Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 and Anor

[2014] HCATrans 52

[2014] HCATrans 052

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S198 of 2013

B e t w e e n -

BROOKFIELD MULTIPLEX LTD (ACN 008 687 063)

Applicant

and

OWNERS CORPORATION STRATA PLAN 61288

First Respondent

MULTIPLEX CORPORATE AGENCY PTY LTD

Second Respondent

Application for special leave to appeal

FRENCH CJ
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 14 MARCH 2014, AT 9.30 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR T.J. BREAKSPEAR, for the applicant.  (instructed by Gilbert + Tobin Lawyers)

MR F. CORSARO, SC:   If it please the Court, I appear with my learned friend, MR P.J. BAMBAGIOTTI, for the first respondent.  (instructed by Grace Lawyers Pty Ltd)

FRENCH CJ:   Yes, Mr Jackson.

MR JACKSON:   Your Honours, the application seeks to challenge the finding by the Court of Appeal that the applicant, the builder of an apartment block, relevantly to be used for commercial purposes, owed a tortious duty of care to the body corporate which came into existence on the registration of the strata plan.  The duty of care related to economic loss where the economic loss would result from latent defects in the common property of the building it was assumed.  Your Honours, the formulation of the duty can be seen at page 107, paragraph 132, subparagraph (2).  I do not think I need to take your Honours to it especially, but the duty of care was held ‑ ‑ ‑

CRENNAN J:   In that context, Mr Jackson, is the special leave question no 1 a little too widely framed, because it only deals with economic loss as a result of latent defects and does not make any reference to the qualifiers to which you have just pointed us in 132(2), that is to say, it is a latent defect that is structural, a danger and, as I understand it, renders the property uninhabitable?

MR JACKSON:   Well, your Honour, could I say this?  We would say that the issue that arises, whilst the particular duty that was found was narrower than the one stated in question 1, is one which would apply to the matters in question 1.  We would seek to put it a little more broadly, at least in argument, if I could put it that way.

Your Honour, could I just say this?  The duty of care was held to exist, notwithstanding, your Honours, as one might expect in developments of this kind, the existence of contractual provisions which first defined the rights which the developer of the units, the owner of the land, would have against the builder in respect of defects in the building work and defects of this kind and, your Honours, defined also the rights which the purchaser of a lot would have against the developer, the vendor to it, in respect of such defects.  Your Honours, notwithstanding also that the developer and the unit holders were those through whom the body corporate derived its title and they were all the same person at the time when the body corporate came into being.

Your Honours, could I go first and very briefly to the contractual provisions and then to the statutory provisions dealing with the body corporate?  The owner of the property on which the development was to take place was Chelsea Apartments – you will see that in the first paragraph of the primary judge’s reasons at page 3.  It entered into – in 1997 – a design and construct contract with us to build the building.  The agreement – if I could take your Honours to page 12 at paragraphs 44 to 48 in Justice McDougall’s reasons – contained detailed provisions as to the quality of the services to be provided, the defects liability period and the issue of the final certificate.  Your Honours will see those matters in paragraphs 44 to 48.

The provisions can be seen in more detail in the reasons of Justice Basten at page 78 and, your Honours, in particular if one goes to paragraphs 54 to 58 you will see the paragraph 54 our obligation to do the work and, your Honours, our primary obligations in our contractor’s warranties in paragraph 55.  You will see, if I could go over to paragraph 58, that there was the ability to obtain a final certificate which was final, except in the case of – and your Honours will see paragraph (b):

any defect . . . in the Works or any part thereof which was not apparent at the end of the Defects Liability Period, or which would not have been disclosed upon reasonable inspection at the time of the issue of the Final Certificate –

There were numerous provisions also, your Honours can see, referred to, but the contract between - our contract to build the building also specified in detail what were to be the terms on which the developer might sell units in the building, including matters as to the entitlement of holders of lots to the quality of the building.  Your Honours will see those referred to at page 80, paragraph 59.

CRENNAN J:   What about Justice Basten’s apparent starting point?  I just want to test whether you agree with that, which appeared to be, if you take into consideration an authority like Barclay v Penberthy, a building contract, the existence of even a complicated building contract, will not necessarily negative concurrent duty of care.  Do you accept that general proposition ‑ ‑ ‑

MR JACKSON:   Well, no, your Honour, that is a proposition which we would really seek to challenge in the proceedings, and I think it right to say that in challenging that proposition, that really goes in a sense to the heart of the matter because what we would say is that, first of all, one has a situation where there were specific rights given to the developer, the specific rights being ones which are perhaps a little more limited than one would find if there were a tortious duty of care, questions of the time at which one could sue and so on.

But it seems, with respect, your Honours, really very strange that in circumstances like that – and in circumstances like that where you have those specific but a little more limited rights given the parties had bargained for – that there should yet be another duty owed which goes beyond it.

CRENNAN J:   Well, certainly, if it heads into the reasoning on vulnerability, does it not, which is critical?

MR JACKSON:   Yes, your Honour, and could I just say this also, that one is talking in the present context of, let us say multistorey to make it short, buildings which are constructed for commercial purposes as distinct from home buildings, but in dealing with that you do have a situation where at the time when the – as the two judges in the Court of Appeal said – at the time when the strata plan is registered and the body corporate comes into existence all the units are held by the developer, that is the person with whom they are contracted.

Now, it is no doubt right to say that if you add together all the interests of each of the lot holders, the one person, and the interests in the body corporate all held by the one person, that the body corporate would be able to use the rights of the developer as against us, for example.  But there is not any basis, we would say, for the court to feel the need to develop as between those parties some further right which is independent of the contractual rights that those parties have bargained for.

CRENNAN J:   So what you are saying is your complaint is not confined to – as the respondent would put it – a complaint about the way in which the builder and the original developer are characterised in terms of their bargaining with each other?

FRENCH CJ:   Is your position that – what you have just been putting really encapsulated in 6 through to 8 of your reply at pages 140 to 141, and am I right in reading that as an acceptance that, of course – and I think you have already implied that in your response to Justice Crennan – the proposition you can have concurrent duties in tort and liability in relation to a building contract, but that this is a building contract of such complexity and detail that it should have been – the concurrent liability should have been excluded?

MR JACKSON:   Yes, your Honour, we say that.

FRENCH CJ:   Yes.  The question, I suppose, is what is the question of principle to which that gives rise?  Obviously, that is the point made against you.

MR JACKSON:   Well, your Honour, the point of principle is this, that there appears to be reliance in (a) our learned friend’s argument, (b) in the Court of Appeal, on the notion that there can be concurrent duties in tort and in contract which arise, and they may be different, of course.  But what one sees is that the basis for that really seems to be a combination of things.  One is the holding of the Court in Bryan v Maloney, a case which, with respect, has its difficulties, some of which have been adverted to in various courts over time.

Secondly, the decision in Woolcock Investments, your Honours, does not really, with respect, provide ‑ because of the way in which the decision was made and was ultimately determined on the facts of the case ‑ it does not really provide a particularly sound basis for determining when in cases like this, which are common types of cases, the duty is to arise.  Nor, if one goes to the cases such as Penberthy, to which your Honour referred a moment ago, what one sees is that the notion that there can be duties in contract and tort, and one does not exclude the other, really derives from the discussion in Astley, and in Astley ‑ ‑ ‑

FRENCH CJ:   They have their different histories and so forth.

MR JACKSON:   Well, indeed, your Honour.  But in Astley what was being sought to be done was to ‑ ‑ ‑

FRENCH CJ:   Displace the contractual.

MR JACKSON:   ‑ ‑ ‑ displace the contractual, implied contractual duty.  So, your Honour, we would say – if I could perhaps put it directly – that this perhaps is a case where a dagger might be put to the heart of the beast and the beast which ‑ rather marauding the law since the decision in Bryan v Maloney.  I am sorry, your Honour, I am just going to say one further thing.  It is an important case, your Honour, because if one is dealing with the circumstances of bodies corporate of this kind one would normally expect there to be building provisions in the building contract which deal with the very topic.

If I could just say this, your Honours, it has got – the case really does not depend on its own terms.  I have referred to the fact that the Court of Appeal’s treatment really treats the specific contractual terms of being of little significance and, your Honours, we do end up with a situation where on the – if I could say one further thing on the test that has been adopted by the Court of Appeal, bearing in mind the fact that what was referred to in

Bryan v Maloney was that there was no evidence that the defects posed any risk of danger to person or property, one would think that the plaintiff would have lost in that case.  So one has ended up with a curious ‑ ‑ ‑

FRENCH CJ:   This is sort of a parasitic point, the dangerous defects point you made?

MR JACKSON:   Yes.

FRENCH CJ:   Yes, I see.

MR JACKSON:   Yes, your Honour.  But, your Honours, there is – the duties give rise to significant consequences as to costs of work, financial reporting, account provisions, insurance run‑off and, in our submission, it is a case where it would be appropriate to grant special leave.  Could I just say one further thing, your Honours, in relation to the statutory provisions?  What your Honours will see is that ‑ ‑ ‑

FRENCH CJ:   Well, perhaps we can hear from Mr Corsaro on that.  Can I just ask you about your draft notice of appeal at 116?  Do grounds 3 and 5 add anything?  That is a genuine – question, not a ‑ ‑ ‑

MR JACKSON:   Yes.  Your Honour, I think the answer is that they are perhaps a bit repetitive.  If the Court were otherwise to grant special leave might we have leave to amend the notice of appeal to perhaps – at least to give consideration to deleting those grounds?

FRENCH CJ:   All right, thank you.  We might hear from Mr Corsaro at this point.  Yes, Mr Corsaro.

MR CORSARO:   Your Honour, the first leave issue turns on the proposition that the court below erred, or was mistaken in the finding, that the developer of the scheme was vulnerable because it had the power to negotiate the allocation of risk under the contract and did so.  The allied proposition, which my learned friend has accepted, is that although concurrent duties in tort and contract can arise, in the particular circumstances of this case, having regard to the design and construct contract which has its particular provisions and are particular to the circumstances of this case, that contract precludes the concurrent tortious duties from arising.

We start, your Honours, with the simple proposition that Justice McHugh’s decision in Perre v Apand made clear that when one talks about vulnerability, which will be sufficient to support the duty, those features of vulnerability will vary from a case to case, category by category basis even if it be correct, as the applicant’s submissions seem to suggest that vulnerability is a necessary precondition for the existence of a duty of care to avoid pure economic loss.  Indeed, your Honours, the plurality in Woolcock expressly declined to take that step at 24, and even Justice McHugh did not go that far in Perre.

Can I invite your Honours to go to paragraph 10 of Justice Basten’s decision below -it is 61 of the application book?  His Honour there starts with a bare statement of the principles of general law, which the court below was guided by in relation to the determination of the duty question.  There is no challenge to that approach as a matter of principle.  The applicant does not seek to advance any different proposition as to how a court should determine what his Honour Justice Leeming described below, your Honours, as “not even a ‘non‑radical’” development of the duty issue.  Your Honours will find that at 146 of the reasons below, page 112, your Honours, of the application book, lines 20 and following.

Your Honours, the applicant does not invite a challenge to that approach as a matter of principle ‑ does not seek to advance any different principle.  It says that there is a continuum of construction cases ‑ at one end a simple residential contract, at the other a more complex contract ‑ and they do not posit, your Honours, how the dividing line, if their proposition be right, ought be determined as a matter of principle, and so it is a little unclear as to what it actually invites this Court to do by way of guidance to ‑ ‑ ‑

CRENNAN J:   Well, I suppose on one view there may be force in the idea that this is not a particularly radical increment, but all the judges – both the primary judge and the intermediate Court of Appeal judges all seem to accept that in common law terms this is an increment.

MR CORSARO:   Yes, and can I say something about that approach?  The way his Honour Justice Basten reasoned through to the duty point, accepting that he was bound by the authority of this Court, that pre‑existing duty to the developer had to be found in order for a duty to the owners’ corporation to ‑ ‑ ‑

CRENNAN J:   Just applying Bryan v Maloney and Woolcock, yes.

MR CORSARO:   Yes, your Honour, and we actually put the proposition to the court below and to the first instance judge that the salient features approach now dictates that we ought be seen as a particular plaintiff and the features do not require the pre‑existing duty, but his Honour Justice Basten along conventional lines considered that by reference to the authorities in this Court he had to find a pre‑existing duty to the developer in order to then establish vulnerability and duty on the part of the applicant to the first respondent.

If I could just invite your Honours to go back to the reasoning?  At 21, page 66 of the application book, a key plank in the proposition was that his Honour considered two features, namely, assumption of responsibility and reliance as really an aspect of vulnerability.  Your Honours will see that at 21 on that page.  The criticism then made by the applicant attaches to the conclusion which your Honours will find at 103 of the application book, paragraphs 118 and 120, because what his Honour did – and as your Honour the Chief Justice correctly pointed out, Astley comes from a different genesis, in a different era pre‑vulnerability, pre‑Perre v Apand.  I think it preceded Perre v Apand by a couple of months.

So one does not find the language of vulnerability in the concurrent duty case, but what emerges is if – and Astley v Austrust has been applied by various courts and this Court on such occasions in the post‑vulnerability era ‑ so it seems to be consistent with the proposition that Astley v Austrust really essentially turned on the assumption of responsibility and reliance, which is part and parcel of the contractual obligations incurred when one enters into a contract, as manifesting vulnerability in the true sense, so that is what his Honour then reasoned too.

Your Honours will see at 118, having started to deal with the issue of vulnerability at 118, his Honour said at 120 that on any view the developer was reliant, was vulnerable because the contract was carried out as it was intended and still the contractual result was not procured.  There is no challenge, we think, to the proposition that the existence of a contract will not exclude liability under the dictates of the law of negligence.  That is clear from my friend’s acceptance of Bryan v Maloney in a general sense, and this Court’s reconsideration of the whole area in Barclay v Penberthy, and there is no occasion for the Court really to reconsider that particular area of the law.

This Court has firmly declared in that last case that the existence of a duty or otherwise will not be determined by the existence of a contract or otherwise, and that is consistent with the development of the law in Astley and we say is not in any way opened up by what my friends seek to do.  My friends seek to challenge in essence the application of those principles.  There is no challenge that we hear either orally or see in writing from the applicant that challenges the underlying proposition that comes out of Barclay v Penberthy.  In fact, my learned friend, Mr Jackson, accepted that proposition.  So we do not ‑ ‑ ‑

CRENNAN J:   But not in this context.  I think he firmly made that point.

MR CORSARO:   But your Honour has added “not in this context”.  With respect, we accept it is in this context, and that is why we say in our written submissions and we repeat that we are a little confused as to what the general principle being urged is.  In other words, what is being said to this Court is there are a continuum of cases because there are a continuum of building contracts and somewhere along the line this Court ought draw some proposition to distinguish what is not under attack, namely, Astley v Austrust and Barclay as opposed to what is under attack based on the particular circumstances of this case.

Firstly, there is no evidence, and there was no evidence below, that this was a typical arrangement.  My friend says that from the Bar table and, indeed, we say that at its very best, when viewed in the cold light of day, this is a case where the Court is being asked to consider whether or not as a matter of particular circumstances based on the particular circumstances of this case it falls on one side or the other of a dividing line which is not posited and not made clear to us ‑ ‑ ‑

CRENNAN J:   Some sort of exception to concurrency.

MR CORSARO:   The fact that your Honour says to me “some sort of exception”, we say correct but we do not have articulated to this Court in any meaningful way, either in writing or orally, what it is that this Court is invited to say.  In other words, what is the line?  Is it the ‑ ‑ ‑

FRENCH CJ:   Do we have articulated in any of the authorities a criterion, if you like, or an answer to the question whether complexity and detail in a contract is capable of excluding concurrent liability in tort?

MR CORSARO:   Not in express terms; by implication, yes, your Honour.  Can I suggest why?

FRENCH CJ:   Yes.

MR CORSARO:   Woolcock involved a complex ‑ ‑ ‑

FRENCH CJ:   Warehouse ‑ ‑ ‑

MR CORSARO:   It involved a complex case.  Nowhere does your Honour find in Woolcock the suggestion that the complexity of the contract in some way precluded the existence of the duty; that turned on other ‑ ‑ ‑

FRENCH CJ:   Well, the point was not being put?

MR CORSARO:   No, it was not put.  Secondly, in Barclay, your Honours looked at the area.  Your Honours looked at whether or not contract and the ability to contract in any particular term to take on the risk precluded the existence of duty, and your Honours made it perfectly clear, we think, that the ability to contract did not preclude it, thus if you have contracted we would say is a non sequitur.  We say, therefore, there is nothing to re‑examine because your Honours have already looked at it.  But we accept, your Honour, that at no stage has the question which your Honour put to me been clearly articulated and defined in any of the authorities.

CRENNAN J:   Added to that, I suppose, is the qualifiers, particularly the one about a latent defect which is dangerous.

MR CORSARO:   Well, I know the applicant puts that submission.  Can I just answer that very briefly?  The proposition that the duty was found by reference to some case which is said to be foreign ‑ and I will come back to that in a moment – because it is an interesting submission but the ‑ ‑ ‑

CRENNAN J:   Well, I think to be fair, Justice Basten was only saying this is not a particularly novel idea.

MR CORSARO:   Indeed.

CRENNAN J:   He was not saying any more than that in relation to cases from other jurisdictions, I do not think.

MR CORSARO:   Yes, and can I just say something about these so‑called foreign decisions?  Firstly, Winnipeg, which is criticised by our friends as being a poor basis for the development of the law in this area, and was actually cited with approval in Bryan v Maloney at 22, your Honours, and described by this Court as persuasive Canadian authority, so that deals with that.  So his Honour’s reference to Winnipeg Condominium is not unusual to illustrate that what he is doing is not unorthodox.

Secondly, Invercargill, which is criticised, was referred to by Justice McHugh in Woolcock at 55 with authority and, lastly, RSP Architects, if your Honours go to it, contains a detailed and correct analysis of Australian law to a scenario which is strikingly similar to the present case so it would be odd that his Honour, knowing of that decision, would not, in fact, cite it as being consistent with the proposition which he developed.

On the statutory structure, can I take your Honours to what Justice Leeming had to say because the remarks are probably apposite and, although given in the context of dealing with the criticism below based on the structure of the Act - your Honours will find it at 110 of the application book and we may we take your Honours to it?  Your Honours will see Justice Leeming at 142, application book 110, line 38 dealt with the structure which is, I think, a matter on which your Honour Justice Crennan wanted me to address your Honours.

Your Honours will see at 111, 143 and 144, Justice Leeming with the elegant succinctness of what appears at 143 and 144 said that what was being proposed by the owners’ corporation below was not untoward and, indeed, consistent with the scheme because your Honours will see at 140 his Honour said that initially the proposition put below in relation to the very criticism made here seemed to be superficially attractive but then on analysis fell away to nothing, and that appears at 143 and 144.

CRENNAN J:   This was the point that the statutory scheme did not cover commercial ‑ ‑ ‑

MR CORSARO:   No, this related to lifting the veil in order to ‑ ‑ ‑

CRENNAN J:   I am sorry, yes.

MR CORSARO:   ‑ ‑ ‑ in some way equate the interests of the individual investors.  Your Honours will recall that this building was partly residential and partly commercial.

FRENCH CJ:   We are dealing with ‑ this is the serviced apartments corporation we are dealing with?

MR CORSARO:   Yes, it is, and the proposition that was advanced in the court below was that it was appropriate to, in effect, lift the veil – that is not the precise terminology, but to in some way look behind the legislation which ‑ ‑ ‑

FRENCH CJ:   Well, the veil of the corporate body dropped on top of Chelsea for ‑ ‑ ‑

MR CORSARO:   Your Honour, we will call it the Chelsea veil, whatever, but to lift that veil for the purposes of equating the individual investors – which were essentially people like me who were investing in serviced apartment buildings which were specifically then going to be leased out for superannuation purposes and so on and derive an income, so we are not talking about commercial investors in a broad sense beyond that.  What was put below was what is being put here, namely, if one lifts the Chelsea corporate veil, returning to that expression, one should equate the investors as being commercial investors and so on, and that was dealt with at 140 through to 145 of Justice Leeming’s decision at 110 of the application book.

Although recognising the superficial attraction of the proposition put – and this is to answer your Honour Justice Crennan’s question of me – then at 143 and 144, at 144 in particular, his Honour says:

There is nothing antithetical in those provisions to a duty of care owed by the builder to that special creature of statute which is intended by builder and developer to come into existence following the performance of the builder’s obligations ‑

and so on.  So can I lastly make two points?  The applicant’s reliance on Robinson, which your Honours will find in the written submissions, which is the English authority to support the applicant’s position, namely, that there is no warrant for the imposition of a duty in circumstances where there is a contract, although the applicant has moved slightly from the broad proposition today is, firstly, inconsistent with Australian authority because it is predicated on a stream of law which includes Murphy v Brentwood and D & F Estates as representing the law and, of course, that proposition was rejected by this Court in Bryan v Maloney at 21.

Lastly, returning to your Honour the Chief Justice’s question of me in relation to whether or not this Court has given consideration to the critical issue about whether or not a complex case would preclude the existence of the duty, can I return to that your Honours?  I am reminded by my learned junior that in Woolcock the Court did consider the role of the building contract and perhaps I should take your Honours to that at 28 to 30, and the emphasis there, your Honours, was on whether or not there is disconformity, which has always been really the emphasis of the analysis post‑Astley v Austrust, namely, whether or not there is a provision in the contract that precludes the existence of the duty.  In Woolcock that was then the emphasis and we say that there is no reason to revisit that particular ‑ ‑ ‑

FRENCH CJ:   Is this suggesting that implicit in that there is a kind of covering the field exclusion of the tortious ‑ ‑ ‑

MR CORSARO:   No, your Honours.  What we say is that having dealt with – we had a complex contract in Woolcock.  The consideration there was whether or not there was any part of the contract which excluded the imposition of the duty, which was the inquiry below.  His Honour Justice Basten considered that there was no particular provision of this contract that did so and I do not think that there is anything being advanced in this Court to suggest that on the strict terms of even this contract there is a clause that says there will be no duty of care, so we say that that is where Woolcock was.  It relied on – it had a sophisticated building contract, the Court considered it and we say that there is no warrant to return to it.  Your Honours, they are the only points that we want to add to ‑ ‑ ‑

FRENCH CJ:   Thank you, Mr Corsaro.  We will not need to hear from you in reply, Mr Jackson.

There will be a grant of special leave and the appellant will have leave to file and serve an amended notice of appeal.  That is not a requirement, of course.  It is a matter for you to consider whether you need to, and can that be done within seven days?

MR JACKSON:   Yes, your Honour.

FRENCH CJ:   There is a standard timetable for directions.  Thank you.

AT 10.04 AM THE MATTER WAS CONCLUDED