163 Clarence Street P/L v New world Oil & Developments P/L
[1994] FCA 1075
•25 Nov 1994
| JUDGMENT No. .... !.%L/ | ..?.k.. |
IN THE FEDERAL COURT OF AUSTRALIA )
| NEW SOUTH WALES DISTRICT REGISTRY ) | No. NG 249 of 1993 |
| GENERAL DIVISION | 1 |
| Between: | 163 CLARENCE STREET PTY LIMITED ACN 001 042 262 |
Applicant
| And : | NEW WORLD OIL h DEVELOPMENTS |
| PTY LIMITED ACN 008 979 422 |
First Respondent/
Cross Applicant
JAMINO PTY LIMITED
| RECEIVED | ACN 002 704 047 |
| 2 2 MAR 1995 | Cross Applicant |
| Second Respondent/ |
AUSTRALIA PRINCIPAL REOlSTRY
| And : | OPTIMUS PTY LIMITED |
| ACN 0001 847 785 | |
| --- |
Cross Respondent
REASONS FOR JUDGMENT
| EINFELD a | SYDNEY | 25 NOVEMBER 1994 |
In this case the applicant, a service company for a firm of solicitors, has sued the respondents under the Trade Practices Act (the Act) in respect of the installation of an airconditioning system (the system) in a city building (the
| _ . | building) containing the offices in which the firm has conducted its professional practice (the offices) since April 1990. The first and second respondents are the owners and lessors of the building. The action was commenced by application and statement of claim dated 27 April 1993 claiming that the applicant was |
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induced to enter a lease of the offices by representations
concerning the superior quality and characteristics of the system. The claim apparently is that the system does not function properly so as to keep the offices, and the members, employees and clients of the firm in appropriate climatic
comfort .
Although the applicant's claim was virtually ready for hearing at the time and was said to have a degree of urgency, in a reserved judgment given on 31 May 1994 I allowed the filing of a cross claim by the respondents against the cross respondent (Optimus) and its joinder in this action. Optimus was the designer, builder and installer of the system against whom the assertion is made by the respondents that the system was negligently designed, constructed and installed, and is thereby, in many specific respects, unsuitable for its ostensible purpose. Optimus is also said to have breached its contract with the respondents and section 52 of the Act.
| While critical of the respondents' delay in propoundingthe cross claim so late, I held in the judgment of 31 May 1994 permitting joinder that there appeared to be a likelihood of a major factual and evidentiary overlap between the claim and the cross claim and that the risk of inconsistent findings was sufficiently high to | - | _ |
| require a joint hearing. I was influenced at that time by the prospect, if there were separate hearings, of certain witnesses having to give evidence twice and of the Court having to make available two lots of significant hearing times. I discounted |
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any prejudice to the applicants on the basis that the court's clogged lists at the time would in any event have prevented a hearing much before the cross claim could be made ready for hearing, and that I could at that time expedite the hearing if appropriate.
On 5 September 1994 Optimus moved to have the whole case cross vested to the Supreme Court. In a judgment given that day, I dismissed the motion but in the light of the evidence filed in the matter to date and the projected course of the remaining preparation, including the gross default of Optimus in complying with the Court's directions for the preparation of the cross claim for hearing and the stated possibility of Optimus joining yet further parties, I re-opened the question of a separate hearing of the cross claim and invited submissions. What had also happened since 31 May was that the evidence filed by the respondents in the cross claim had clearly demonstrated, in a way that could previously onlybe guessed at, the distinction between the claim and the cross claim in terms of the subject matter of the dispute. Whereas the claim concerns whether and what repre,sentations were made by the respondents to the applicant concerning the system, and whether and what misleading and deceptive conduct occurred, most of which will be evidenced by lay witnesses, the cross claim is a common law "building case" involving a host of expert technical evidence about airconditioning systems and the influence on their function of building type and fit out.
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Not surprisingly the respondents rely upon the earlier judgment to oppose separation. They again refer, as they did earlier, to the risk of inconsistent findings. The argument is that the system could be held to be defective in one case but not the other, there being available no issue estoppel against Optimus if it was not a full participant in the principal hearing. They again say that many facts would need to be given twice. More unusual is the respondents' suggestion that Optimus could be compelled to provide evidence in the applicant's claim which could be used against it in the cross claim. The respondents say that these and other injustices far outweigh any prejudice to the applicant. They discount the extra wait for the hearing from t h e n own delay in launching the cross claim by pointing to the applicant's own delays in complying with court-directed timetables. They even assert that the possibility of settlement would be adversely affected by the absence of Optimus.
It must at once be admitted that on their face these are reasonable arguments against separation. On the other hand, there appears to be a strong element of almost in terrorem theory about these propositions in fact, as an analysis of the pleadings and the intended evidence shows. The applicant's statement of claim is divided into what it calls two distinct "causes of action" under the Act. They are in fact two sets of representations each of which is alleged to amount to misleading and deceptive conduct by or on behalf of the respondents calculated to induce the applicant to enter into the lease. The
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first set, contained in the respondents' advertising brochure for
the building, has two elements, viz. that
1. (a) the system was "high-tech" (surely "hi-tech"?)
(b) the office tower was "state of the art"
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sustaining the latest office technology
2. the building, the offices and the system
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The applicant says that it entered the lease in reliance on these representations.
The second "cause of action" alleges that in a report on the system prepared by a company called TWA Consultants Pty Ltd in about' September 1989 received by the respondents about a year later, it was revealed that the system had "significant shortcomings for a major office user in the legal profession, in terms both of initial loadings for this application and for the ability to meet load growth in the future". The report is also said to have revealed that the building was not an "intelligent" office building as represented. The respondents' failure to disclose to the applicant the report or the facts and findings
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contained in it is said to represent misleading and deceptive conduct under the Act. In substance, this is not a second cause of action at all but evidence of breaches of the alleged representations or particulars of misleading and deceptive conduct arising therefrom.
By their defences, the respondents admit the first set of representations but say that even if they were not true, they were in the nature of "puffery". They deny the second set of representations and their breach, and deny all the applicant's allegations concerning the TWA report.
~ i k e the originally filed cross claim, the amended cross claim filed on 5 September 1994 alleges that Optimus contracted in September 1987 to design, construct and instal the system for the whole building. A term of the contract was that the system would be "the latest hi-tech airconditioning" embodying a range of specialised features to give meaning to that term. It is alleged that Optimus knew or ought to have known that the respondents would advertise and pass on to prospective tenants its promises to teem and that any leases would embody terms to the same effect. The respondents allege that "for the purposes of [the] Cross Claim only, the building was not provided with the latest hi-tech airconditioning" and that the system did not embody the promised specialised features. The installation was apparently completed in November 1989.
The amended cross claim also alleges for the first time that at the respondentst request Optimus prepared a response to the TWA report (the response) which statedthat TWAhadmisunderstoodthe system or been inadequately informed about it. As a consequence of the response, the respondents did not inform the applicant of the existence and contents of the TWA report. The respondents allege that if the applicant's assertions about the correctness of the TWA report are successful, the response amounted to misleading and deceptive conduct. To similar effect were the other representations by Optimus concerning features of the system. The respondents therefore allege that negligence, breach of contract and contraventions of the Act by Optimus caused any loss or damage suffered by the applicant and that they are entitled to indemnity or contribution from Optimus.
No amended defence has been filed to deal with the amendments to the cross claim, especially the allegations of misleading and deceptive conduct under the Act. But the defence filed by Optimus on 20 July 1994 to the original cross claim denies the allegations of negligence and breach of contract and provides a guide to its likely attitude on the statutory claims. Optimus denies any term of its contract that the system would provide the latest hi-tech airconditioning and does not admit that the system does not measure up to that description. It does not admit promising the special features alleged by the respondents and breaching any such promise proved. It denies any knowledge of the respondents' advertising brochure or leases and does not
admit actual or imputed knowledge of what the respondents might
tell prospective tenants or might include in the leases.
As an alternative, Optimus says that any defects in the system are due to design instructions given to it by the builder, advice given by the applicant's expert advisers, the applicant's failure to instal and operate blinds in accordance with Optimus' design criteria, and other matters still to be identified. Similar matters are pleaded in answer to the respondents' claim for contribution or indemnity for any damage or loss proved by the applicant.
In other words, if the applicant's evidence is accepted that the fact in relation to the system is relevantly different to what was represented, the applicant's action, apart from its claim for section 87 relief which is in a special category of its own, will succeed if damage is proved. In essence therefore the applicant will seek to prove its case that the representations made, including those admitted, amount to misleading and deceptive conduct by showing that the system does not work effectively. As 1,read the filed evidence, it is intended to do this by lay evidence about the system's faults and some expert evidence as to its technical defects so far as they affect the applicant's offices. I accept the applicant's submission that its expert evidence will be of limited, if any, utility or relevance in the cross claim.
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On the other hand, the cross claim is about design, construction and installation faults. It will involve a much longer and more technical hearing and be considerably more expensive to present than the principal claim. There will be a large body of expert engineering evidence in the cross claim with which the applicant will not be concerned yet will have to be present to hear. Optimus has submitted in this connection that:
the applicant 'S allegation of misleading and deceptive conduct is not a discrete issue. It cannot be resolved in isolation. It did not occur in a factual vacuum. It must necessarily be determined by reference to the same underlying factual and technical questions as underpin the cross claim. It is the allegations as to the deficiencies in the airconditioning system which characterise the representations as being misleading. Those deficiencies are the sine qua non of the applicant's
case.
There is no analysis of these very general, wordy and unhelpful submissions with which for the reasons given I do not agree.
Optimus has also submitted that it is in the best position to supply the Court with the evidence and expertise to enable appropriate findings of fact to be made. If so, it is remarkable that in more than 5 months it has been able to file none of it. Moreover, if this statement applies to the applicant's claim, then it is for the applicant or the respondents to call that evidence. Optimus further argued that it may be sued by other tenants, and therefore has what it calls a "right" to ensure that no facts are found that might prejudice it in other actions. This tendentious argument, which was baldly stated and not
developed or explained in any way, is at best irrelevant to present considerations. Optimus has no such "right". In any case no such claims have yet been commenced or brought to attention despite the passage of years. In fact the respondents have notified an intention to call several other tenants to evidence that they have had no problems with the system.
Optimus also claims to have "a direct and legitimate interest" in the applicant's claim against the respondents such that it has a "right" to test and directly challenge the applicant's claim. This suggestion is also wrong and of no moment. Optimus gains whatever "rightsn it has by reason of the cross claim and the joinder of the cross claim with the applicant's claim. If these proceedings are severed -- and there is no suggestion that the Court does not have the power to do so -- its rights to challenge the cross claim remain. In either case these rights are to resist the claim made by the respondents, not the claim made by the applicant.
I also do not agree that the five issues in the claim and cross
| ~lairn~are, | as alleged by Optimus: |
(a) The specification for an airconditioning system;
(b) The performance of an airconditioning system;
| (c) | Who was responsible for any deficiencies in the airconditioning system; |
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| (d) | The amount of any damage suffered if the airconditioning |
system did have deficiencies; and
(e) Who should bear that damage.
This is an altogether too simplistic way even to summarise the dispute to be actually litigated. I agree with the applicant that responsibility for deficiencies in the system is relevant to the applicant's case only on the peripheral matter that the deficiencies in the system are due to fit-out matters, the only item of which raised by Optimus to this time relates to the installation and use of window blinds. Both the pleadings and the filed evidence indicate that this is likely to be a matter of at best minor moment.
Even the damages claims are quite different. It is also a mistaken concept of trials such as this to speak, as Optimus has done in its submissions, of "participating" in the applicant's claim for damages. Optimus will be challenging the respondents' claim for indemnity, not the applicant's claim for damages which will pe done by the respondents who have a primary, and common, interest in that aspect of the applicant's case.
Both the respondents and Optimus have assured the Court of their interest in expedition. However, the failure of Optimus to file its defence to the amended cross claim and its evidence, and its
announcement of a contemplation or intention to join other as yet unnamed parties, and the respondents' willingness to abide the
time consequences of that situation, belie their statements. The prospect facing the applicant is of a very much delayed, very
long and very expensive hearing -- much, even most, of which will
be quite irrelevant to its claim and interests. These interests are to terminate or vary the lease and damages for the losses it has sustained by reason of any misleading or deceptive conduct it is able to establish.
It is of interest that on the cross vesting motion Optimus as the moving party was at most quite ambivalent about separate hearings. To my proposition that the applicant's claim might remain in this Court but that the cross claim be cross vested to the Supreme Court, thereby separating the two, counsel for Optimus raised some practical difficulties but stated that (T5):
| Your Honour's | s u g g e s t i o n d o e s n o t p a r t i c u l a r l y concern |
| us because | we | would | s t a n d | t o one | s i d e . . . . . |
Taking up the theme being advocated by Optimus in support of its motion to cross vest the whole proceeding, my thought at the time was that as the Supreme Court has a specialised engineering list, it mi'ght be better placed to entertain the cross claim. The applicant said that the practical problems were minimal but after hearing argument I thought theywere sufficiently substantial not to pursue that avenue further.
I have given careful attention to the filed evidence in
considering the possibility of inconsistent findings of fact, especially the ultimate one postulated by the respondents and
Optimus that -the system could be found to be defective in the applicant's claim but not so in the cross claim. In my opinion the likelihood of such an occurrence is remote even if the matters are heard by two different Judges. It is certainly not likely if the two claims are heard by the same Judge. The respondents' answer to the applicant's case is and has always been that there is nothing wrong with the system. This position is indistinguishable from the presumed answer of Optimus to the amended cross claim. This case does not need to be put twice. If the respondents succeed on the principal claim, the case finishes . If the applicant succeeds on its claim, the respondents can conduct their case of defective design and manufacture which Optimus will presumably deny. If the respondents succeed, Optimus apparently intends to seek indemnity or contribution from other parties who presumably supplied expertise, advice or parts for the manufacture of the system.
These are two quite distinct pieces of litigation. One is not ready for hearing, the other is ready. The applicant again presses a case for urgency. The conduct of business by members and staff of the firm and their and their clients' comfort are said to continue unsatisfactorily. The applicant is seeking termination of the lease. Meanwhile the value of its investment in the offices is said to be reduced and it needs to know its future position urgently. If the trials are not separated, the applicant will be, as it said, "an unwilling party to a major piece of CBD construction litigation between parties with
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comparatively unlimited resources", and will therefore be put to
"the enormous cost ... of being involved in the cross claim".
In the light of my other conclusions this submission must be given great weight. No reason has been advanced either by the respondents or Optimus as to why this serious prejudice from the further projected delay should be borne by the applicant. If there is any inconvenience or prejudice to the respondents by separation, it is a result of their own failure to bring the cross claim earlier, when it might more easily have been incorporated in the time frame and substance of the principal proceedings. Any prejudice to Optimus is due to its manifest and quite inexcusable non-compliance with the Court's orders and directions for preparation and in not deciding long ago whether further parties are to be joined and presenting the proposed pleadings against them.
I have therefore decided that, subject to what follows, the claim and cross claim be heard separately. What I propose to do is as
follows :
1. The applicant's claim will be fixed for hearing before me at a directions hearing at 9.30am on Wednesday November 30
1994. The applicant will serve an up to date particularised statement of damages together with supporting documentation, and in place of filing in the registry, deliver a copy to my Chambers by hand or fax to (02)221.3238, by 4pm on Tuesday November 29.
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2. The cross respondent will file and serve documents as follows :
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(i) an amended defence to the amended cross claim to contain the precise matters by way of defence for which the cross respondent actually intends to advocate: mere denials or "do not know and cannot admit" or other general defences will not be acceptable, nor will reservations of particulars stiil to be supplied; and
(ii)any applications for leave to join further parties with supporting affidavit(s) annexing the draft claims to be made and setting out the factual matters intended to be propounded and the witnesses intended to be called.
(b) by not later than 4pm on Wednesday December 14:
the statements of the witnesses upon whom it intends to rely in response to the amended cross claim.
3. Unless in an extreme or extraordinary circumstance no extension of the times in order 2 will be allowed. A failure to comply with them will be taken into
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consideration in any application to strike out the amended defence and give judgment by default on the amended cross claim.
4. The respondents will by not later than 4pm on Friday December 9 file and serve a particularised statement of the damages they are seeking on the cross claim together with supporting documentation.
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5. The respondents' cross claim will be listed for further directions at 9.30am on Thursday December 15 when, subject to any evidence from the respondents in reply, the cross claim will be fixed for hearing before me at or after the completion of the hearing of the applicant's claim. I shall at that time entertain any application by the cross respondent to be permitted to cross examine any witnesses to be called in the applicant's claim to avoid the need for their attendance on more than one occasion.
6. There will be liberty to any party to apply on 3 days notice. If the parties to either claim can agree on sufficient issues of fact as to establish an essential 'compatibility between the two claims, I shall entertain a further application for a joint hearing.
There will be no order for costs on the Court's motion to separate the claims or on the motion to cross vest without which the present result may never have occu
| I certify that this and the | 1 |
Reasons for
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