D J Piercy Pty Ltd v Parsons Management Group Pty Ltd [No 3] - [2016] WADC 2

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: D J PIERCY PTY LTD -v- PARSONS MANAGEMENT GROUP PTY LTD [No 3] [2016] WADC 2

CORAM: DEPUTY REGISTRAR HARMAN

HEARD: 15 OCTOBER 2015

DELIVERED : 28 JANUARY 2016

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:

Practice - Western Australia - Practice under the Rules of the Supreme Court of Western Australia 1971 - Application to amend statement of claim

Legislation:

Nil

Result:

Application dismissed

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):

Caltex Oil (Australia) Pty Ltd v Dredge 'Willemstad' (1976) 136 CLR 529
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515

DEPUTY REGISTRAR HARMAN: The first plaintiff and the defendant were parties to an agreement whereby the defendant would construct a self‑storage facility on the first plaintiff's land. Since the building works were completed the second plaintiff has conducted a self‑storage business at the facility.
The plaintiffs have applied for leave to amend their statement of claim in accordance with terms of a minute dated 8 September 2015 under which they each claim damages for breach of duty of care and the first plaintiff, for breach of contract. The process of amendment was imposed upon them in the course of an appeal.
The second plaintiff's claim is put along the lines that it was owed a duty of care because its business has been interrupted due to consequences attributed to acts or omissions of the defendant in the course of construction of the facility. The defendant contends that the proposed pleading is insufficient.
The applicants carry the onus of persuasion that the proposed amendment be allowed.
The case put on behalf of the second plaintiff is drawn from the following pleaded context:
6.As part of the works, the Defendant agreed to supply and install within the buildings to be constructed:
6.13 goods hoists …;
6.2an office electrical switchboard ('Switchboard');
6.3emergency light fittings ('Emergency Lights');
6.4an automatic sliding gate ('Gate'),
(collectively referred to as the 'Goods').
…
11. Since the completion of the Works, the Second Plaintiff:
(a)has carried on a self storage business from the Site under the name Cockburn Central Self Storage ('Business'); and
(b)paid all costs associated with the running of the Business, including repairs and maintenance of the buildings on the Site, and paid all rates and taxes charged on the Site.
…
19A.As a consequence of problems and faults with the Hoists, Switchboard, Emergency Lights and the Gate the Second Plaintiff has paid costs, incurred liability and suffered loss of profit as follows:
(a)the cost to remove the 3 supplied Hoists, and supply and install 3 replacement goods hoists, being $294,473.83;
(b)storage costs in respect of the 3 supplied Hoists which remain at the Site, particulars of such costs to be provided prior to trial;
(c)the removal and relocation of existing customers from self-storage units adjoining the supplied Hoists, including lost rental income in respect to such units, with the particulars of such further costs to be provided prior to trial;
(d)the cost to repair to the supplied Hoists prior to their removal, full particulars of which will be provided prior to trial;
(e)the cost of inspecting and testing of the Switchboard, being $1,254.79 and $5,886.20 for purchasing a replacement switchboard;
(f)the cost of replacing certain of the emergency lights that were not working, being $4,040.30;
(g)the cost for the repair and replacement of a number of items and components of the Gate including the Gate's motor, keypad system, battery, safety beams, charger and circuit board, being $7,888.78.
19B.The Plaintiffs have agreed that the First Plaintiff will pay to the Second Plaintiff the sum of money representing the loss it has incurred pleaded in paragraph 19A above, and the Plaintiffs have agreed that in the event that the First Plaintiff does not obtain a judgment in these proceedings in its favour against the Defendant for the sum of money representing the loss pleaded in paragraph 19A, then to the extent of any shortfall the Second Plaintiff shall repay to the First Plaintiff the amount of any such shortfall.
…
19C.It is an express term of the agreement pleaded in paragraph 19B that:
(a)the First Plaintiff agrees to pay the Second Plaintiff the sum of money representing the costs paid, liability incurred by and loss of profit suffered by the Second Plaintiff a consequence of problems and faults with the Goods;
(b)in the event that the First Plaintiff cannot or does not obtain a judgment in these proceedings in its favour against the Defendant for the sum of money it has paid to the Second Plaintiff, then to the extent of any shortfall, the Second Plaintiff shall repay to the First Plaintiff the amount of any such shortfall;
(c)to the extent that the First Plaintiff cannot recover the sum of money representing the costs paid, liability incurred by and loss of profit suffered by the Second Plaintiff a consequence of problems and faults with the Goods the Second Plaintiff may endeavour to recover that loss from the Defendant in these proceedings. [sic]
19D.Pursuant to the agreement pleaded in paragraph 19A [sic] the First Plaintiff has paid to the Second Plaintiff the sum of $326,128.39.
…
There is no pleading that the second plaintiff has any interest in the land on which the facility is located or either any entitlement to its occupation or any possessory entitlement to anything at the facility. There is no allegation of any obligation on the part of the second plaintiff generated by its ongoing use of the facility. Accordingly its payment of the cost of repairs and maintenance of the buildings at the facility and of the specified charges each specified at par 11(b) has been voluntary.
At pars 19A(a) ‑ 19A(g) the plaintiffs plead what are characterised at par 19A as costs, liabilities and loss of profit arising from problems and faults with features of the facility. Despite the reference to liabilities there is no relevant allegation of material fact in either the balance of par 19A or elsewhere. As for loss of profits, the only support may be provided at sub-par (c) but further pleading is necessary.
The particular costs specified in the balance of par 19A were paid by the second plaintiff because it either commissioned the work or otherwise chose to do so. It is not clear whether the second plaintiff intended that some of those costs may be characterised as business expenses and if so, what would be the significance of that result.
It is also not clear how much of what precedes par 16 is presented for the purposes of the second plaintiffs claim. I refer in particular to par 7(c), pars 14 and 15; they are as follows:
7.At all material times:
…
(c)the Defendant knew or ought to have known that:
(i)the Goods and their reliable operation were important to the operation of a self‑storage business;
(ii)if the Goods were not fit and suitable for their proper purpose, nor reliable in their operation, that could have detrimental effect on the conduct of a self‑storage business to be conducted from the site.
…
14.At all material times the Defendant:
(a)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;
(b)sourced and chose the Goods; and
(c)installed the Goods in the buildings constructed on the Site.
15.By reason of the matters pleaded in paragraphs 7(c) and 14 above, the Defendant assumed responsibility to supply goods that were:
(a)fit and proper for the purpose of use in a self‑storage business;
(b)suitable for the purpose of use in a self‑storage business; and
(c)reliable in operation for the purpose of use in a self‑storage business.
Although the allegation put at par 7(c) would extend to a mere user of the facility and thereby it is open to consider that the responsibility pleaded at par 15 would be drawn upon by the second plaintiff, according to par 15 its assumption by the defendant was generated under the agreement with the first plaintiff. There being no reference in par 15 to any party, prima facie it should be difficult to sustain the proposition that the contended responsibility would otherwise have been generated; yet because the first plaintiff has put the same allegations at par 8 in order to establish the duty of care owed to it, it is open to consider that par 15 had been intended to speak to the case of the second plaintiff. Under that prospect the allegation is deficient because the expression 'assumed responsibility' conveys no more than scope for drawing inferences.
At par 16 and following the second plaintiff's case is put as follows:
16.The Second Plaintiff, as the first operator of the Business was vulnerable and susceptible to suffering economic loss from interruption of its business operations if:
(a)the Hoists were not fit for their purpose for use as goods lifts in a self‑storage business and reliable in their operation;
(b)the Switchboard was not reasonably fit for its purpose and reliable in its operation;
(c)the Emergency Lights were not reasonably fit for their purpose and reliable in their operation; and
(d)the Gate was not fit for its purpose and reliable in its operation.
17.The Defendant knew or ought reasonably to have known, of the matters pleaded in paragraph 16.
18.In the premises at all material times, it was or ought reasonably to have been, foreseen to the Defendant that:
(a)in the event that the Goods were defective; or
(b)not fit for their purpose; or
(c)not reliable in their operation;
then:
(d)interruption to the operations of the self‑storage business at the Site could occur; and
(e)loss could be suffered by the operator of the self‑storage business at the Site.
19.In the premises, at all material times, the Defendant owed the Second Plaintiff a duty to:
(a)execute and carry out the Works with care, professional skill and diligence having regard to their nature; and
(b)exercise reasonable care and skill in selecting and installing the Goods so as to prevent any interruption to the self‑storage business and thereby avoid economic loss being suffered by the Second Plaintiff by reason of any interruption to the conduct of the self‑storage business to be conducted from the Site.
…
22.By reason of the Defendant's breach of duty of care to the Plaintiffs:
(a)…, alternatively
(b)the Second Plaintiff
have suffered loss and damage.
Particulars
To the extent that the first plaintiff cannot recover the loss and damage particularised, on the basis that it did not pay the costs particularised (or any like basis) the second plaintiff claims that loss and damage.
The particulars at par 22 are of the amounts paid and payable to the second plaintiff pursuant to the agreement pleaded at par 19B. I previously observed that par 19A(c) requires further pleading to establish loss of profit. According to pars 19B and 19C, by a process that is not revealed by the pleading the agreement between the plaintiffs would transform the costs liability and loss of profit pleaded at par 19A into loss that the second plaintiff would seek to recover under its claim.
As par 18 expresses, pars 16 and 17 put the second plaintiff's case in relation to foreseeability.
No pleading supports that proposition at sub pars 19(a) and (b) that in undertaking its obligations to the first plaintiff the defendant owed the second plaintiff a duty.
As for the proposition bound up in the allegation at par 19(b), that the defendant owed a duty to avoid harm to the operator of the first self‑storage business at the facility; the allegation that the defendant prevent interruption of the second plaintiff's business operations is consistent with those at pars 7(c), 15(c), 16, and 18 and 19A; yet there is no pleading of any such loss. The only loss revealed by the pleading is that which emerges at par 22, under the agreement between the plaintiffs.
None of the allegations at pars 19A(a) – 19A(g) are expressed in a manner that would speak of loss arising from interruption of its business: each puts loss in terms measured either by capital expenditure or loss of opportunity. There is no pleading of any process by which the costs and loss pleaded would generate loss arising from interruption of the second plaintiff's business. No case put for recovery of the costs and loss expressed in par 19A.
Although at par 16 the second plaintiff pleads vulnerability, it is expressed by reference to it being the first operator of the business, not to any vulnerability to the consequences of the particular acts or omissions of the defendant. There is no relevant pleading of loss.
I also note that the second plaintiff's case does not draw upon the allegation at par 15.
Before I move on to consider the issues raised by the defendant I would add that it is not clear whether the use of the definite article in putting the allegations at pars 8(b)(ii), 16, 18(d) and 18(e) and 19(b) is significant.
The second plaintiff's pleading does not specify any interruption of its business. It does not attribute any loss to such an event or events.
To turn to the particular issue raised by the defendant, I am satisfied that the state of the common law is that damages are not recoverable if all that is alleged is that negligence has resulted in economic loss that was reasonably foreseeable.
A particular submission of the defendant is that in order to establish the existence of the duty for which the second plaintiff contends it would be required to put a special case.
The only allegation to that end is that the second plaintiff is the first user of the facility.
The fact that every commercial building would have a first user renders that allegation insufficient.
In Caltex Oil (Australia) Pty Ltd v Dredge 'Willemstad' (1976) 136 CLR 529 Stephen J considered that there were sufficient features which combined to establish the defendant's knowledge that damage to the pipeline leading to the facility would be inherently likely to produce economic loss. In Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 under its commentary on the law the majority advanced the proposition that the vulnerability of Caltex may have accounted for the in the earlier case; vulnerability having been portrayed as a 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 that case it was suggested that vulnerability along with notions of responsibility and reliance would speak for the existence of a duty. I have already recorded the token pleading of vulnerability and responsibility. There is no allegation of reliance.
The second plaintiff presents a novel claim that calls for a comprehensive pleading. In my opinion no useful purpose would be served by allowing amendment of the claim in the terms proposed.