Elmgrove Holdings Pty Limited v Sellick Consultants 2009 Pty Limited
[2017] ACTSC 282
•22 September 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Elmgrove Holdings Pty Limited v Sellick Consultants 2009 Pty Limited |
Citation: | [2017] ACTSC 282 |
Hearing Date(s): | 3 August 2017 |
DecisionDate: | 22 September 2017 |
Before: | McWilliam AsJ |
Decision: | 1. The applications lodged 26 May 2017 are dismissed. 2. The first and third defendants are to pay the plaintiff’s costs of the applications. |
Catchwords: | PRACTICE AND PROCEDURE – Court Procedures Rules 2006 (ACT) r 1147 – application for summary judgment – where threshold for summary judgment not met – applications dismissed |
Legislation Cited: | Conveyancing Act 1919 (NSW) s 12 Corporations Act 2001 (Cth) s 601AH |
Cases Cited: | Austino Wentworthville Pty Limited v Metro Australia Limited [2013] NSWCA 59 Bolas v Calvary Health Care Limited [2016] ACTSC 58 |
Parties: | Elmgrove Holdings Pty Limited (ACN 078 613 831) (Plaintiff) Sellick Consultants 2009 Pty Limited Previously Known as Sellick Consultants Pty Ltd (ACN 136 601 146) (First Defendant) GHD Pty Limited (ACN 008 488 373) (Third Defendant) |
Representation: | Counsel W Sharwood (Plaintiff) T W Marskell (First and Third Defendants) |
| Solicitors Baker Deane & Nutt (Plaintiff) Wotton + Kearney (First Defendant) Cantle Carmichael Legal (Third Defendant) | |
File Number: | SC 319 of 2016 |
McWilliam AsJ:
By Statement of Claim initially filed on 20 July 2016 (Claim), the plaintiff has commenced proceedings in negligence against the first and third defendants. The Claim concerns a bridge which collapsed on 14 August 2010, which the plaintiff says caused damage to equipment owned by Reynders Constructions Pty Limited (Reynders). The alleged damage suffered by Reynders also extended to loss of reputation and goodwill, and loss in the value of the business.
The Claim alleges the first defendant was the independent structural engineer who provided a complete falsework design for the bridge, and the third defendant was the superintendent engaged in the project to build the bridge. Proceedings against the second defendant, Abergeldie Contractors Pty Limited, the initial contracting party with Reynders for the project, have been discontinued.
The plaintiff’s interest in the loss suffered by Reynders is derived by an assignment on 6 January 2012 (as pleaded in [2] and [3] of the Claim). The plaintiff says it is now the holder of a charge (initially held by the National Australia Bank (NAB) from 20 June 2006) over the assets of Reynder, including the right to take action against the defendants in relation to the matters pleaded in the Claim.
It is not in dispute that Reynders was placed into administration and was de-registered before the Claim was filed.
The present application
The two applications for determination by the Court, filed on 26 May 2017, seek summary judgment for the first and third defendants (collectively, the defendants) pursuant to r 1147 of the Court Procedure Rules 2006 (ACT) (Rules). In the alternative, the defendants seek that the proceedings be struck out pursuant to reg 425(1) of the Rules.
In either case, further orders are sought that the plaintiff pay the defendants’ costs and be prevented from commencing any further proceedings in the Court in respect of matters that are either the same or substantially similar unless and until the plaintiff has paid any costs order made.
For reasons that follow, I have determined that at this summary stage, the Claim ought be allowed to proceed.
Principles
The Court ought grant the discretionary remedy of summary relief (of part or all of the proceedings) with the utmost caution and only in very clear cases: O’Brien v Bank of Western Australia Ltd[2013] NSWCA 71 at [66]; Young v Hones[2014] NSWCA 337 at [163], citing General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 (General Steel) at 128-129.
The applicable principles to applications for summary judgment are contained in Galovac Pty Ltd v Australian Capital Territory[2010] ACTSC 132 at [5], cited with approval in McColley v Commonwealth of Australia [2012] ACTSC 154 and Bolas v Calvary Health Care Limited [2016] ACTSC 58 at [1]. It is unnecessary to set out those principles again. It is suffice to say that in accordance with the authorities in the previous paragraph, the threshold is very high.
With particular relevance to the present case, extensive argument is no bar to the remedy, including as to questions of law: see, for example, Carlisle v Filara Pty Ltd [2002] ACTSC 33 at [19]. Financial Integrity Group Pty Ltd v Scott Farmer & Bravium Pty Ltd [2009] ACTSC 143 at [20]. However, as soon as it appears that there is a ‘real question’ to be determined on which relief depends (whether that be fact or law), the summary judgment procedure is not available (General Steel at 130 citing Dey v Victorian Railways Commissioners(1949) 78 CLR 62 at 91).
Defendants’ arguments
The application was brought on four independent grounds:
(a)Lack of standing of the plaintiff.
(b)The causes of action are incapable of assignment.
(c)The Claim discloses no reasonable cause of action and is embarrassing.
(d)Other grounds disclosed in the affidavit of Mr Scott Puxty sworn 22 May 2017.
Having read and heard the defendants’ submissions, the last of these grounds is in fact evidence relating to the first two grounds and I have treated it that way in the consideration below.
Standing
The defendants argued that the deed between the plaintiff and the NAB, which was in evidence on this application, involved the assignment of a charge, not the assignment of any cause of action held by Reynders to the plaintiff.
Further, the charge itself did not see the NAB acquire any interest in the property of Reynders (including any right to sue following the collapse of the bridge). It was a security interest.
The nature of the charge was a fixed charge ‘on all present and future estate, right, title and interest of [Reynders]’ and a floating charge over all mortgaged property which was not charged by way of the fixed charge.
The defendants contend that, if the alleged negligence in the pleading were made out (that is, taking the Claim at its highest), Reynders was the party entitled to an award of damages as against the defendants, not the NAB under the terms of the charge. Simply put, the NAB cannot assign rights to the plaintiff that it never had. Accordingly, the plaintiff lacks standing to sue. That argument assumes that on the proper construction of the ‘charge’, there was no assignment.
The plaintiff submitted that where there is an absolute assignment of property, the whole interest is vested in the assignee. It is the assignee alone who has any interest in the property assigned. The assignor is not only not a necessary party, it is not a proper party: Redman v Permanent Trustee Co of NSW Ltd (1916) 22 CLR 84 at 95.
So much may be accepted, but to my mind there is a difference between the assigning of the charge itself and the right to the property secured by the charge, which in turn gives a right to sue for damage to it. The defendants drew the Court’s attention to the succinct dictum of Denman J in Tancred v Delagoa Bay & East Africa Railway Co (1889) 23 QBD 239 at 242 as to the nature of a charge is:
a document given ‘by way of charge’ is not one which absolutely transfers the property with a condition for re-conveyance, but is a document which only gives a right to payment out of a particular fund or particular property, without transferring that fund or property.
The above passage was part of an extract cited in Austino Wentworthville Pty Limited v Metro Australia Limited [2013] NSWCA 59 (Austino) at [49].
If the assignment to the plaintiff is put to one side (as is separately considered below) and the position of the NAB considered as the initial holder of the charge, it is by no means clear to me how the NAB could bring proceedings such as the present cause of action.
Reynders has been deregistered. It cannot itself bring the cause of action. One of the purposes to which the reinstatement provisions in the Corporations Act 2001 (Cth) (s 601AH) may be put is for the company to litigate a claim, as a deregistered company can itself be a person aggrieved by deregistration: Re Piccolo Tesori Pty Ltd (deregistered); Ex parte Bertuol [2006] FCA 462; 151 FCR 109 at 111-112. A creditor who can show a real economic interest in the company being reinstated may also be entitled to reinstatement: Wyse & Young International Pty Ltd v Corrado [2015] NSWSC 1863 at [43].
The fact of those cases suggests that a creditor cannot simply step into the shoes of a company, and bring a cause of action that the company could have brought in tort but did not (pursuant to a charge or otherwise), when the company has been deregistered.
The means by which the NAB could bring a claim in tort on behalf of a company no longer in existence seems to me to depend on the proper construction of the words of the charge itself and whether it effected a legal assignment. The plaintiff appears to assume that a legal assignment of the ‘right’ from Reynders to the NAB had occurred. Otherwise, I do not see how the submission that the deregistration of Reynders had no effect on its present right in tort can be made.
At stated in Austino, the character of the assignment must be ascertained from the terms and effect of the instrument, according to the construction of it as a whole. Very little argument was directed to that issue before me. It seems that the parties are each proceeding on different assumptions about the nature of the interest held by the NAB. That constitutes a ‘real question’, albeit legal, such that the summary judgment procedure is not available.
In some circumstances, the construction of a contractual clause is appropriate at a summary stage to prove that a case is untenable. The defendants’ argument may be a complete answer to the cause of action, and certainly, if the NAB had no right to bring the action, then neither does the plaintiff.
However, I do not consider that I have had the benefit of sufficiently considered argument on this aspect of the charge to find that this is such a case. I am unable to be satisfied, on the authorities to which I have been taken by the parties, that the plaintiff's case on this issue is so obviously untenable that it could not possibly succeed.
The cause of action was not assigned
A further argument as to the plaintiff’s standing to bring the proceedings was that even if it were arguable that the cause of action was capable of assignment (a matter also considered separately below), s 12 of the Conveyancing Act 1919 (NSW) (Conveyancing Act) applied and, as the requirements under that section had not been fulfilled, there had been no valid assignment.
The defendants sought to file a further submission on the proper construction of that section and submissions of the parties were subsequently received on the point, with the last of those supplementary submissions received on 14 August 2017.
I accept the plaintiff’s submission that even if there were no valid assignment because the requirements of s 12 of the Conveyancing Act had not been followed, that does not result in the cause of action being untenable. The consequence may be an argument that there had been an equitable assignment. On that basis, the plaintiff would have an equitable interest and thus, arguably, standing to sue.
Such a conclusion means that it is unnecessary to consider the proper scope or application of s 12 of the Conveyancing Act, because it is not certain, at this summary stage, that non-compliance with that section would entirely defeat the Claim.
The causes of action are incapable of assignment
With respect to this alternative ground, so described by the defendants, the argument is that a tortious chose in action was unassignable. The defendants rely primarily on the principle that a right to sue for tort is a bare right of action and therefore unassignable either at law or in equity: Poulton v The Commonwealth (1953) 89 CLR 540 (Poulton) at 602.
The defendants further rely on the obiter reasoning of McCallum J in Kovarfi v BMT and Associates Pty Ltd [2012] NSWSC 1101 (Kovarfi) where her Honour, having earlier referred to Poulton, would have concluded that a cause of action in tort was not capable of being assigned, had the issue arisen.
In Kovarfi, the underlying claim that had been assigned was the alleged negligent overstatement of the extent of building completion works for the purpose of a bank loan. It was not tied to damage to an asset. That distinction is important when considering whether the obiter statement in Poulton means the present Claim is untenable.
Earlier in McCallum J’s reasons in Kovarfi, her Honour had given consideration to the divergence in the authorities, stating at [51]:
What is unclear to me is whether the existence of a genuine commercial interest in the enforcement of the assigned claim is properly considered as the basis for an exception to the rule in Poulton (regardless of the cause of action allegedly assigned).
The exception to which McCallum J was referring was based on a line of authority, discussed by her Honour at [53], to the effect that an assignment of a right of action incidental and subsidiary to a right of property (which also is assigned) falls outside the category of a bare right of action: see Ellis v Torrington [1920] 1 KB 399 at 407-408; Trendtex Trading Corporation v Credit Suisse [1982] AC 679 (Trendtex) at 703; both of which were referred to by McCallum J and to which I add Dawson v Great Northern and City Railway Co [1905] 1 KB 260 at 271. That category of assignment is valid, by reason of the assignee’s interest in the underlying property, which is assignable.
On that line of authority, a genuine commercial interest must be shown: Trendtex at 703. Trendtex was applied in Equuscorp Pty Ltd v Haxton [2012] HCA 7; 246 CLR 498 at [51], although the High Court’s reasoning there did not assist McCallum J on the facts before her Honour.
The claim in the present case is different from the facts in Kovarfi and it appears to me more closely aligned with the Trendtex line of authority. It is not necessary for the purposes of this application to consider how a test of genuine commercial interest has been applied among the cases. The essential point is that the law is more nuanced than the bare proposition relied upon here by the defendants to defeat the claim on a summary basis.
Were the action under consideration here based solely on a wrong of a distinctly personal nature, such as to the reputation, or the feelings of the injured party, the defendants’ submission that the Claim was untenable may well have succeeded. In that regard, some aspects of the Claim (for example the loss pleaded at [18(b)] and [18(c)]) may require revisiting, with proper consideration given to the authorities set out above.
However, tortious damage to property has been held to be assignable in other jurisdictions: W J Vine Pty Ltd v Hall [1973] VR 161 at 161-165; Cooper v. Runnels, 48 Wn.2d 108, 109 (Wash, 1955) and Summers v. Freishtat, 274 Md. 404 (Md, 1975). Accepting such authorities are not binding on this Court, in combination with the discussion above, their existence takes this case outside the high threshold required for summary judgment on a question of law.
Alleged pleading issue
The primary basis on which the pleading was alleged to disclose no reasonable cause of action was that the tort was one based on pure economic loss suffered by Reynders and as such, lacked a critical pleading of an element of vulnerability in the sense described in Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515 at [23].
It is true that the Claim lacks the articulation of a material fact expressly directed to establishing vulnerability. However, the Court’s enquiry on a summary judgment application is not restricted to matters that have been specifically pleaded: O’Brien v Bank of Western Australia Ltd [2013] NSWCA 71 at [3] and [68].
The Claim does plead that the contractual basis was between Reynders and the second defendant, and not with either the first or third defendant. It may be assumed that Reynders was reliant on the first and third defendants to complete their respective contractual obligations properly, in the sense that Reynders was not in a position to supervise or control the work being done by the first and third defendants.
In Brookfield v Multiplex Ltd v Owners Corporation Strata Plan 611288 [2014] HCA 36; 254 CLR 185 at [56]-[58] reliance in a similar sense was insufficient to demonstrate vulnerability. While that may be a matter for consideration in amending the Claim as to how that aspect of the case is put, the present lack of the proper articulation of that aspect of the pleading is insufficient to establish that summary judgment is appropriate. What constitutes vulnerability may well be a question of fact and degree and that is a further reason why the Court would not in its discretion enter summary judgment.
In any event, that submission misunderstands the pleading in its entire form. As I have set out above, the Claim was not limited to a pleading of pure economic loss. Part of the loss suffered was damage to property, expressly particularised at [23] of the Claim. Any element of vulnerability is entirely unnecessary to that aspect of the Claim.
Accordingly, the Claim does disclose a reasonable cause of action, is not embarrassing and ought not be struck out. Counsel for the defendants accepted that if the defendants were unsuccessful on their application for summary judgment, it would be appropriate instead to permit the plaintiff to amend its claim.
Costs
Costs are in the discretion of the Court and I see no reason to depart from an order that costs follow the event. The defendants having been unsuccessful, they ought pay the plaintiff’s costs.
Orders
The orders of the Court will be as follows:
1.The applications lodged 26 May 2017 are dismissed.
2.The first and third defendants are to pay the plaintiff’s costs of the applications.
| I certify that the preceding forty-seven [47] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: |
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