Bevendale Pty Ltd v Equiset Construction (Epping) Pty Ltd

[2010] VCC 805

IN THE COUNTY COURT OF VICTORIA Unrevised

Not Restricted

AT MELBOURNE
CIVIL JURISDICTION
COMMERCIAL LIST

BUILDING CASES DIVISION

Case No. CI-09-04940

BEVENDALE PTY LTD	Plaintiff
(ACN 006 392 267)
v
EQUISET CONSTRUCTION (EPPING) PTY LTD	Defendant
(ACN 117 404 270)

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JUDGE:	HIS HONOUR JUDGE SHELTON
WHERE HELD:	Melbourne
DATE OF HEARING:	26 May 2010
DATE OF JUDGMENT:	9 June 2010
CASE MAY BE CITED AS:	Bevendale Pty Ltd v Equiset Construction (Epping) Pty Ltd
MEDIUM NEUTRAL CITATION:	[2010] VCC 0805

REASONS FOR JUDGMENT

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Catchwords: Part IVAA Wrongs Act 1958 – in normal proceeding by proprietor against contractor, sub-contractor is not concurrent wrongdoer – Rule 9.06(b) of the County Court Civil Procedure Rules 2008 – Atkins v Interprac Financial Planning Pty Ltd & Crole (No 2) [2008] VSC 99 – St George Bank Ltd v Quinerts Pty Ltd [2009] VSCA 245 –Woolcock Street Investments Pty Ltd v CFG Pty Ltd (2004) 216 CLR 515.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Andrew	Wotton + Kearney
For the Defendant	Mr P J Cosgrave SC	Herbert Geer
HIS HONOUR:

1 This is an application by the defendant for an order pursuant to rule 9.06(b) of the County Court Civil Procedure Rules 2008 and section 24AL of the Wrongs Act 1958 (“the Act”) that GFC Industries Pty Ltd (“GFC”) be joined as a defendant to these proceedings and for leave to file and serve an Amended Defence consequent upon this.

2 Rule 9.06(b) provides:

“At any stage of a proceeding the Court may order that—

(a)

…

(b)

any of the following persons be added as a party, namely—

(i)	a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or
(ii)	a person between whom and any party to the proceeding there may exist a question arising out of or relating to or connected with any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding.

(c)

… .”

3 Section 24AL of the Act provides:

“Joining non-party concurrent wrongdoer in the action

(1)	… the court may give leave for any one or more persons who are concurrent wrongdoers in relation to an apportionable claim to be joined as defendants in a proceeding in relation to that claim.
(2)	… .”

The Facts

4          The plaintiff is the owner of the Epping Plaza Regional Shopping Centre (“the shopping centre”). It entered into a building agreement on or about 16 December 2005 with the defendant, pursuant to which the defendant agreed to carry out construction works at the shopping centre for the sum of $81.5 million, plus GST (“the contract”).

5          The contract contained warranties which are conveniently set out in the written submission prepared by Mr Andrew, who appeared for the plaintiff, to oppose the application. I reproduce it:

“(a)	The Defendant warranted to the Plaintiff that the Defendant would execute and complete the work under the contract in accordance with the Drawings and the Specification so that the Works, when completed, would comply with all the requirements of the contract, including without limitation all Legislative Requirements (clause 4.2(b) of the Instrument of Agreement);
(b)	The Defendant warranted to the Plaintiff that all materials to be supplied by it for use in the Works would be good and suitable for the purpose for which they were used (clause 4.2(g) of the Instrument of Agreement);
(c)	The Defendant warranted that the methods and materials used in carrying out the Works to the extent not specified expressly in the contract, would be fit for their purpose and would be of such nature and quality that they might reasonably be expected to achieve that result (clause 4.2(i) of the Instrument of Agreement);
(d)	The Defendant warranted to the Plaintiff that, by applying for and accepting the Certificate of Practical Completion, the Works had been properly completed and that all materials, articles and goods used or incorporated therein or supplied by it directly or through a subcontractor or supplier, whether nominated or otherwise, complied with the quality, quantity, number, nature, description and conditions as required by the contract (clause 4.2(j) of the Instrument of Agreement).”

6          The plaintiff alleges that on or about 3 December 2008, a structural steel truss and four concrete wall panels constructed by the defendant at the shopping centre fell approximately three metres, causing damage to the shopping centre (“the incident”). The plaintiff claims in this proceeding that the incident occurred as a result of a failure by the defendant to properly erect the structural steel truss and that it has suffered loss and damage as a result of the incident.

7          The defendant entered into a sub-contract with GFC on or about 3 June 2006, pursuant to which GFC was to supply and install structural steel for it at the shopping centre. The defendant alleges that the incident occurred because the structural steel truss was poorly attached to prefabricated concrete panels and that this was the responsibility of GFC.

Discussion and Conclusion

8          The defendant seeks to join GFC as a defendant to the proceeding on the basis that it is a concurrent wrongdoer.

9 It relies upon s.24AF(1)(a) of the Act, which states:

“Application of Part

(1)	This Part applies to—
(a) a claim for economic loss or damage to property in an action for damages (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care; …”

10        Mr Cosgrave, Senior Counsel, who appeared for the plaintiff, relied upon Atkins v Interprac Financial Planning Pty Ltd & Crole (No 2) [2008] VSC 99, where Hargrave J stated, at paragraph 6:

“The parties agree that, in order for the defendants to obtain leave to add a party for the purposes of contending that the added party is a concurrent wrongdoer, they must put forward a pleading which raises an arguable case that the party is a concurrent wrongdoer. It is common ground that, in order to enliven the Court’s jurisdiction to allow joinder of an alleged concurrent wrongdoer, the defendants need only plead a case which is ‘not hopeless’.”

and in paragraph 12:

“… On an application such as this, the defendants need only establish that the proposed pleadings contain factual allegations which, if established at trial, could arguably found one or more of the causes of action alleged. If the Court is satisfied that such an arguable case has been put forward, joinder should be allowed.”

11        A similar approach was adopted in Main-Road Property Group Pty Ltd v Pelligra & Sons Pty Ltd [2010] VSC 5 by Croft J, at paragraphs 8 and 9:

“The proper approach of the courts in determining whether a claim is an ‘apportionable claim’ under Pt IVAA of the Wrongs Act for the purposes of applications such as the present one was considered in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216. In that case Middleton J said:

‘29. As the respondents observed, in drafting the provisions of Pt IVAA of the Wrongs Act, the legislature deliberately chose to define ‘apportionable claim’ by reference to an action for damages arising from a failure to take reasonable care. The provisions do not require that the claim itself be a claim in negligence or for a breach of duty — it only requires that the claim arise from a failure to take reasonable care. The expressions ‘arising from’ or ‘arising out of’ are of wide import — see the discussion in A Stephenson, ‘Proportional Liability in Australia — The Death of Certainty in Risk Allocation in Contract’ (2005) 22(1) ICLR 64 at 71 to 73, and generally B McDonald, ‘Proportionate Liability in Australia: the Devil in the Detail’ (2005) 26(1) ABR 29.

30. In my view, Pt IVAA could apply in the circumstances of this proceeding according to its own terms. Where a claim brought by an applicant does not have as one of its necessary elements any allegation of failing to take reasonable care, an additional enquiry into the failure to take reasonable care may become relevant in the course of a trial to determine the application of Pt IVAA. Even though the claims in this proceeding themselves do not rely upon any plea of negligence or a ‘failure to take reasonable care’ in a strict sense, a failure to take reasonable care may form part of the allegations or the evidence that is tendered in the proceedings. At the end of the trial, after hearing all the evidence, it may be found that Pt IVAA applies.’

Similarly, in Suncorp Metway Pty Ltd v Panagiotidis [2009] VSC 126,
Associate Justice Evans said:

‘20. In Solak v Bank of Western Australia, Pagone J expressed his opinion (obiter) as to the proper approach in determining whether or not a proceeding relates to an apportionable claim under Part IVAA and similar regimes as follows:

‘the factual precondition to the operation of the relevant statutory regimes does not depend upon how a claim is pleaded but whether the statutory precondition exists, namely whether the claim arises from a failure to take reasonable care. In Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd [2007] FCA 1216; ((2007) 164 FCR 450) Middleton J said that the words arising from the failure to take reasonable care should be interpreted broadly (ibid) [29]. In my view the State regimes providing for the apportionment of liability between concurrent wrongdoers require a broad interpretation of the condition upon which the apportionment provision depends to enable courts to determine how the claim should be apportioned between those found responsible for the damage. The policy in the legislation is to ensure that those in fact who caused the actionable loss are required to bear the portion of the loss referable to their cause. That task ought not to be frustrated by arid disputes about pleadings.’’”

and in Coastal Seafarms Holdings Pty Ltd v Port of Portland Pty Ltd [2010]
VSC 167, by Ross J, at paragraph 9:

“As emphasised by Middleton J in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd the assessment of the application (or otherwise) of Pt IVAA of the Act at a preliminary stage of the proceedings does not pre-empt the final determination of that issue at trial. On an application such as this the defendant need only establish that the pleadings contain factual allegations which, if established at trial, arguably support the contention that it is an apportionable claim and that the SECV is a concurrent wrongdoer.”

12        As appears, the threshold for joinder of a concurrent wrongdoer is low. It is sufficient that there are factual allegations which arguably support there being an apportionable claim.

13 Mr Andrew, who appeared for the plaintiff, submitted that GFC was not “a concurrent wrongdoer”. He relied upon s.24AH(1) of the Act, which states:

“Who is a concurrent wrongdoer?

(1)	A concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions caused, independently of each other or jointly, the loss or damage that is the subject of the claim.
… .”

14        In St George Bank Ltd v Quinerts Pty Ltd [2009] VSCA 245, Nettle JA, with whom the other two members of the Court agreed, considered the purpose behind the enactment of Part IVAA – Proportionate Liability – in the Act. He stated, at paragraph 57, that these provisions were –

“designed to overcome what were perceived to be undesirable

consequences of the joint and several liability rule.”

15        At paragraph 59, he stated:

“As appears from the Second Reading Speech on the Commonwealth Proportionate Liability Bill, the object of the apportionment legislation was to put a defendant in exactly the position it would have been if all other concurrent wrongdoers liable to make contribution under the Commonwealth equivalent to s.23B were before the court and of sufficient means to meet their obligations to make contribution according to their respective responsibilities for the loss and damage suffered by the plaintiff.

… .”

16        Accordingly, he concluded, at paragraph 64:

“…a ‘concurrent wrongdoer’ includes a person whose acts or omissions caused the damage or loss that is the subject of the plaintiff’s claim only if the person is ‘liable’ to the plaintiff for that loss and damage. … .”

(emphasis added)

17        The other two members of the Court agreed with Nettle JA.

18        The question thus becomes whether GFC has any legal liability to the plaintiff.

19        Here there is no contractual relationship between the plaintiff and GFC. Therefore, any possible legal liability would need to be based on a duty of care owed by GFC to the plaintiff. The plaintiff asserts this in its proposed Amended Defence, alleging a claim for economic loss, and that the plaintiff “would be vulnerable to suffer loss and damage to problems with defective workmanship” if GFC did not carry out its works as required under the sub- contract.

20        In Woolcock Street Investments Pty Ltd v CFG Pty Ltd (2004) 216 CLR 515, the High Court held that an engineering company which designed the foundations of a warehouse and office complex did not owe a duty of care to a subsequent purchaser of the property upon which the warehouse and office complex were constructed. In so concluding, the majority (Gleeson CJ, Gummow, Hayne, Heydon, JJ) particularly relied upon the fact that there was no vulnerability on the part of the purchaser to the economic consequences of any negligence on the part of the engineering company in their design of the foundations for the building. The purchaser could have inspected the building for defects prior to purchase and thus protected itself. Vulnerability meant an inability on the part of the purchaser to protect itself from a want of reasonable care on the part of the engineering company. Here too, the plaintiff is not vulnerable in this sense, since it is fully protected by the warranties it obtained from the defendant.

21        McHugh J, who agreed with the majority, referred with approval to D & F Estates Ltd v Church Commissioners for England [1989] AC 177, where the House of Lords refused to hold a builder liable for the negligence of a plasterer who was a sub-contractor. He stated, at paragraph 90:

“… Indeed, one reason that the House of Lords gave for denying the owner's claim in D & F Estates Ltd was that it would outflank the operation of the law of contract. Lord Bridge of Harwich said that to require the builder to owe a duty to a subsequent purchaser ‘would be to impose upon him for the benefit of those with whom he had no contractual relationship the obligation of one who warranted the quality of the plaster as regards materials, workmanship and fitness for purpose’.”

(emphasis added).

22        At paragraph 110, he stated:

“…purchasers of commercial buildings are ordinarily in a position to protect themselves from most losses that are likely to occur from defects in the construction of such buildings. … .”

and at paragraph 111:

“There are many means of protection open to first owners and purchasers of commercial buildings to cover the risk that the building may have latent defects. The first owner can enter into contractual arrangements with those involved in the construction. Those arrangements can include warranties concerning the fitness of the building for the purpose for which it was constructed. The first owner can supplement the contractual arrangements with those directly involved by obtaining similar warranties from directors and other persons connected with the construction of the building. The first owner can employ other professionals to check the work of those directly involved in the project. … .”

and at paragraph 112:

“… That is, this court should hold that, in the absence of a contract between the owner of commercial premises and a person involved in the design or construction of those premises, the latter does not owe a duty to the current owner to prevent pure economic loss. … .”

23        I note particularly the reference of McHugh J, to outflanking the operation of the law of contract and the ability of a proprietor to obtain warranties from the builder.

24        Further, actions by proprietors against contractors with respect to defective work carried out by sub-contractors of the contractor are commonplace. Yet Mr Cosgrave was not able to refer me to any cases where the proportionate liability legislation was relied upon to allow joinder of a sub-contractor by a contractor. I agree with Mr Andrew’s submission that to allow joinder of GFC would dilute the effect of the contractual warranties given by the defendant to the plaintiff and would substantially change the long-established contractual relationships which exist in the building industry.

25        It is clear, in my view, that the plaintiff was not owed a duty of care by GFC, that this is not even an arguable proposition and that any claim against GFC could be described as “hopeless”.

26        The defendant’s application to join GFC as a defendant to the proceedings and to amend its Defence accordingly is refused.

27        I will hear from the parties as to appropriate directions which should now be made for the hearing of this proceeding and as to costs.

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