163 Clarence Street Pty Ltd v New World Oil & Developments Pty Ltd

[1995] FCA 136

IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY )   No. NG 249 of 1993
GENERAL DIVISION                )

Between:163 CLARENCE STREET PTY LIMITED   ACN 001 042 262

Applicant

And:NEW WORLD OIL & DEVELOPMENTS PTY LIMITED ACN 008 979 422

First Respondent/ First and Third Cross Applicant

JAMINO PTY LIMITED

ACN 002 704 047

Second Respondent/ First and Third Cross Applicant

And:OPTIMUS PTY LIMITED

ACN 0001 847 785

First Cross Respondent/Second Cross Applicant

CARRIER AIRCONDITIONING PTY LIMITED     ACN 000 024 742

Second Cross Respondent

INTERIOR DIRECTIONS PTY LIMITED   ACN 003 715 697

Third Cross Respondent

REASONS FOR JUDGMENT

EINFELD J                 SYDNEY          24 FEBRUARY 1995

The respondents moved on 4 January 1995 for a number of orders.  Several of them have been dealt with orally or in the run of the hearing of the motion on 10 and 13 January.  One significant application remains, viz. that

1. The hearing of the Applicant's claim against the Respondents and the hearing of the Respondents' claim against the Cross Respondents be returned to a joint hearing.

If this order is made, another order sought for the vacation of the hearing date on 13 March 1995 will have to be granted. This is because if one cross claim is rejoined to the hearing, all should be, and two of the cross respondents, having been joined only recently, could not be expected to be ready for hearing in such a short time.

The facts do not need to be stated because they appear in the two written judgments I gave on 31 May and 25 November 1994 on the question of whether the applicant's claim and the cross claims should be heard together.  In the first of those judgments Optimus was allowed to be joined in the existing proceedings on terms so as to expedite preparation.  In the second (the November judgment) the trials of the principal claim and the first cross claim were separated.  Since that time two additional cross claims have been filed, one by Optimus against Carrier Air Conditioning Pty Ltd (Carrier) and one by the respondents against Interior Directions Pty Ltd (Interior Directions) provisionally allowed pending further submissions on the matter, and ultimately decision by the Court, of the question of joinder.

The matter is not merely academic, forensic or argumentative. The two previous judgments have outlined the extraordinary delays in this matter caused in major part by the respondents and Optimus.  Other events have taken place during the interlocutory
stages of the case which to say the least do not bring credit on the respondents.  If the present fixture was vacated and the cross claims joined in a new hearing, the case presently fixed for one week would blow out to many weeks if not months.  Both because of the time needed by Carrier and Interior Directions to fully prepare for the hearing, and because of the pressure of work in the Court, such a hearing could not take place this year.  By the time a judgment could be written, any success enjoyed by the applicants would be very long delayed.  The costs would be enormous, with the applicant a silent participant during much of the hearing while the cross claims were pursued.  Apart from the increased inconvenience and discomfort from faulty airconditioning that would then have been proved, the applicant's lease of level 22 would be nearly concluded, with the consequence that at least some of the relief granted, including any section 87 relief, would be comparatively moot.  There is considerable doubt that further delay could be adequately compensated in damages, and costs would certainly not compensate the applicant for the loss of the hearing date.  Moreover, it has now become clear from the evidence and submissions that the respondents do not essentially deny that the airconditioning on level 22 does not function adequately and as they represented it would function.  In all the circumstances a heavy responsibility devolves upon those who seek orders which would have these results.

The respondents submitted that the judgment of 24 November 1994 was "inappropriate" and "wrong" and that it should be reversed.
They say that since the November judgment the issues in the cross claim against Optimus have been "significantly narrowed".  The factual issue between them is now described as "whether the airconditioning on level 22 is deficient and if so in what respects".  This issue, to be decided on expert evidence, "will involve determining the nature and extent of any problem in the operation of the airconditioning, including determining the cause of any problems, whether the problems are capable of rectification and if so at what cost" (respondents' written submissions filed 27 January 1995).  The respondents allege that this issue is "at the heart of their defence to the statement of claim and that the (November) judgment misconceived the nature of the defence" and the respondents' evidence.

The applicants of course must primarily prove that the respondents' representations about the airconditioning amounted to misleading or deceptive conduct.  The respondents concede, as was said in the November judgment, that although there may be some limited expert evidence it will not be necessary for the applicant to prove what the technical source of the problem with the airconditioning is, but only that the occupants of level 22 find it uncomfortable.  The respondents describe this situation as establishing that the issues in the applicant's claim "correspond precisely" to the issues in the Optimus cross claim.  It seems to me that the respondents' own definitions deny their conclusion.

Optimus supports a joint hearing of the cross claims with the applicant's claim but bases its argument on the presentation by the applicant on 9 February 1995 of a motion to strike out the respondents' defence and for a consequential summary judgment.  In the course of this presentation, the applicant sought to establish from the daily diaries of the respondents' own letting agent (the Mulholland diaries) that at a comparatively early time many faults were identified in the airconditioning system, some conceptual and planning, some mechanical and highly technical.  This, Optimus said, made clear that the applicant intends to lead substantial technical evidence as to the cause of the problems.

It is certainly true that during its submissions on the summary judgment motion, the applicant pointed to evidence which it said will or does establish design and systemic problems and installation inadequacies as the causes of its problems.  If proving the truth of these matters were to form part of the applicant's claim at trial, whether in chief or by attack on the respondents' evidence, there would clearly be a substantial evidentiary and issue overlap with one or more of the cross claims and a joint hearing would prima facie be indicated, if for no other reason than that findings would be necessary as to the source of these errors as between the respondents and the cross respondents.  Such findings could not be made binding on parties not present and the possibility of inconsistent findings in the separate cross claim proceedings would be sufficiently significant to order a joint hearing.
However, on 3 February the following statements were made by the applicant's counsel on the issue (T42-3):

Mr Libling:Our claim is not concerned with analysing in any way the cause of the fault in the building.

His Honour:   So you will be objecting to such parts of the defence as seek to put those matters in issue?

Mr Libling:Such part of the defence as debates as to what caused -- except, of course, they are entitled to say, "It is your own modification".

His Honour:     Yes, they are entitled to say it is your fault, you did it, but they are not entitled to say that it is not our representation that have brought about this damage, but Carrier's incompetence or Optimus' negligence or something?

Mr Libling:Yes.  Absolutely.  As your Honour so well put it.  One is a case concerning representation as to result and the final result.  The other is assuming the result is as we say and there seems to be no doubt about that, who, out of all these people is responsible?

His Honour:   You realise of course that in the event that such matters are legitimately raised in the hearing, if they can be legitimately raised, the hearing will be aborted.

Mr Libling:Yes.

His Honour:     Because the people who would have to bear that responsibility, if any, will not be there.  So, to the extent to which the case becomes or is allowed to become a case about the cause of your client's difficulties other than your own fault, the case will have to stop.

Mr Libling:Yes.  Knowing your Honour one would expect your Honour's customary reaction to objections and we will certainly make them.  Our case, subject to that one addition which I told your Honour about, which relates to what comes out
of the ducts when they join our floor, has nothing to do with causes.  We are not interested in what causes not enough or bad quality air.

His Honour:   Well, you are not interested in the static air pressures and the VAV units and the ...

Mr Libling:Well, we are interested in static pressures but only in as much as it ...

His Honour:   I mean the causes of it.

Mr Libling:No, totally not.

His Honour:   You are interested in the fact of it but not the cause of it?

Mr Libling:Yes, your Honour.  Yes.  We totally eschew any investigation of the causes of it.

Clearly the applicant was making clear that the type of analysis it presented on the summary judgment motion was not intended to be part of its case at trial.  Apart from the incredible waste of time for all involved, it is obvious that the applicant is likely to have to bear the costs of any hearing aborted on this basis.

The respondents have made clear in their defence, their evidence, and their submissions that apart from putting the applicant to formal proof of certain matters, their substantive defence to the applicant's assertions is that whatever faults there are in the airconditioning system are largely or wholly due to the applicant's own fit out of level 22, including some custom-made alterations to the system on that floor.  It follows from the applicant's submissions on 3 February which I have substantially quoted that the applicant does not intend to counter this defence by attempting to prove the type of systemic or fundamental faults for which it argued on the summary judgment motion.  Obviously such an approach would raise the same types of problems as would arise if these matters were to be led in chief and might again lead to the aborting of the trial.

In fact the applicant has repeated its 3 February statement of its own case in submissions on this motion.  It says that proving the cause of the airconditioning's failure is not part of its case.  It says of the Mulholland diaries that they contain Mr Mulholland's views as to the cause of the failure but the applicant has no intention of seeking to prove their accuracy.  They will be tendered as evidence that the airconditioning "did not function consistently with the representations which had been made".  The applicant says that it will meet "the fit out defence" by showing that the applicant's problems on level 22 were also experienced on other floors where the fit out was quite different.  Apparently it disavows the possible alternative approach of meeting this defence by proving or attempting to prove that the cause of the applicant's problems was one or a collection of the matters raised in the Mulholland diaries and the cross claims.

I should also briefly note some submissions on this motion received from Carrier which only became a party on 21 December 1994.  Carrier is thus not to blame for any delays which might make a joint hearing difficult.  Nor could it be expected to be ready for a hearing on 13 March 1995 or for several months thereafter.  Despite the applicant's repeated assurances to the contrary, Carrier also argues, from the pleadings, the evidence, the oral submissions made on 3 and 9 February 1995, and the written submissions, that it will be necessary for findings to be made in the proceedings between the applicant and the respondents as to the causes of the airconditioning problems on level 22.  In these circumstances, Carrier says that "it would be unjust and inappropriate" for it to be excluded from a hearing where the standard and suitability of its equipment may be in issue.  It describes an aborted hearing as "a serious risk".

If there is not to be a joint hearing, Carrier submits that to deal with this risk, the Court should give a ruling, presumably in advance or at the commencement of the hearing, "excluding and/or disallowing" the leading of any evidence or the making of any finding as to:

(a)alleged defects in the equipment supplied by Carrier; and

(b)the nature or accuracy of representations allegedly made by or on behalf of Carrier in relation to the quality, characteristics or performance of equipment supplied by Carrier and/or the suitability of that equipment for any particular purpose.

Carrier points to the fact that the respondents have refused to give an undertaking, earlier given by the applicant, not to lead evidence at the proposed separate trial alleging any defect with the equipment supplied by Carrier.  This refusal is hardly surprising given the respondents' current motion, as they would scarcely be likely to assist in facilitating its defeat.  No precedent is put forward to support the proposal for the so-called "ruling" and I cannot think how it is even supposed to work.  I decline to give the ruling requested but I shall be mindful of its spirit during the trial.  In this connection I record the applicant's response to Carrier that it has no intention of presenting any evidence or asking for any finding of a defect in any equipment supplied by Carrier or of a representation having been made by it.

Authority has made clear, as is commonsense, that normally claims and cross claims arising out of the same subject matter will be heard together:  see Barclays Bank v Tom [1923] 1 KB 221; Standen v G.H. Varley Pty Limited [1956] 56 SR (NSW) 346; Godfrey v Nominal Defendant [1963] 63 SR (NSW) 412. However, I am not at all impressed or moved by the approach of those who would seek to convert this hearing from a comparatively straightforward misrepresentation matter into a major complex "building" case.

Ultimately the matter is discretionary and these circumstances are not normal for the many reasons I have previously detailed here and in the other two judgments.  I believe that fairness and justice will best be achieved by retaining the separate hearing of the applicant's claim against the respondents and having the
cross claims heard when they are all ready.  I will of course be conscious of the problems and potential pitfalls referred to and will not hesitate to intervene in the trial if the applicant's assurances and my expectations are not realised.  But as presently advised I can see little but the most superficial identity of issues between the applicant's claim and the three cross claims.  To me the attitude of the respondents and Optimus appears to have few bona fides and to bear all the hallmarks of seeking to further delay the applicant as they have done in the past.

The respondents' motion for a joint hearing of the claims and cross claims is dismissed.  I shall hear the parties on costs at a convenient time.