendered by it at Villawood pursuant to the subcontract between it and Resolve.

6 There is a substantial dispute between Broadlex and Resolve as to what constitutes the contract between them and what are the terms of that contract. There is nothing that I need to say about that aspect of the dispute at this time.

7 There are two specific allegations raised by Resolve that are of present relevance. One is that (so it says) it has overpaid substantial amounts of money to Broadlex for the services provided. The amount of that overpayment is said to be of the order of $886,000.

8 Another answer made by Resolve is that, if it is liable to Serco for the amount of the claimed abatement (or any part) it is entitled to recover that from Broadlex because to the extent that there were deficiencies in the work done at Villawood, responsibility for that should be attributed to Broadlex.

9 As between Broadlex and Resolve, Resolve relies on those matters both by way of defence and by way of cross-claim.

10 The matter arises by way of defence, so Resolve says, because it was a term of the contract (at least, on Resolve's analysis) that Broadlex was only entitled to be paid to the extent that it actually performed the required scope of services. Thus, to the extent that it did not do so, it is not entitled to be paid. In addition, to the extent that Broadlex has been overpaid, Resolve is entitled (it says) to recover the excess. The former aspect goes to the defence strictly so-called. The later is relevant both to the defence and to the cross-claim.

11 Again, Resolve says by way of defence that under the conditions of the contract between it and Broadlex it, is entitled to deduct, from any amount that otherwise it owes Broadlex, any amount that Broadlex owes it. Again, this is relevant both by way of defence (because it is said to be a direct contractual answer to the claim) and to the cross-claim.

12 In those circumstances, there is a common issue in the proceedings in this Court and in the proceedings in the District Court. That common issue is (as Serco puts it) whether Resolve failed to meet key performance indicators in respect of services at Villawood and, if it did, the extent to which Serco is entitled to backcharge Resolve, or set off against amounts otherwise owed to Resolve, the amount required to be "abated". Exactly that same issue arises in the District Court, because one of the aspects of the defence, as I have sought to point out, relates to the performance by Broadlex of services at Villawood, the alleged overcharging for them, and in addition the inappropriate performance of them, which, it is said, may give rise to the abatement.

13 In those circumstances, Resolve has moved by way of notice of motion filed on 15 October 2014 for an order that the District Court proceedings be transferred to this Court, and an order that they be consolidated with the proceedings in this Court.

14 Broadlex opposes the application for transfer (and, hence, the application for consolidation). Serco neither consents to nor opposes the application for transfer. However, it says, if the District Court proceedings are to be transferred into this Court, there should be no order for consolidation. Rather, Serco says, it would be sufficient if the two proceedings are heard together, with the usual order to that, subject to any proper objection, evidence in one be evidence in the other to the extent that it is relevant.

15 It appears to be common ground that if no order for transfer is made, a necessary consequence (assuming that both matters go to trial) will be that a judge of the District Court and a judge of this Court will each have to consider the question of the quality of services performed by Broadlex at Villawood, and the extent to which those services did or did not measure up to what was required by the contract between Broadlex and Resolve. That is a key issue in the District Court proceedings. It may be said to be less of a key issue in this Court, because that aspect of Serco's defence and cross-claim is relatively confined in monetary terms, having regard to the total amount of the claim and the amount attributable to the "abatement" defence. However, whether it is monetarily significant in terms of the overall dispute or not, it is a defence that has been raised (and that Serco on the face of things appears to be entitled to raise) and a defence that must be dealt with if the matter goes to trial.

16 Equally, as I have said, it is a matter that must be dealt with if the proceedings in the District Court go to trial.

17 It follows, as is correctly pointed out both in the evidence and in the submissions, that there would be two hearings in two courts by two judges on an identical factual and legal issue. Of course, neither hearing will be confined to that factual and legal issue. But the duality of hearings cannot be avoided.

18 Thus, there will be a duplication of costs. There will be a duplication in the use of administrative and judicial resources. And there may be, as has been pointed out, some other complexities (for example, in relation to documents produced on discovery or under subpoena, and the implied undertakings as to confidentiality in respect of documents so produced).

19 It was submitted for Broadlex that one way around the problem might be in effect to deal with the District Court proceedings in the absence of any abatement issue relating to Villawood, to raise that by way of cross-claim or amendment in these proceedings, but not to deal with that issue unless and until, in these proceedings, Serco establishes that it is entitled to the abatement. I do not see that as being a realistic way of dealing with the problem. That would seem to me to entail not just one but potentially three separate hearings. It would involve not just one but potentially three judicial officers dealing with at least a core of testimonial and documentary evidence that is common to each of those three hearings. It does not seem to me that it will do anything other than create confusion, increase complexity and multiply costs.

20 It is manifestly undesirable that the same issue (of fact or law or both) between the same parties should be considered by different judges in different courts. It leads to the risk of inconsistent verdicts. It raises the potential for estoppels to complicate one or other sets of proceedings. And it has the consequences, in terms of costs and other complexities and waste of resources, to which I have referred already.

21 I do accept that it is unfortunate for Broadlex that, having brought what was a relatively small and confined claim, it will (if the order for transfer is made) find itself caught up, in effect as a bit player, in far more substantial proceedings. But the same position would arise if Broadlex were joined as a defendant only, or perhaps as a cross-defendant, in these proceedings (on the assumption that there were no District Court proceedings to complicate matters). In other words, if in this hypothetical universe Resolve had paid everything that Broadlex claimed but then the issue of abatement arose, it is likely - I would have said inevitable - that Broadlex would be caught up in these proceedings in any event.

22 One of the submissions that was put is to the effect that the District Court proceedings are at a more advanced stage, and that it is likely that a hearing date will be obtained in the District Court before one could be obtained in this Court. I am not sure that this is necessarily correct. However, to the extent that it may be correct, there are two answers. One is that Broadlex has a claim for interest. If it succeeds, interest will to some extent compensate it for the delay. Although interest is not always a complete answer to a party kept out of its money, in the present case I do not think that the incremental delay (if there be any) will be of such magnitude that interest will not be a sufficient solatium.

23 Further, I think that there are procedural mechanisms that this Court can adopt to ameliorate the consequences of delay. One of the matters that I raised in argument, which I think may well prove to be of utility, is (on the assumption that the order for transfer is made) to adjourn the proceedings for a week or a fortnight, and to direct the parties to agree on directions necessary to get the matter ready for trial. The Court could be asked to appoint a hearing date taking account of that timetable, and thereafter progress could be monitored at directions hearings so that any slippage can be accommodated and, if necessary, the hearing date adjusted. Experience teaches that often, in proceedings that are not particularly complex (and I do not think that these proceedings are), that is an effective way of sharpening parties' attention on preparation for trial.

24 Another problem, from the perspective of Broadlex, is that it is likely to be involved in a more expensive hearing. If however it succeeds, it will recover an order for its costs. If it does not succeed, then a fortiori the problem is of its own making. And in any event, as I have said, exactly the same position would apply had there been no separate dispute as to unpaid invoices between Broadlex and Resolve, and Broadlex were joined as a defendant in these proceedings once the abatement issue surfaced.

25 For those reasons, it seems to me that it is appropriate to transfer the District Court proceedings into this Court.

26 I turn to the application for consolidation. The submissions for Resolve focussed on the procedural benefits that, it was said, would follow if the proceedings were consolidated so that there were one plaintiff, one defendant and one cross-defendant. Reference was made to the judgment of Austin J in A Goninan & Co v Atlas Steels [2003] NSWSC 956.

27 However, it is only necessary to look at what his Honour said as to the issues at [1], and to the identification of the five separate sets of proceedings at [2], to realise why the remedy of consolidation appealed, for the reasons that his Honour briefly outlined at [3] to [5].

28 The present case is far removed. I do not think that the particular facts leading to the exercise of the discretion in the way that Austin J did are even remotely close to the particular facts with which I am concerned. Accordingly (and this was the case too with many of the decisions relied on by Broadlex), I see nothing in the Courts' applications of the discretion in the various cases as offering any significant guidance in the present case.

29 It does not seem to me that there would be any benefit to anyone in reconstituting the two sets of proceedings into one, and repleading all the claims. Simplicity, as much as the just, quick and cheap identification and resolution of the real issues in dispute, seems to me to require no more than that the two sets of proceedings be managed together, be heard together, and be heard together on the basis that evidence in one be evidence in both.

30 For those reasons I make the following orders:

1. Order that District Court proceedings 2014/69596 be transferred to this Court and entered into the Commercial List.

2. Order that the transferred proceedings be managed and heard together with these proceedings on the basis that, subject to any proper exception, evidence in one be evidence in both.

[Counsel addressed.]

31 The question of costs has been argued. Resolve seeks its costs of the motion as against Broadlex, but only of today. That limitation reflects the recognition that the notice of motion and affidavit had to be filed in any event, even if, ultimately, the orders were made by consent.

32 Broadlex opposes the order. It suggests that costs should be costs in the proceedings as between it and Resolve.

33 For reasons I do not quite follow, Serco, which had advised yesterday that it neither consented to nor opposed the relief sought, but chose to turn up at the hearing, today, now seeks some order for its costs.

34 As between Resolve and Broadlex, the position was made clear by the notice of motion. Prayer 3 sought an order for costs if the application were opposed. It seems to me that Broadlex took the risk, in terms of costs, of opposing the motion. The relevant event is that, with the presently immaterial exception of consolidation, the motion succeeded. The relevant outcome was that Resolve was at least substantially successful. Particularly bearing in mind both the warning given by the motion and the proper limitation that Resolve accepts should be made, costs should follow the event as between Resolve and Broadlex.

35 As between Resolve and Serco, it is correct to say that Serco today contended for hearing together rather than consolidation, and that this is the result to which the court came. However, that had not been raised as an issue apparently until the hearing of the motion commenced.

36 The parties are agreed, in terms of directions, that I should vacate the date presently fixed and allocate an earlier date.

37 I make the following further orders:

1. Order Broadlex Services Pty Ltd, the respondent named to the plaintiff's notice of motion filed on 15 October 2014, to pay the plaintiff's cost of that notice of motion limited to the costs of the hearing today.

2. Make no order as to costs of that notice of motion as between the plaintiff and the defendant.

3. Vacate the listing for directions on 14 November 2014 and instead list the matter for directions on 7 November 2014.

4. Direct the parties to confer in good faith in an attempt to resolve, prior to 14 November, the appropriate directions to be given on that date.

5. Note that if the Court considers it appropriate, the parties may make application for a provisional hearing date to be allocated when the matter is listed on 7 November 2014.

6. Direct that the exhibits on the hearing of the notice of motion be handed out.

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Decision last updated: 29 October 2014