D J Piercy Pty Ltd v Parsons Management Group Pty Ltd [No 2] - [2015] WADC 53

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: D J PIERCY PTY LTD -v- PARSONS MANAGEMENT GROUP PTY LTD [No 2] [2015] WADC 53

CORAM: KEEN DCJ

HEARD: 4 MAY 2014

DELIVERED : 14 MAY 2015

FILE NO/S: CIV 4003 of 2013

BETWEEN: D J PIERCY PTY LTD
First plaintiff
COCKBURN CENTRAL SELF STORAGE PTY LTD
Second plaintiff
AND
PARSONS MANAGEMENT GROUP PTY LTD
Defendant

Catchwords:

Appeal from registrar - Summary judgment O 16 - Whether plaintiffs have arguable case in tort for economic loss - Turns on own facts

Legislation:

Nil

Result:

Appeal allowed

Representation:

Counsel:

First plaintiff                 :     Mr M Curwood
Second plaintiff            :     Mr M Curwood
Defendant:     Mr J P Cook

Solicitors:

First plaintiff                 :     Frichot & Frichot
Second plaintiff            :     Frichot & Frichot
Defendant:     Mendelawitz Morton

Case(s) referred to in judgment(s):

Agar v Hyde [2000] HCA 41
Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209
Apache Energy Ltd v Alcoa of Australia Ltd [No 2] [2013] WASCA 213; (2013) 45 WAR 379
Manzi v Smith [1975] HCA 35; (1975) 132 CLR 671
Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180
Woolcock Streets Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515

KEEN DCJ: This is an appeal from the decision of a deputy registrar made 16 December 2014 whereby he entered judgment for the defendant against the second plaintiff pursuant to O 16 r 1 of the Rules of the Supreme Court 1971 (RSC) and also entered judgment for the defendant against the first plaintiff limited to the claim for breach of duty of care, again pursuant to O 16 r 1. In addition, the deputy registrar struck out various paragraphs of the statement of claim on the ground they disclosed no reasonable cause of action or that they may prejudice, embarrass or delay the fair trial of the action.

Background

The plaintiffs' claim arises out of the construction by the defendant of buildings on property formally owned by the first plaintiff. It is said those buildings were to enable a self storage business to be conducted on the land.
The first plaintiff entered into a written agreement for the building works on 1 September 2008. According to the affidavit of Peter James Piercy sworn 7 July 2014 on behalf of the plaintiffs, those works were completed on or about September 2009.
After completion of the works the second plaintiff commenced carrying on the business of self storage from the premises.
It is said that pursuant to the contract the defendant was to supply and install three goods hoists, an electrical switchboard, emergency light fittings and an automatic sliding gate (the goods). It is argued on behalf of the plaintiffs that the goods were defective and ultimately, after some repairs were carried out - which did not completely overcome the problems - two of the hoists were removed and replaced and it was anticipated that the third hoist would have to be replaced and various costs were incurred.
The plaintiffs claim damages in respect of those matters.
At this level of inquiry it is not necessary for me to consider the claims as to the allegations of defective goods or indeed the necessity for and the cost of repair or replacement.
By summons dated 6 June 2014 the defendant applied for summary judgment against the plaintiffs and for various paragraphs of the substituted statement of claim to be struck out.
The application was supported by an affidavit sworn by Jonathon Peter Cook on behalf of the defendant on 5 June 2014 and opposed by the affidavit of Peter James Piercy to which I have already referred.
The deputy registrar made the orders which I have already outlined. He produced written reasons for his determination on 18 September 2014.
By notice of appeal dated 22 December 2014 the plaintiffs appeal the decision.
The reasons of the deputy registrar reveal that the sole cause of action brought by the second plaintiff is for damages for loss arising from breach of duty of care. The defendant argued that there was no basis for that allegation that it owed a specific duty of care. The reasons of the deputy registrar reveal that there is no pleading which would suggest any relationship between the second plaintiff and the defendant either by reference to the works or at all and there is no pleading that the second plaintiff acquired some benefit under the agreement between the first plaintiff and the defendant or had any interest in the land on which the works were undertaken.
The defendant's second contention was that there was no scope for any finding of any loss.
It would appear from a reading of the statement of claim that the second defendant incurred the costs of replacement and repair and ancillary costs but it was pleaded (par 19):
H.The Second Plaintiff has and will charge to the First Plaintiff any and all costs it has paid as set out above together with any lost rental income; and
I.All loss and damage particularised above is claimed by the first plaintiff. To the extent that the First Plaintiff cannot recover the loss and damage particularised the Second Plaintiff claims that loss and damage.
That pleading of loss is prefaced by the words 'by reason of the defendant's breach of its duty of care to the plaintiffs the plaintiffs have suffered loss and damage'. Accordingly, it is a rolled up plea of damage in respect of each of the plaintiffs.
In his affidavit in opposition to the summons, Peter Piercy deposed:
27.It has been resolved by the First Plaintiff and Second Plaintiff that the costs for the repairs carried out on the Goods paid by the Second Plaintiff are to be charged to the First Plaintiff.
28.Accordingly, I instructed Blyth Partners, who are the accountants for both the First Plaintiff and the Second Plaintiff, to on-charge the costs paid by the Second Plaintiff in respect of the repair and/or replacement of the Goods to the First Plaintiff.
29.I am told by the accountant from Blyth Partners and I verily believe that the accountant has charged the costs paid by the Second Plaintiff in respect of the repair and/or replacement of the Goods to the First Plaintiff in the accounting and taxation records of the companies in accordance with my instructions.
It is appropriate to note at this stage that both the first and second plaintiffs are companies who have common directors. As at the date of the contract the first plaintiff owned the shares in the second plaintiff and as from 2011 those shares were owned by Mr Peter Piercy.
The deputy registrar at [14] said:
On the evidence of Piercy I am satisfied that the cost of relevant expenditure of the second plaintiff has been subjected to a process by which it has been accounted for in the books of the first plaintiff. There is no explanation either in the pleading or the evidence as to whether the second plaintiff has recovered the cost of its expenditure. There is insufficient to conclude that the second plaintiff has had the benefit of any arrangement between the plaintiffs.
The deputy registrar went on to note that the case for judgment against the first plaintiff was limited to the claim for breach of duty of care on the basis that it had sustained no loss. He noted that loss was an essential feature of the cause of action. He was satisfied that the first plaintiff had resolved that it would accommodate the second plaintiff and, but for that implementation of the resolution, the first plaintiff could not have projected any loss.
The deputy registrar also noted that he was satisfied, in the case of the second plaintiff, that there was no basis for it to contend for the specific duty of care and that the first plaintiff had sustained no loss consequent upon any act or omission of the defendant. The registrar had noted that whilst the cost of the expenditure of the second plaintiff had been subjected to a process by which it had been accounted for in the books of the first plaintiff, there was no explanation, either in the pleading or the evidence, whether the second plaintiff had recovered the cost of the expenditure. There was insufficient to conclude that the second plaintiff had the benefit of any arrangement between the plaintiffs.
I do not propose at this stage to go through the reasons further in relation to the paragraphs of the statement of claim that was struck out. At this stage I limit myself to the claim for judgment and the decision of the deputy registrar in that regard.

Plaintiffs' submissions

The plaintiffs argue that the claim by the second plaintiff arises only in negligence whereas the claims of the first plaintiff arise in both contract and in tort. It is argued that there can be concurrent claims in contract and tort insofar as these matters relate to the first plaintiff. As to the second plaintiff, the plaintiffs' argument is that the statement of claim discloses an arguable cause of action in negligence for pure economic loss.
It is also argued that the pleading makes it clear that the second plaintiff has incurred the rectification costs and that it will charge the first plaintiff those costs. The first plaintiff will claim those damages against the defendants. However to the extent that the first plaintiff cannot recover those costs, it is said that the second plaintiff should be able to do so. The claims are described as alternative claims. It could not be the case at trial that both plaintiffs could recover the same loss.
It is argued that the statement of claim reveals a cause of action in respect of both plaintiffs and the appeal should be allowed.

Defendant's submissions

The defendant argues that the second plaintiff has no contractual arrangement with the defendant and there is therefore no claim in contract. So much does not appear to be in dispute.
It is also argued that damage is an essential element to complete the tort of negligence and the second plaintiff has suffered no loss. It is argued that by the arrangement between the first and second plaintiffs the second plaintiff is not 'out of pocket'. It was accepted during the course of argument by the defendant, for the purposes of the hearing, that the second plaintiff had paid a sum of money with respect to the alleged defective work and by the book entries referred to by Mr Piercy in his affidavit, the second plaintiff has been reimbursed by the first plaintiff, a position adopted by the plaintiffs. It is argued that the first plaintiff did so voluntarily.
As an aside, during the course of the hearing, I expressed the view that the affidavit of Mr Piercy did not condescend to particulars as to how the costs had been on‑charged by the second plaintiff to the first plaintiff and what was meant by those words. The plaintiffs were given the opportunity of an adjournment in order to clarify the position but given the concession made by the defendant elected not to do so.
It is also argued on the defendant's behalf that there were no features pleaded of the relationship between the second plaintiff and the defendant which would give rise to a duty of care to avoid economic loss, which is the nature of the second plaintiff's claim. There is no pleading to show a nexus between the defendant and the second plaintiff and the second plaintiff had no proprietary interest in the land.
As to the position of the first plaintiff, it was accepted that arguably the plaintiff could have a claim in breach of duty concurrent with the claim for breach of contract but it was argued that there was no loss to sustain the breach of duty, the costs of repair and replacement having been met by the second plaintiff.
On that last proposition it seemed to me that it was inconsistent with the concession that had been made by the defendant in relation to the way in which the costs of such repairs and replacements were dealt with as between the two plaintiffs. Either the second plaintiff had not suffered the loss because of the book entries, in which case the first plaintiff had or, as found by the registrar, there was no explanation or evidence as to whether the second plaintiff had recovered the costs of expenditure, and if that be the case then there was no loss by the first plaintiff but a loss by the second plaintiff. It seemed to me that it had to be one or the other.

Substituted statement of claim

The statement of claim pleaded that the plaintiffs were companies associated with Donald James Piercy and his son Peter James Piercy.
The statement of claim went on to allege that as at February 2008 the first plaintiff was the registered proprietor of the relevant land and owned all the shares in the second plaintiff.
It went on to plead (par 4.3):
[I]t had been agreed between Donald James Piercy and Peter James Piercy that:
(a)the First Plaintiff would construct buildings to enable the Site to be used as a business of providing self-storage facilities for hire to the public ('self storage business'); and
(b)the Second Plaintiff, would, upon completion of the construction of the buildings referred to in paragraph 4.3(a) conduct a self storage business from the Site.
Paragraph 6 of the statement of claim pleaded the written agreement dated 1 December 2008 between the first plaintiff and the defendant for the works which in par 7 were described to include three goods hoists, an office electrical switchboard, emergency light fittings and an automatic sliding gate.
At par 9 it was pleaded:
At all material times, the Defendant was aware that the Goods were intended to be used for commercial purposes at the Site and for the purposes of a self storage business, and at all material times the Plaintiffs relied upon the Defendant's skill and judgement.
At par 10 it was pleaded:
The Defendant owed the Plaintiffs a duty of care to execute the works with care, professional skill and diligence having regard to their nature.
The statement of claim then went on to set out what were alleged to be the express and implied terms of the agreement.
At par 13 it was alleged that:
Since the completion of the Works, the Second Plaintiff:
13.1has carried on a self storage business from the Site under the name Cockburn Central Self Storage ('Business'); and
13.2paid all costs associated with the running of the Business, including repairs and maintenance to the buildings on the Site, and paid all rates and taxes charged on the site.
Paragraph 14 is expressed:
On 30 December 2011 the First Plaintiff transferred to Peter James Piercy the land and improvements comprising the Site.
The statement of claim then goes on to set out the alleged breaches of the express and implied terms of the agreement as alleged and the loss and damage arising therefrom.
Paragraph 18 of the statement of claim alleged a breach of duty of care in that the defendant failed to execute the works with care, professional skill and diligence.
In par 19 the plaintiff pleaded the loss and damage alleged to have been suffered by the plaintiffs for the breach of the duty of care as alleged. That included by way of particulars:
H.The Second Plaintiff has and will charge to the First Plaintiff any and all costs it has paid as set out above together with any lost rental income; and
I.All loss and damage particularised above is claimed by the First Plaintiff. To the extent that the First Plaintiff cannot recover the loss and damage particularised, the Second Plaintiff claims that loss and damage.

Principles

There is little in the way of dispute between the parties as to the general principles relating to summary judgment.
It is well recognised that an application for summary judgment for a defendant or to strike out a cause of action should be approached with great caution. Having made that comment, his Honour Le Miere J went on to expand upon the same in Alcoa of Australia Ltd v Apache Energy Ltd [2012] WASC 209, 113, et seq. It is not necessary for me to canvass all that was said by his Honour but to adopt the same with respect.
In particular his Honour noted in Agar v Hyde [2000] HCA 41, that there needs to be a high degree of certainty about the ultimate outcome of the proceedings if it were allowed to go to trial in the ordinary way.
In the appeal in that matter (Apache Energy Ltd & Ors v Alcoa of Australia Ltd [No 2] [2013] WASCA 213; (2013) 45 WAR 379, 86) Buss JA said:
On an application by a defendant for summary judgment of the plaintiff's claim, the defendant must demonstrate that, on the material before the court, the action should not be permitted to go to trial in the ordinary way because it is apparent the action must fail. The power to order the summary dismissal of a claim must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried' (citations omitted).
It is also well recognised that there may be concurrent duties in both contract and tort: Apache Energy Ltd v Alcoa of Australia Ltd [No 2] (183 and following). However there are limits to this, for example, where the contract itself excludes tortious liability or if to permit of tortious liability would enable the plaintiff to circumvent or escape a contractual exclusion or limitation of liability.
In the present case it is said that the second plaintiff's claim is one for pure economic loss. So much seems to be the plaintiffs' position and accepted by the defendant. The present claim is one for the removal and replacement of hoists and consequential losses. They arise by reason of alleged breaches of the contract by reason, inter alia, that the equipment was not fit for the purpose for which it was provided.
I shall proceed on the basis that the second plaintiff's claim is for economic loss on the basis that it does not arise as a result of any damage or injury to property belonging to or for which the second plaintiff has some demonstrated responsibility.
There are limitations to the imposition of a duty of care to avoid pure economic loss. Again there is little in the way of dispute in respect of this.
In Apache Energy [No 2] Buss JA reviewed numerous authorities. His Honour noted, by reference to Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180, that determining whether a duty of care exists in a novel category of cases requires a multifaceted inquiry or salient feature analysis with a close examination and evaluation of the facts pertinent to the relationship between the plaintiff and the defendant. His Honour said at (232) that the court must focus on the factors which militate in favour of and against the imposition of a duty of care and this assessment must be undertaken and the ultimate conclusion arrived as a matter of principle.
At (233) his Honour noted that vulnerability of a plaintiff appeared to be a highly significant salient feature in deciding whether the defendant was under a duty to exercise reasonable care to prevent the plaintiff from suffering pure economic loss. He noted that vulnerability referred to the plaintiff's inability to protect itself from the defendant's failure to exercise reasonable care. He also noted at (234) that in Perre McHugh J had said that the vulnerability of the plaintiff to harm from the defendant's conduct is 'ordinarily a pre-requisite to imposing a duty' in cases of pure economic loss. In Woolcock Streets Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515, the majority observed that the plaintiff's vulnerability had become an important requirement.
However as Buss JA noted at (237), the majority in Woolcock noted that it was unnecessary, in that case
to attempt to identify or articulate the breadth of any general proposition about the importance of vulnerability.
In Apache Energy [No 2] Buss JA at (239), having remarked about the findings in Woolcock, opined that their Honours did not hold that vulnerability was an essential 'salient feature' in all cases or that, in the absence of vulnerability, a duty of care to avoid pure economic loss could not, as a matter of law, arise in any case. He went on to suggest the point is at least attended by doubt.

Discussion

The first plaintiff

There is no issue that the claim by the first plaintiff, as it sits in breach of contract, is open to the first plaintiff. Even if the first plaintiff was unable to demonstrate any specific loss, demonstration of a breach of that contract would entitle the first plaintiff to at least nominal damages.
However it is the first plaintiff's case that it has a case in negligence as well as breach of contract.
The statement of claim pleads in relation to the negligence claim that the defendant failed to execute the works with care, professional skill and diligence. By way of particulars it repeats those matters which are said to also comprise the breach of the agreement.
In my view it is arguable that the plaintiff could establish a claim in negligence for breach of duty of care. The claim as it is currently expressed, albeit inelegantly, is one whereby it is open to interpret the words used, namely failure to execute the works with care, professional skill and diligence, as being that the defendant carried out the works negligently.
I am satisfied that in all the circumstances it is open to the first plaintiff to plead a case in negligence.
Of course it is necessary for the first plaintiff to demonstrate some loss arising out of the negligence in order to complete the cause of action. In this regard the concession made by the defendant as to the meaning of the words used by Mr Piercy in his affidavit would suggest that the cost of repairs and replacements has been met by the second plaintiff but has been paid for by the first plaintiff by reason of the various book entries. There seems to be little doubt that such matters may be accommodated by agreement as between those parties by way of book entries: Manzi v Smith [1975] HCA 35; (1975) 132 CLR 671, 674.
It is by no means clear from the evidence before the court that those costs have not been paid by the first plaintiff. This is a matter alluded to by the deputy registrar in his reasons for judgment when he noted there was no pleading or evidence as to whether the second plaintiff had recovered the costs of its expenditure. However that is a matter for evidence at trial but given the book entries that appear to have been made in some form or other there is some evidence to suggest that that may have occurred. If the first plaintiff at trial fails to prove that it has suffered loss then it will of course fail on its claim in negligence.

The second plaintiff

Here the case is more difficult. It is not sought to be advanced that there is a claim in contract merely one of breach of a duty of care. The losses that are sustained by the second plaintiff and articulated in the statement of claim are not losses that arise consequent upon physical damage to its tangible property. There is no evidence before the court that the goods the subject of the contract became the property of the second plaintiff. Accordingly, it would seem, as I have noted it has been accepted, that the loss is economic loss.
The statement of claim seeks to found this claim on the basis that the defendant was contracted to build self storage units on the site. It follows from that that there was a clear intention that those premises would be used for commercial purposes as alleged in par 9 of the statement of claim. Whether or not the plaintiffs relied upon the defendant's skill and judgment as pleaded remains to be seen. Nevertheless, it follows that if it was the intention that the buildings and equipment will be used for commercial purposes, it follows that a breach may cause economic loss to the person carrying on that particular business, as put by counsel for the plaintiffs, the first time conductor of the business. It seems to me that that is something of which the defendant should arguably have been aware.
In dealing with matters of salient features it was argued on behalf of the defendant that no salient features have been pleaded in the current case in contrast to Apache Energy [No 2] at [63]. All that is said that the plaintiffs rely upon is the fact that the first plaintiff had a contract. It is said the second plaintiff has no proprietary interest in the land and it is unknown as to the terms with the first plaintiff upon which the second plaintiff was conducting the business on the land.
There are clearly deficiencies in the statement of claim. However those are deficiencies that may be cured by appropriate amendment.
As I have noted, it is pleaded that the defendant was aware that the goods were intended to be used for commercial purposes at the site and that of itself would suggest a vulnerability on the part of the person carrying out those commercial purposes if, by negligence, the goods had not been properly supplied or installed. As was noted in Perre v Apand at (129), the degree and nature of vulnerability sufficient to found a duty of care will ultimately be a question of fact. Le Miere J noted in Apache Energy (61) that it was not appropriate to determine summarily if the plaintiff was vulnerable. He expanded at (64) with the view that whether or not a duty of care existed should be determined having regard to the findings of fact made at trial.
It seems to me that this vulnerability is arguably something of which it is arguable the defendants knew or ought reasonably to have known. Vulnerability, as noted in Apache Energy [No 2] at (253), in the context of an alleged duty of care to avoid economic loss, is understood as the 'plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant'.
In all the circumstances it seems to me by reason of that vulnerability that the law may a duty of care upon the defendant in favour of the second plaintiff. Whilst the claim is weak, on its face it is at the very least arguable. In that context such an argument is not suitable for summary determination and the nature of the relationship requires illumination by findings of fact based on the evidence adduced at trial (Apache Energy [No 2] (270)).
Of course that does not conclude the argument. It is also necessary for there to be a demonstrated loss. Again I return to the concession made by the defendant at the hearing of the appeal. That concession was one whereby the defendant accepted that by the book entries the second plaintiff had paid for the cost of the repairs and rectification or replacement and was paid back by the first plaintiff. However I return to the findings of the deputy registrar which I endorse and that is that the evidence about this is not clear. There seems to be little doubt that the second plaintiff did make the initial payments for the cost of repairs and rectification and replacements and that being the case there ought at least at this level to be an acceptance of a loss and damage sustained by the second plaintiff.
In the circumstances I would allow the appeal by the second plaintiff. It seems, given the way in which the defendants have argued the appeal by way of the concession and then arguing that the first plaintiff has not suffered a loss, that it is attempting to have a foot in each camp. Whether or not there has been a breach of contract or negligence remains to be determined. However if that is the case then the plaintiff or plaintiffs should not be entirely deprived because of falling between two stools. It has clearly been stated that these are alternative claims depending upon the final nature of the evidence as demonstrated at trial. It will be a matter for the trial judge to determine where the loss lies.
Finally, before leaving this aspect of the appeal I should briefly deal with a matter raised by the defence, that the plaintiffs have no proprietary interest. The statement of claim alleges that the first plaintiff has transferred the subject land and improvements to Peter James Piercy. It is said it ceased to own the land on 30 December 2011. It is argued that beyond that date it could not suffer any loss in relation to the land or the subject goods. It is also noted that the second plaintiff had no proprietary interest in the land or the goods. In my view that latter point would not prevent the claim in negligence for the reasons I have already disclosed.
As to whether or not the transfer of the proprietary interest in the land from the first plaintiff will affect any right to damage is a matter for the trial judge and not for determination at this level of inquiry, in my opinion.

The striking out of the statement of claim or parts thereof

I have already noted that the pleading is inelegant. It clearly requires some further amendment. Part of the striking out ordered by the deputy registrar arose by reason of his finding that it was inevitable given the success of the summary judgment application that that would have an impact upon the pleading.
Concessions are made by the plaintiffs as to the inapplicability of the Sale of Goods Act 1895 and amendments are required to expunge that from the pleading.
It seems to me inappropriate to try to deal with the complaints about the statement of claim given my findings on the summary judgment application. In my view an appropriate way to deal with the matter would be to allow the plaintiffs to bring in a fresh minute in order to more fully articulate their claims and to abandon those aspects of the statement of claim which they concede are unsustainable but it is not for the court at this point to make suggestions as to how the statement of claim should be rectified.
It seems to me that the statement of claim criticism stands or falls with the application for summary judgment.

Conclusion

In my view the plaintiffs' appeal should be allowed and I will hear the parties as to the terms of the relevant orders and costs.