Heaven Builders Pty Ltd v Moustafa
[2023] ACTMC 27
•4 August 2023
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Heaven Builders Pty Ltd v Moustafa |
Citation: | [2023] ACTMC 27 |
Hearing Dates: | 14 June 2023 |
Decision Date: | 4 August 2023 |
Before: | Magistrate Temby |
Decision: | See [165]. |
Catchwords: | CIVIL PROCEDURE – INTERLOCUTORY APPLICATION – strike out application – whether Third-Party statement of claim discloses reasonable cause of action – where pleading fails to comply with the procedural rules to such an extent that it fails to expose the case the party intends to run – whether leave to replead should be given – where certain causes of action sufficiently disclosed to warrant granting of leave to replead |
Legislation Cited: | Civil Law (Wrongs) Act 2002 (ACT) ss 124A, 124B Construction Occupations (Licensing) Act 2004 (ACT) ss 28, 31 Construction Occupations (Licensing) Regulation 2004 (ACT) r 19 Court Procedures Rules 2006 (ACT) rr 20, 302, 303, 406, 407, 430, 432, 425, 1147 |
Cases Cited: | Clarence City Council v Commonwealth of Australia [2020] FCAFC 134; (2020) 280 FCR 265 Findex Group Limited v McKay [2022] ACTSC 192 Georges v Georges [2022] NSWDC 558 M1 v R1 & Ors [2022] NSWDC 409 Manny v Commonwealth of Australia; Manny v University of Canberra [2023] ACTSC 160 Prior v South West Aboriginal Land and Sea Council Aboriginal Corporation [2020] FCA 808 |
Parties: | Heaven Builders Pty Ltd ( Plaintiff) Nour Moustafa ( First Defendant) Marwa Moustafa ( Second Defendant) Khalil Khattak ( First Third-Party) Muhammad Naizi ( Second Third-Party) Mice Kljusuric ( Third Third-Party) Syeda Gul ( Fourth Third-Party) |
Representation: | Counsel B Buckland ( Plaintiff, Third-Parties) |
| Solicitors Bradley Allen Love Lawyers ( Plaintiff, Third-Parties) Self-Represented ( First Defendant) Self-Represented ( Second Defendant) | |
File Number: | CS 182 of 2022 |
MAGISTRATE TEMBY:
Table of Contents
Introduction
Summary
Litigation context for Third-Party claims
Third-Party claims
First Third-Party statement of claim
Second Third-Party claim
Third Third-Party claim
Fourth Third-Party claim
Summary judgment / Strike out application
Position of the Third-Parties
Position of the Defendants
Relevant Rules
Third-Party claims
Pleadings
Rules governing summary judgment / strike out applications
Principles applicable to the determination of summary judgment / strike out applications
Consideration
Third-Party notices
First and Second Third-Party claims – alleged breaches of the Second Contract
First Third-Party claim – other possible claims
Disposition of application in relation to the First Third-Party claim
Second Third-Party claim – other possible claims
Disposition of application in relation to the Second Third-Party claim
Third Third-Party claim
Fourth Third-Party claim
Costs
Orders
Introduction
1․The proceedings concern a dispute between the Plaintiff and the Defendants with respect to the Plaintiff’s construction of a residential dwelling for the Defendants. The Defendants filed a counterclaim against the Plaintiff and also filed four Third-Party claims. This decision concerns a summary dismissal application made by the four Third-Parties.
2․Specifically, by an Application in Proceeding filed on 18 May 2023, Khalil Khattak (the First Third-Party), Muhammad Niazi (the Second Third-Party), Mice Kljusuric (the Third Third-Party) and Syeda Gul (the Fourth Third-Party), seek summary judgment in relation to third-party claims that have been brought against them by Dr Nour Moustafa and Dr Marwa Keshk. Drs Moustafa and Keshk are the First and Second Defendants (collectively the Defendants) to a claim brought by Heaven Builders Pty Ltd, the Plaintiff in the proceedings.
3․In the alternative, the First to Fourth Third-Parties seek to have the Third-Party notices filed by the Defendants struck out.
4․I heard the Third-Parties’ application on 14 June 2023. The First to Fourth Third-Parties were represented by Mr Buckland, of Counsel. Dr Moustafa appeared in person.
Summary
5․For the reasons set out in this judgment, I am of the view that none of the Third-Party claims disclose a reasonable cause of action and, accordingly, they should be struck out pursuant to rule 425(1) of the Court Procedures Rules 2006 (ACT) (Court Procedures Rules). In this respect, I note that I have found that certain claims are clearly untenable. These are:
(a)all claims advanced by the Defendants which rely on a breach of the contracts entered into between the Plaintiff and the Defendants;
(b)the claim that the Fourth Third-Party “falsely witnessed” the second of the contracts entered into between the Defendants and the Plaintiff (which is the subject of the Fourth Third-Party claim and is also pleaded in the First Third-Party claim); and
(c)the claim in defamation that the First Defendant pleaded against the Second Third-Party.
6․The Third-Party claims raise a number of other issues but do not make clear whether the Defendants seek to pursue a claim in relation to them. However, I consider that there are three claims which are sufficiently identifiable from the Second and Third Third-Party claims, and from argument at the hearing of the Third-Parties’ application, to warrant granting the Defendants leave to replead. If they wish to do pursue these claims, they will also need to amend the respective Third-Party notices and I grant leave for them to do so.
7․The three claims which I grant leave to replead are:
(a)any action in negligence against the Second Third-Party, arising from the Second Third-Party’s alleged representation that he held a building licence, with respect to the Defendants’ loss of an opportunity to claim the ACT Home Builder Grant;
(b)any statutory cause of action with respect to the Third Third-Party’s alleged failure to comply with the Construction Occupations (Licensing) Regulation 2004 (Licensing Regulation); and
(c)any action in negligence with respect to the Third Third-Party’s alleged failure to adequately supervise the construction of the Defendants’ dwelling.
8․I note that the Defendants also submitted at the hearing that the First Third-Party supervised the construction of the Defendants’ dwelling without a building licence and, in that context, owed the Defendants a duty of care. As this claim is not pleaded in the First Third-Party claim, I make no orders in relation to it.
9․However, for the same reason, my decision to strike out the First Third-Party claim does not concern this claim and it would be open to the Defendants to pursue a negligence claim against the First Third-Party by filing a further statement of claim against the First Third-Party. I grant the Defendants leave to file an amended Third-Party notice raising an action in negligence against the First Third-Party with respect to the First Third-Party’s alleged failure to adequately supervise the construction of the Defendants’ dwelling.
Litigation context for Third-Party claims
10․The Plaintiff commenced proceedings against the Defendants by originating claim filed on 24 November 2022.
11․The Plaintiff’s statement of claim, also filed on 24 November 2022, sets out the basis for the Plaintiff’s claim against the Defendants. In essence, the claim is that:
(a)on 16 December 2020, the Plaintiff entered into a contract with the Defendants (the First Contract) for the construction of a single-storey residential dwelling;
(b)on 16 April 2021, the Plaintiff and the Defendants entered into a second contract (the Second Contract). This contract was for the construction of a double-storey residential dwelling (the Works). The Second Contract in effect replaced the First Contract;
(c)on 22 June 2022:
(i)the Defendants breached the Second Contract by taking possession of, and using, the Works (the dwelling); and
(ii)the Plaintiff suspended the Works; and
(d)the Defendants owe the Plaintiff $132,733, plus interest, comprising:
(i)an unpaid progress payment from 7 June 2022, in the amount of $63,750;
(ii)an amount of $39,777.50 for cost variations;
(iii)a margin of 20% with respect to the cost variations, being an amount of $7,955.50;
(iv)the unpaid balance of the contract sum under the Second Contract, being $21,250; and
(v)interest on the unpaid sums at the rate of 20% per annum.
12․In the alternative to a claim in contract, the Plaintiff seeks for damages to be assessed on a quantum meruit or quantum valebant basis.
13․On 27 February 2023, the Defendants filed a Defence and Counterclaim to the Plaintiff’s claim.
14․The claims raised by the Defendants in the Defence and Counterclaim may be summarised as follows:
(a)the Plaintiff was not a licensed builder prior to 9 July 2022. Because the Plaintiff was not a licensed builder as at 29 November 2020, the Defendants were ineligible to apply for the ACT Home Builder Grant. Prior to 9 July 2022, the Plaintiff used the licence of the Third Third-Party. On 16 January 2021, the Defendants advised the Plaintiff that they would need to terminate the First Contract, however the Plaintiff said: “please do not cancel your contract with us and we will compensate you for the loss of the grant” (the Grant Claim).
(b)the Plaintiff commenced the works on 3 March 2021, prior to receiving ACT building approval;
(c)the Plaintiff excavated 1200mm deeper than was required. This exposed a public drainage system running across the Defendants’ land. As a result of this mistake, the Defendants were required to pay for a retaining wall and obtain approval for the construction of a double storey dwelling (this appears to be the genesis of the Second Contract) (the Remedial Retaining Wall Claim);
(d)on or about 15 April 2021, the Plaintiff contracted a retaining wall subcontractor and supervised the construction of the retaining wall. The Third Third-Party did not supervise these works;
(e)the Plaintiff did not complete all of the Works up to the painting stage in a proper, skilful and workmanlike manner;
(f)despite this, the Defendants paid the Plaintiff the progress payment for the painting stage of the Works, in the amount of $63,750;
(g)on 23 August 2022, the Defendants terminated the Second Contract;
(h)the Defendants were required to engage alternative contractors to remedy defects in the Plaintiff’s work and complete the Works, at a cost of $148,939.42;
(i)the Defendants were contractually entitled to occupy the premises prior to their completion; and
(j)the Plaintiff owes the Defendants $106,139.42, comprising:
(i)the cost of the remedial works, being $148,939.42, less the amount unpaid under the Second Contract, being $85,000 (net cost of $63,939.42);
(ii)$17,200 in liquidated damages; and
(iii)$25,000 for the Grant Claim.
Third-Party claims
15․On 31 March 2023, the Defendants filed Third-Party notices against the First to Fourth Third-Parties. Each of the Third-Party notices was accompanied by a statement of claim. In discussing particular paragraphs of the statements of claim below I have used the shorthand expression “claim” to refer to the relevant statement of claim.
16․The relief sought against the Third-Parties, in total, is the sum of $206,139.42. It is apparent from my review of the Third-Party statements of claim that this figure is comprised of:
(a)the amount of $106,139.42 that the Defendants seek in their Counterclaim; and
(b)compensation in the amount of $100,000 that the First Defendant seeks from the Second Third-Party for alleged defamation.
17․With respect to all four Third-Party notices, the Defendants claim against the Third-Parties:
… a contribution or indemnity, or relief as stated in this notice, and require an issue stated in this notice to be decided not only between the plaintiff and defendants but also between either of them and you.
18․The claim that is identified in each of the Third-Party notices, relying on the facts claimed in the attached statements of claim, is:
Claim for damages for breach of residential building contract by the first two third-parties, supervising the building without a nominee’s builder license [sic] by the first two third parties, failing to carry out the works in a proper, skilful and workmanlike manner by the first three third-parties, reputation damage of the first defendant caused by the second third-party, and signing as a witness of the building contract without the presence of the defendants by the fourth third-party.
First Third-Party statement of claim
19․Paragraphs 1 to 4 of the First Third-Party claim plead certain introductory matters. Paragraph 2 pleads that the First Third-Party signed the First and Second Contracts in his capacity as the secretary and director of the Plaintiff. Paragraph 4 pleads that the First Third-Party provided a ‘Letter of Commencement’ to the Defendants on 26 December 2020, stating that “we will commence work in accordance with the Agreement dated 16 December 2020 [the First Contract] on or before 5 February 2021”.
20․Paragraphs 5 to 8 raise the Remedial Retaining Wall Claim. The First Third-Party claim alleges that the First Third-Party commenced the relevant works prior to receiving building approval, excavated 1200mm deeper than was required and, ultimately, supervised the construction of the retaining wall. It is noted that this is inconsistent with the Defence and Counterclaim, in which the Defendants assert that these actions were undertaken by the Plaintiff.
21․The Defendants claim that the First Third-Party represented to the First Defendant that the only way to address the excavation mistake was to convert the single storey house plan into a double storey design and that the First Third-Party asked him to enter into a new building contract (the Second Contract). The First Defendant says that he relied on the First Third-Party to his detriment.
22․In paragraph 10, the Defendants plead that the First Third-Party told the First Defendant on 8 March 2021 that the cost of the retaining wall would be $9,000, but that the First Third-Party later said on 25 April 2021 that the cost would be $17,500 (Retaining Wall Cost Claim). The Defendants say that the First Defendant paid $17,500 but told the First Third-Party that the “nominee’s licensed builder” should supervise the construction of the retaining wall. The Defendants say that the First Third-Party said that he would ask the licensed builder to estimate the cost, that he would be consulted before “we” do any further work and that there would be no additional costs.
23․Paragraphs 11 to 19 allege that the First Third-Party breached the Second Contract and raise a number of issues with respect to the First Third-Party’s performance of the Second Contract. In particular:
(a)paragraph 12 alleges that the copy of the building contract that the Plaintiff served on the Defendants with the originating claim in these proceedings has the signature of a purported witness, the Fourth Third-Party, who was not present when the contract was signed and whose signature did not appear in the copy of the contract that the First Defendant sent to the Defendants on 25 May 2021. Paragraph 13 alleges the First Third-Party breached the Second Contract by serving the copy of the Second Contract containing the signature of the Fourth Third-Party and, seemingly in the alternative, that the Second Contract “may not be genuine” (the False Witness Claim);
(b)paragraphs 14 and 19 allege that the First Third-Party supervised the construction of the premises “without having a licensed builder under his name” and failed to carry out the Works in a proper, skilful and workmanlike manner. The Defendants claim that this resulted in mistakes including “changing the approved plan requested by the certifier on 24 February 2022 without acknowledging the defendants, water leakage in the property, and the wrong cutting of the land” (the Unlicensed Builder Supervision Claim);
(c)paragraph 15 alleges that the First Defendant raised the fact of incomplete works with the First Third-Party on 7 June 2022, but the First Third-Party did not respond to the email or remedy the works. Paragraph 17 alleges that that the First Third-Party “failed to complete the fixing stage paid by the Defendants on 17 May 2022” and paragraph 18 alleges that that the First Third-Party did not complete certain works “requested in the alleged variation notice while the defendants ordered and supplied them to the property” (the Incomplete Works Claim); and
(d)paragraph 16 alleges that the First Third-Party asked the First Defendant to undertake certain works, including building the front retaining wall (Front Retaining Wall Claim).
24․Paragraph 20 says that that the Defendants terminated the Second Contract with the Plaintiff as a result of the First Third-Party’s failure to carry out the Works in a proper, skilful and workmanlike manner, and alleges that the Defendants “remedied the defects and incomplete works of the property caused by the first third-party” and that ”the defendants lost $63,939.42, which should be paid by the first third-party and the plaintiff to the defendants”.
25․Paragraph 21 alleges that the Plaintiff is liable to the Defendants for liquidated damages (Liquidated Damages Claim).
26․Paragraph 22 alleges the Grant Claim arises because the First Third-Party and the Plaintiff “did not have a valid licence at that time”.
27․Paragraph 23 alleges that the First Third-Party and the Plaintiff have failed to compensate the Plaintiffs.
28․The Defendants seek the sum of $35,379.81 as the First Third-Party’s “contribution” to the loss suffered by the Defendants.
Second Third-Party claim
29․Paragraphs 1 to 3, 12 and 15 of the Second Third-Party claim plead certain introductory and background matters. Relevantly, paragraph 15 pleads that “the defendants and the plaintiff of the second third-party signed the second contract” on 16 April 2021.
30․Paragraphs 4 to 8 and 26 raise the Grant Claim against the Second Third-Party. The Defendants plead, in addition to those matters set out in the Defence and Counterclaim, that:
(a)on 24 November 2020, the Second Third-Party issued a ‘Preliminary Agreement’ to the Defendants for the construction of a single storey premises, which the Second Third-Party signed as a ‘Builder’ even though the Second Third-Party was not a licensed builder at that time;
(b)given that the Second Third-Party made representations about his building services to the Defendants when he was not a licensed builder, he was in breach of the law;
(c)the Defendants signed the First Contract in the presence of the Second Third-Party; and
(d)the Grant Claim arises because the Plaintiff and the Second Third-Party did not have a building licence at the time of the misrepresentations made by the Second Third-Party as to his building licence.
31․Paragraph 8 also alleges that the Second Third-Party made a misrepresentation to the First Defendant that the Second Third-Party had constructed his own house, which was not true (the Expertise Misrepresentation Claim).
32․Paragraphs 9 and 10 allege that the Second Third-Party had possession of a lounge, that had been purchased by the Second Defendant, whilst the premises were being constructed, and that the Second Third-Party and his wife initially refused to return the lounge on request. While the Defendants say that the lounge was ultimately returned, they appear to allege that the Second Defendant became unwell as a result of the stress and consequently was admitted to hospital. The Defendants allege that the First Defendant’s life was difficult at the time because of the stress of dealing with the dispute with the Second Third-Party and related issues (the Lounge Claim).
33․Paragraphs 11, 13 and 14 allege that the Remedial Retaining Wall Claim arises partly from what the Second Third-Party said and did and, in relation to the subcontracting and supervision of the construction of the retaining wall, also from the actions of the First Third Party.
34․Paragraph 16 alleges that the Retaining Wall Cost Claim arises from what the First Defendant was told by the Second Third-Party.
35․Paragraphs 17 to 23 allege that the Second Third-Party breached the Second Contract. In particular:
(a)paragraph 17 alleges that the Second Third-Party failed to comply with the requirement in the contract for written notice to be given “before the variation work is agreed, undertaken, or forms part of the contract” (the Non-Compliance with Variation Process Claim);
(b)paragraphs 18 and 23 allege the Unlicensed Builder Supervision Claim arises from the actions of the Second Third-Party; and
(c)paragraphs 19, 21 and 22 raise the Incomplete Works Claim against the Second Third-Party (and, in relation to the Defendants raising the issue with respect to incomplete works, is also made against the First Third-Party).
36․Paragraph 20 raises the Front Retaining Wall Claim against the First and Second Third-Parties.
37․Paragraph 24 alleges that that the Defendants terminated the Second Contract with the Second Third-Party and its Plaintiff as a result of their failure to carry out the Works in a proper, skilful and workmanlike manner, and alleges that the Defendants “remedied the defects and incomplete works of the property caused by the second third-party” and that ”the defendants lost $63,939.42, which should be paid by the plaintiff and third-parties to the defendants”.
38․Clause 25 raises the Liquidated Damages Claim against the Second Third-Party.
39․Clause 34 alleges that the Second Third-Party has failed to compensate the Plaintiffs.
40․The Defendants seek the sum of $35,379.81 as the Second Third-Party’s “contribution” to the loss suffered by the Defendants.
41․Paragraph 27 alleges that the Second Third-Party defamed the First Defendant by making certain statements about the First Defendant to other people (the Defamation Claim). Paragraphs 28 to 32 appear to plead certain facts which seek to refute the alleged defamatory statements. In paragraph 33, the First Defendant seeks $100,000 as compensation.
Third Third-Party claim
42․The focus of the Third Third-Party claim is an allegation that, while the Third Third-Party “was nominated as the builder … for supervising the construction of the plaintiff’s property in the ACT Building Commencement Notice on 25 June 2021 by the plaintiff”:
(a)the Third Third-Party was not a director or employee of the Plaintiff prior to 9 July 2022, contrary to the requirement of the Licensing Regulation that a nominee for a corporation be a current director or employee of the company; and
(b)the Third Third-Party did not adequately supervise the construction services being provided by the Plaintiff and did not do so “in accordance with the regulations”.
43․The Third Third-Party claim also alleges that the Third Third-Party “failed in carrying out the works in a proper skilful and workmanlike manner”.
44․The Defendants allege that they engaged their own contractors “to finish the incomplete works and remedy the defects caused by the third third-party and the plaintiff”.
45․The Defendants seek the sum of $35,379.81 as the Third Third-Party’s “contribution” to the loss suffered by the Defendants.
Fourth Third-Party claim
46․The focus of the Fourth Third-Party claim is the False Witness Claim.
47․The Defendants allege that:
(a)the Fourth Third-Party “would be liable for fraud and negligent misrepresentation”;
(b)the Second Contract “may not be genuine on this ground”; and
(c)the Fourth Third-Party “would be responsible for the damages caused to the defendants plus pain and suffering plus punitive damages due to her signature without the presence of the defendants”.
Summary judgment / Strike out application
48․As noted above, on 18 May 2023 the First to Fourth Third-Parties filed an application in proceedings, seeking:
(a)summary judgement in relation to third-party claims; or
(b)alternatively, an order that the third-party notices be struck out.
49․In support of their application, the Third-Parties read an affidavit of Ms Anna Philips, affirmed on 31 May 2023. Ms Philips is an employed solicitor of BAL Lawyers, who are the solicitors for the Plaintiff and Third-Parties.
50․The key elements of Ms Philips’ evidence are that:
(a)on 28 April 2023, BAL Lawyers wrote to the Defendants, inviting them to withdraw their claim for defamation against the Second Third Party, on the basis that it did not comply with the Civil Law (Wrongs) Act 2002 (ACT) (Wrongs Act). Ms Philips believes that no ‘concerns notice’ was served on the Second Third-Party pursuant to which proceedings for defamation could be brought; and
(b)on 1 May 2023, the Second Defendant wrote to BAL Lawyers, asserting that the claims in the Third-Party notices are compliant with the Court Procedures Rules and the Wrongs Act, and would not be withdrawn.
51․I received as exhibits:
(a)a copy of the Second Contract, which the Defendants say that they were served by the Plaintiff around 10 December 2022; and
(b)a bundle of documents which were annexed to an affidavit affirmed by the First Defendant, but which was not admissible at the hearing of the Third-Parties’ application.
52․The parties also took me to particular documents within a bundle of documents that the Defendants filed with their Defence and Counterclaim, to which I have had regard.
Position of the Third-Parties
53․The Third-Parties’ position is that each of the Third-Party notices:
(a)disclose no reasonable cause of action;
(b)may tend to prejudice, embarrass or delay the fair trial of the proceeding;
(c)are frivolous, scandalous, unnecessary or vexatious; and
(d)are otherwise an abuse of process of the court.
54․The Third-Parties say that, in respect of the First Third-Party notice:
(a)the notice discloses no reasonable cause of action because the First Third-Party is not a party to the contracts referred to in the First Third-Party notice,; and
(b)the Defendants have failed to provide any particulars capable of supporting the False Witness Claim in accordance with rule 430(1) of the Court Procedures Rules.
55․The Third-Parties say that, in respect of the Second Third-Party notice:
(a)the notice discloses no reasonable cause of action because the Second Third-Party is not a party to the contracts referred to in the Second Third-Party notice;
(b)the Defendants have failed to provide any particulars capable of supporting the Lounge Claim in accordance with rule 430(1) of the Court Procedures Rules; and
(c)the Defendants have failed to comply with s 124B of the Wrongs Act with respect to the Defamation Claim. In this respect, the Third-Parties say that:
(i)no ‘concerns notice’ was given by the Defendants to the Second Third-Party before filing the Second Third-Party notice;
(ii)the purported concerns notice dated 5 June 2023 was sent after the Second Third-Party notice had been filed; and
(iii)in any event, the purported concerns notice contains no particulars of any ‘serious harm’ arising from the defamatory statements allegedly made by the Second Third-Party.
56․The Third-Parties say that, in respect of the Third Third-Party notice:
(a)the notice discloses no reasonable cause of action because the Third Third-Party is not a party to the contracts referred to in the Third Third-Party notice; and
(b)the Defendants have failed to provide any particulars capable of supporting the claim pleaded in the Third Third-Party notice.
57․The Third-Parties say that, in respect of the Fourth Third-Party notice:
(a)the claim pleaded in the Fourth Third-Party notice discloses no reasonable cause of action against the Fourth Third-Party, and is frivolous and vexatious; and
(b)the claim has no reasonable prospect of being established, having regard to the Defendants’ failure to provide any particulars capable of supporting such a claim in accordance with rule 430(1) of the Court Procedures Rules.
Position of the Defendants
58․The Defendants’ position in relation to the First and Second Third-Party claims is that:
(a)the First Third-Party was personally involved in the Works, as shown by the fact that the Defendants paid the First Third-Party one progress payment that was due to be paid under the Second Contract to the First Third-Party’s personal account;
(b)the First Third-Party supervised the Works without a building licence and this led to defects;
(c)the First Third-Party owed the Defendants a duty of care; and
(d)the construction of a retaining wall was not part of the Second Contract, as set out in item A21 of Appendix A to the Second Contract. This reflects the facts pleaded in paragraph 16 of the First Third-Party claim, being that the First Third-Party asked the First Defendant to build the front retaining wall (the Front Retaining Wall Claim). The retaining wall that was required to be constructed to address the mistake with respect to excavation work was a retaining wall at the rear of the Defendants’ property. The Defendants say that the First Third-Party undertook the work required to construct the remedial retaining wall under a separate contract to the First and Second Contracts, and they note that the Plaintiff did not send a variation notice in relation to this work. The Defendants submit that the First Defendant paid the First Third-Party for this work to his personal account.
59․The Defendants’ position in relation to the Third Third-Party notice is that:
(a)the Third Third-Party was the nominated builder for the Works from the commencement of the Works, as shown by the Building Commencement Notice, but was not an employee or director of the Plaintiff until 9 July 2022;
(b)the Third Third-Party never supervised the Works; and
(c)the Third Third-Party owed a duty of care to the Defendants.
60․The Defendants’ position in relation to the Fourth Third-Party notice is that:
(a)the Fourth Third-Party is the wife of the Third Third-Party;
(b)the Fourth Third-Party’s signature purports to witness the execution of the Second Contract;
(c)the Fourth Third-Party did not in fact witness the execution of the Second Contract; and
(d)the presence of the Fourth Third-Party’s signature on the Second Contract is evidence of fraud.
Relevant Rules
Third-Party claims
61․Rule 302 of the Court Procedures Rules is as follows:
Third-party proceeding—when available
(1)A defendant may file a third-party notice if the defendant wants to—
(a) claim a contribution or indemnity against a person who is not already a party to the proceeding; or
(b) claim relief against a person who is not already a party to the proceeding that—
(i)relates to or is connected with the original subject matter of the proceeding; and
(ii)is substantially the same as some relief claimed by the plaintiff; or
(c) require an issue relating to or connected with the original subject matter of the proceeding to be decided not only as between the plaintiff and defendant but also between either of them and a person not already a party to the proceeding.
62․Under rule 303(1) of the Court Procedures Rules, a third-party notice “must state briefly and specifically the nature of the claim made and the relief sought”.
63․Under rule 303(2) of the Court Procedures Rules, a statement of claim must be filed with a third-party notice, as the Defendants did in this case. Under rule 400 of the Court Procedures Rules, the statement of claim filed with a third-party notice is a form of pleading to which Part 2.6 of the Court Procedures Rules applies.
Pleadings
64․Part 2.6 of the Court Procedures Rules contains a number of rules applicable to pleadings. Relevantly for present purposes, they include the following requirements:
(a)if a plaintiff (which is defined in rule 20 in a way that includes a party who serves a third-party party process, as the Defendants did in this case) “seeks relief in relation to two or more distinct claims based on different grounds, they must be stated, as far as possible, separately” (rule 405(3));
(b)the pleading must “state specifically any matter that if not stated specifically may take another party by surprise” (rule 406(1)(c));
(c)the pleading must “state specifically any relief the party claims” (rule 406(1)(d));
(d)the pleading must specifically plead breach of contract, breach of statutory duty, damages of every kind claimed, fraud or illegality, misrepresentation and negligence (rule 407);
(e)under rule 430(1), a pleading must include all particulars necessary to:
(a) define the issues for, and prevent surprise at, the trial; and
(b) enable the opposite party to identify the case that the pleading requires the opposite party to meet; and
(c) support a matter specifically pleaded under rule 407 (Pleadings—matters to be specifically pleaded).
(f)under rule 432:
(1)If a party pleads negligence (whether contributory or otherwise) or breach of statutory duty, the particulars must state the facts and circumstances of the negligent act or omission or breach of statutory duty.
(2)Also, if the party alleges 2 or more negligent acts or omissions or breaches of statutory duty, the particulars must, as far as practicable, state separately the facts and circumstances of each negligent act or omission or breach of statutory duty.
65․As McWilliam J noted in Manny v Commonwealth of Australia; Manny v University of Canberra [2023] ACTSC 160 (Manny), at [71], in order to comply with rule 432:
… it is not enough to allege simply that a defendant breached its duty of care or breached its statutory duty. Under that allegation, particulars of the allegation must be provided, setting out what the defendant did or did not do, which is said to constitute the relevant breach.
Rules governing summary judgment / strike out applications
66․Rule 425(1) of the Court Procedures Rules is as follows:
Pleadings—striking out
(1)The court may, at any stage of a proceeding, order that a pleading or part of a pleading be struck out if the pleading—
(a) discloses no reasonable cause of action or defence appropriate to the nature of the pleading; or
(b) may tend to prejudice, embarrass or delay the fair trial of the proceeding; or
(c) is frivolous, scandalous, unnecessary or vexatious; or
(d) is otherwise an abuse of the process of the court.
67․Rules 1147(2) and (3) of the Court Procedures Rules are as follows:
Summary judgment—for defendant
(2)The court may give judgment for the defendant against the plaintiff for the plaintiff's claim for relief (or part of it) if satisfied—
(a) that the claim (or part of it) is frivolous or vexatious; or
(b) that there is a good defence to the claim (or part of it) on the merits; or
(c) that the proceeding should be finally disposed of summarily or without pleadings.
(3)The court may make any other order it considers appropriate.
68․I note that McKerracher J in Prior v South West Aboriginal Land and Sea Council Aboriginal Corporation [2020] FCA 808, at [36], considered the meaning of the phrase ‘frivolous or vexatious’ in the context of the relevant provisions of the Federal Court Rules 2011 concerning summary judgment applications. At [37], his Honour set out the definitions that have been adopted in various decisions as to the meaning of the term ‘frivolous’. His Honour said:
In relation to the term ‘frivolous’:
(a) a matter that is ‘frivolous’ may be described as one that is ‘without substance or groundless or fanciful’: Crocker per Reeves J (at [9]), citing Pickering v Centrelink [2008] FCA 561 per McKerracher J (at [27]); MCG Quarries Pty Ltd v Beach [2017] FCA 1601 per Davies J (at [4])
(b) a proceeding will be ‘frivolous’ where, despite whatever attempts are made to discern a cause of action in the case, it is still not arguable: Pickering per McKerracher J (at [27]), referring to NBGZ v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 143 FCR 434 (at [16]-[22]); and
(c) ‘frivolous’ may also describe a situation where a party is trifling with the Court or wasting the Court’s time: Crocker per Reeves J (at [9]), citing Chaffers v Goldsmid [1894] 1 QB 186.
Principles applicable to the determination of summary judgment / strike out applications
69․Whether the Third-Party claims ought to be dismissed, or the Third-Party notices struck out, is to be considered on a summary basis.
70․In considering whether a reasonable cause of action is disclosed for the purposes of rule 425, McWilliam J said in Manny, at [61] to [64]:
61.Whether a statement of claim discloses a reasonable cause of action is a question of law: McColley v Commonwealth [2014] ACTCA 21 (McColley) at [29].
62.The Court looks solely at what is pleaded and assesses whether it fails to include all the elements of a cause of action: Spencer v Commonwealth [2010] HCA 28; 241 CLR 118 (Spencer) at [22] per French CJ and Gummow J. Their Honours went on (at [23]) to note the distinction between evidence disclosing that a party has a reasonable cause of action, and a pleading disclosing a reasonable cause of action. Where the application is for strike-out in respect of a pleading, the issue is whether there is a defect in the pleading, and if so, whether such defect can be cured. If it can be cured, then the appropriate course is usually to strike out the pleading and give an opportunity to replead the claim: see The Owners – Units Plan No 1917 v Koundouris & Anor [2014] ACTSC 269 at [40].
63.The Court of Appeal in McColley discussed the approach to be taken to a strike out application that alleges that a pleading discloses “no reasonable cause of action or defence” at [31]-[34]. The relevant principles were described as being conveniently set out by Jagot J in Galovac Pty Ltd v Australian Capital Territory [2010] ACTSC 132, with the Court of Appeal stating at [31]:
The application is to be assessed on the assumption that every fact pleaded by the plaintiff is true: West v New South Wales[2007] ACTSC 43 (West) at [9]. There is a “very high threshold”: Financial Integrity Group Pty Ltd v Farmer[2009] ACTSC 143 at [12]. There is a need for “exceptional caution” when deciding whether to order that a claim be struck out: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129. A cause of action is “unreasonable” only if it is “bound to fail”: Seven Network Ltd v News Ltd (No 4) [2005] FCA 244; (2005) 214 ALR 686.
64.The Court of Appeal in McColley then put the test a different way, stating at [34]:
Before a claim may be struck out, it must be shown to be defective in substance and not merely in the manner in which it has been stated, and it must be “clearly untenable”: Carlisle v Filara Pty Ltd [2002] ACTSC 33 at [16].
71․In Findex Group Limited v McKay [2022] ACTSC 192, McWilliam AsJ (as her Honour then was), in relation to an application made pursuant to rule 1147 and/or rule 425 of the Court Procedures Rules (as is the case here), said:
31.The grant of summary relief (whether in part or in whole) is a discretionary remedy, to be exercised with the utmost caution and only in very clear cases: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 128-129; Young v Hones [2014] NSWCA 337 at [163].
32.A case is not to be summarily dismissed unless there is a high degree of certainty that it would fail if it were allowed to go to trial in the ordinary way: Agar v Hyde [2000] HCA 41; 201 CLR 552 at [57].
33.The principles applying to an application for summary judgment pursuant to r 1147 or striking out a pleading pursuant to r 425 have been set out in Galovac Pty Ltd v Australian Capital Territory [2010] ACTSC 132 (Galovac) at [5] per Jagot J. Her Honour there considered a similar application pursuant to rr 425 and 1147 and helpfully collected the leading authorities from which the principles guiding the exercise of the Court’s discretion have emerged at [5]:
There was no dispute about the principles that apply:
(1) The party seeking summary judgment faces a “very high threshold” (Financial Integrity Group Pty Limited v Farmer [2009] ACTSC 143 at 12).
(2) The lack of a cause of action must be “clearly demonstrated” (General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129).
(3) The procedure calls for “exceptional caution” (General Steel at 129).
(4) The necessity for argument, even extensive argument, is no bar. However, as soon as it appears that there is a “real question” to be determined on which relief depends, the summary judgment procedure is not available (General Steel at 130 citing Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91).
(5) Mere implausibility of the claim or improbability of success is insufficient; there must clearly be no real question to be tried in the sense that the claim is bound to fail (Seven Network Ltd v News Ltd (No 4) (2005) 214 ALR 686; [2005] FCA 244 at [14] citing Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (Ch D)at 5; [1991] 4 All ER 961 at 965).
(6) The application is to be assessed on the assumption that every fact pleaded by the plaintiff is true (West v New South Wales [2007] ACTSC 43 at [9]).
(7) The application must be determined on the substance, not the mere form or expression, of the claim (Financial Integrity Group at [15]).
34.The principles set out in Galovac are well-established, and have been reiterated by this Court in cases including Commissioner for ACT Revenue v Arcidiacono t/as Rose Cleaning Service [2017] ACTSC 379 at [18] per Murrell CJ; McColley v Commonwealth of Australia [2014] ACTCA 21 at [31] per Murrell CJ, Refshauge and Penfold JJ;and Bolas v Calvary Healthcare Limited [2016] ACTSC 58 at [1] per Mossop AsJ (as his Honour then was).
35.Accordingly, there is a very high threshold for the defendant to succeed on a summary basis. The Court must be satisfied the claim is obviously untenable, in that there must be a high degree of certainty that there is no real prospect of success on all or part of the plaintiffs’ claim. The application is assessed on the substance, not the form or expression of the claim.
Consideration
Third-Party notices
72․The first thing to observe about the Defendants’ Third-Party notices is that they do not clearly identify which limb of rule 302 is relied on to pursue Third-Party claims against the Third-Parties. The fact that the Defendants have referred to each of the limbs suggests that they have simply included all of the options that are set out in Form 2.12 (Third-party notice form) without turning their minds to the appropriate limb to rely on.
73․However, the fact that the Third-Party notices identify that the Defendants seek the “Relief” stated in the notice (being a sum of money, or damages to be assessed), indicates that they are relying on rule 302(b) of the Court Procedure Rules. I note, in this respect, that each of the Third-Party claims seeks damages, which supports the view that they are relying on rule 302(b). That is, that the Defendants claim relief against each of the Third-Parties that:
(a)relates to or is connected with the original subject matter of the proceeding; and
(b)is substantially the same as some relief claimed by the Plaintiff.
74․In the Defendants’ Third-Party statements of claim the Defendants also seek $35,379.81 from each of the First to Third Third-Parties, as an alternative to the claim for damages, as their “contribution” to the “sum in the third-party notice”, which might indicate that the Defendants also seek to rely on rule 302(a).
75․However, I find that the Defendants do not seek a “contribution” as that term is understood for the purposes of rule 302(a), being a contribution towards the liability that the Defendants owe to the Plaintiff. That is, the Defendants’ Third-Party claims do not allege that the Third-Parties (or any of them) have an obligation to indemnify or compensate the Defendant for any damages that the Defendants might ultimately be ordered to pay the Plaintiff. What the Defendants seek to do is to make their own claims with respect to loss they have incurred in the construction of their dwelling.
76․Accordingly, it is my view that rule 302(a) does not provide an appropriate basis for the Third-Party claims.
77․The second thing to observe about the Defendants’ Third-Party notices is that they do not comply with the requirement in rule 303(1), which requires a third-party notice to specifically state the nature of the claim that is made against each of the Third-Parties. The Defendants’ Third-Party notices do make clear that the Defendants seek damages for breach of a residential building contract (which appears, from the statements of claim, to relate to the Second Contract) by the First and Second Third-Parties, however the nature of the other claims are not specifically stated.
78․In particular, the Defendants do not identify what cause of action they rely on with respect to their claim:
(a)against the First and Second Third-Parties that they supervised the building (presumably referring to the Works) without a nominee’s builder licence;
(b)against the First to Third Third-Parties that they failed to carry out the Works in a proper, skilful and workmanlike manner;
(c)against the Second Third-Party of ‘reputation damage’; nor
(d)against the Fourth Third-Party that she signed the building contract (again, presumably, a reference to the Second Contract) as a witness without the presence of the Defendants.
79․It is noteworthy that the Defendants rely on ‘damages for breach of contract’ in the relief they seek in the First to Third Third-Party notices. This suggests that the Defendants’ claims against the First to Third Third-Parties are limited to claims for breaches of the Second Contract.
80․This view is supported by the fact that the only cause of action that is explicitly pleaded in the statements of claim attached to the First and Second Third-Party notices is a breach of contract claim, as discussed below.
First and Second Third-Party claims – alleged breaches of the Second Contract
81․While the Defendants have raised a number of issues in the First and Second Third-Party claims, the focus of those claims is alleged breaches of the Second Contract by the First and Second Third-Parties.
82․In this respect, I note that:
(a)as noted above, the First and Second Third-Party notices both seek damages for breach of contract as the relief sought in those documents;
(b)paragraphs 13 to 15 of the First Third-Party claim explicitly plead breaches of the Second Contract, and paragraphs 16 to 23 raise the Defendants’ complaints in relation to the First Third-Party’s performance of the Second Contract;
(c)similarly, paragraphs 17 to 19 of the Second Third-Party claim explicitly plead breaches of the Second Contract, and paragraphs 20 to 26 raise the Defendants’ complaints in relation to the Second Third-Party’s performance of the Second Contract; and
(d)the First and Second Third-Party claims mirror, to a significant degree, the claims made in the Defence and Counterclaim that the Plaintiff breached the Second Contract.
83․In my view, the alleged breaches of the Second Contract cannot succeed as none of the Third-Parties are parties to the Second Contract. As Jagot, Kerr and Anderson JJ said in Clarence City Council v Commonwealth of Australia [2020] FCAFC 134, at [77]:
The doctrine of privity of contract, at its simplest, is reflected in the general rule that a person who is not a party to a contract can neither enforce that contract, nor incur any obligations pursuant to that contract.
84․I find the Defendants’ breach of contract claims against the Third-Parties are clearly untenable.
85․However, in circumstances where the Defendants are self-represented, I have sought to understand whether any other claims arise on the pleadings.
First Third-Party claim – other possible claims
Remedial Retaining Wall Claim
86․The First Third-Party claim does not articulate any cause of action against the First Third-Party in relation to the Remedial Retaining Wall Claim.
87․The Defendants do not, for example, allege a breach of the First Contract, or negligence, in relation to the claim that the First Third-Party (or the Plaintiff) excavated to too great a depth. The focus of the claim is the representation allegedly made to the First Defendant by the First Third-Party that the only solution to the issues caused by the excessive excavation was “to convert the single-story [sic] house plan into a two-storey design”.
88․While the Defendants plead in paragraph 7 that the First Defendant relied on the First Third-Party’s representation to his detriment, the detriment is not identified. Further, while the Defendants appear to suggest that the representation that was made to the First Third-Party was incorrect, no allegation to that effect is pleaded. The Defendants have also not identified any breach of any obligation that the First Third-Party owed to them in his individual capacity (separate from his role as a director of the Plaintiff) in making the representation.
89․The Defendants said at the hearing that the First Third-Party undertook the work required to construct the remedial retaining wall under a separate contract to the First or Second Contracts. In this respect, they note that the Plaintiff did not send a variation notice in relation to this work, that the construction of retaining walls was excluded from the Second Contract and that the First Defendant paid the First Third-Party for this work to his personal account.
90․These facts might support a conclusion that the Defendants and the First Third-Party did contract separately for the construction of the remedial retaining wall. However, they are not pleaded in the First Third-Party claim and, accordingly, it is not a claim that arises from the First Third-Party claim.
91․In any event, even if it were correct that the remedial retaining wall was constructed under a personal contract between the Defendants and the First Third-Party, the Defendants have not identified:
(a)any breach of the separate contract that is now alleged; nor
(b)any loss arising from any breach of that contract.
92․The Defendants’ Counterclaim identifies in paragraph 5 the expenses that the Defendants incurred as a result of the Plaintiff’s alleged failure to carry out the works in a proper, skilful and workmanlike manner. The sum of those expenses is relied on in paragraph 19 of the First Third-Party notice. None of the expenses in paragraph 5 of the Counterclaim relate to the construction of the remedial retaining wall.
93․I note that the Defendants seek compensation for the cost of “change plan (Architect)” and for the cost of “amended plan – ACT Certificate Services” and “building approval – Access Canberra”. These costs may relate to the change that the Defendants say that they needed to make, to change from a one-storey dwelling to a two-storey dwelling as a result of the Plaintiff excavating too deeply. However, any expenses incurred by the Defendants in that respect would be recoverable from the Plaintiff because, as I understood the position expressed by the parties at the hearing, the excavation work was undertaken by the Plaintiff pursuant to the First Contract (which was entered into between the Plaintiff and the Defendants).
94․There is otherwise no claim for any loss or expense incurred as a result of the alleged mistake in the Plaintiff’s excavation, the representation that the only solution was to construct a two-storey dwelling, or the additional cost of constructing a two-storey dwelling. Relevantly, there is no claim for compensation for the Remedial Retaining Wall Claim.
Retaining Wall Cost Claim
95․The First Third-Party claim does not articulate any cause of action against the First Third-Party in relation to the Retaining Wall Cost Claim and the Defendants made no submissions as to how any claim might arise from it.
96․As noted above, the Defendants’ Counterclaim identifies in paragraph 5 of the Counterclaim the expenses that the Defendants incurred as a result of the Plaintiff’s alleged failure to carry out the works in a proper, skilful and workmanlike manner. None of those expenses relate to the construction of the remedial retaining wall.
False Witness Claim
97․The False Witness Claim does not give rise to a cause of action relevant to these proceedings. There does not appear to be any dispute as to the terms of the Second Contract, nor any suggestion that the copy of the Second Contract that was provided by the First Third-Party to the Defendants on 24 May 2021 is not a copy of the contract that was signed by the parties in April 2021.
98․There is no doubt that the addition of the Fourth Third-Party’s signature on the copy of the Second Contract that was sent to the Defendants in December 2022 is odd. However, it does not impact the validity of the Second Contract entered into in April 2021, the execution of which did not need to be witnessed in order to have legal effect.
99․The False Witness Claim does not raise any tenable claim against the First Third-Party.
Unlicensed Builder Supervision Claim
100․In paragraph 14 of the First Third-Party claim, this claim is pleaded as a breach of the Second Contract. As I have found above, to the extent that the First Third-Party claim relies on an alleged breach of the Second Contract by the First Third-Party, it is clearly untenable as the First Third-Party is not a party to the Second Contract.
101․As noted above, the Defendants also submit that the First Third-Party had an involvement in the construction of the Defendants’ dwelling that went beyond the Defendants’ contractual relationship with the Plaintiff. I have already addressed the Defendants’ submission that the First Third-Party undertook the work required to construct the remedial retaining wall under a separate contract to the First or Second Contracts.
102․In terms of the Unlicensed Builder Supervision Claim, the Defendants submit that, in supervising the Works without a building licence, the First Third-Party owed the Defendants a duty of care.
103․However, this claim is not pleaded in the First Third-Party claim. It is distinct from the Defendants’ explicit reliance on the breach of contract claim that is currently pleaded and does not arise from First Third-Party claim.
104․If the Defendants wish to pursue a claim in negligence against the First Third-Party personally, they will need to bring a claim against the First Third-Party which does that. In doing so, they will need to identify why they say the First Third-Party was acting in a personal capacity, rather than in his capacity as a director of the Plaintiff, and they will also need to comply with the rules of pleading, including rule 432 of the Court Procedure Rules, as I have noted above.
The Incomplete Works Claim
105․The Incomplete Works Claim is pleaded against the First Third-Party as a breach of the Second Contract. The claim is focused squarely on the alleged failure of the First Third-Party to comply with the requirements of clauses 15 and 27 of the Second Contract and does not raise any allegations with respect to the conduct of the First Third-Party other than in that context.
106․The Incomplete Works Claim is clearly untenable as the First Third-Party is not a party to the Second Contract
Front Retaining Wall Claim
107․It appears that the Front Retaining Wall Claim is pleaded by way of background, in order to understand the Defendants’ claim with respect to the Remedial Retaining Wall Claim. The Defendants do not plead any breach of any obligation owed to them by the First Third-Party, nor seek any remedy in relation to this claim.
108․The Front Retaining Wall Claims does not raise any tenable claim against the First Third-Party.
Liquidated Damages Claim
109․The Liquidated Claim is pleaded against the First Third-Party as a breach of the Second Contract. The claim is focused squarely on the alleged liability of the Plaintiff to pay the Defendants liquidated damages pursuant to clause 10 and Item A17 of the Second Contract and does not raise any allegations with respect to the conduct of the First Third-Party other than in that context.
110․The Liquidated Damages Claim is clearly untenable as the First Third-Party is not a party to the Second Contract.
Grant claim
111․The First Third-Party claim alleges that the Defendants “lost the ACT Home Builder Grant, $25,000 as the first third-party and the plaintiff did not have a valid licence at that time”.
112․Relevantly, the letter from the ACT Revenue Office states that the Defendants’ application for a home builder grant had not been approved because “Your builder, Heaven Builders … did not have a valid builder’s licence on or before 29 November 2020”. That is, it was a requirement that the Plaintiff have a valid builder’s licence for the Defendants to be eligible for the home builder grant, not that the First Third-Party have a building licence. I note that this is consistent with:
(a)the Letter of Commencement that was given to the Defendants following the parties’ entry into the First Contract, which identifies the Plaintiff as the builder. The First Third-Party signed that letter as the Plaintiff’s ‘Authorised Official’;
(b)the Building Commencement Notice, which identifies that the Plaintiff is the builder, and that the Third Third-Party is the Plaintiff’s nominee; and
(c)Item A2 in Appendix A of the Second Contract, which also identifies that the Plaintiff is the builder.
113․To the extent that the Plaintiff was required to have a building licence, and its failure to have one provides a basis for the Defendants to seek compensation for their inability to claim the home builder grant, that is a claim that the Defendants may pursue against the Plaintiff. The Defendants have not identified any basis for the First Third-Party having personal liability to the Defendants for the fact that the Plaintiff did not have a building licence on or before 29 November 2020.
114․The Grant Claim does not raise a reasonable cause of action against the First Third-Party.
Disposition of application in relation to the First Third-Party claim
115․For the reasons set out above, it is my view that the First Third-Party claim does not disclose any reasonable cause of action against the First Third-Party and, accordingly, it is appropriate to dispose of the claim summarily.
116․I note that, while the Third-Parties seek an order pursuant to rule 1147 or, alternatively, under rule 425, the grounds of their application are directed to the bases for an order under rule 425. Accordingly, I will order that the First Third-Party claim be struck out pursuant to rule 425(1) of the Court Procedures Rules.
Second Third-Party claim – other possible claims
Grant Claim
117․In paragraphs 4, 5 and 7 of the Second Third-Party claim, the Defendants allege that:
[4] On 24 November 2020, the second third-party issued to the defendants a “Preliminary Agreement” for constructing a single-dwelling story [sic] at the property and applying for the ACT Home Builder Grant. Notably, the second third-party signed the agreement as a “Builder” even though the second third-party was not a licensed builder at that time.
[5] The defendants note that if a corporation wants to provide or advertise to provide, certain construction services in the ACT it requires to hold a building licence. Unbeknownst to the defendants at the time, the plaintiff of the second third-party was not granted its first building licence until on or about 14 December 2020, which means when the plaintiff and the second third-party started advertising and making their representations about their building services to the defendants, they were in breach of the law. …
[7] … the misrepresentations of the second third-party about his building licence meant that the plaintiffs were refused the Home Building Grant by the Revenue Office as the plaintiff of the second third-party was not a licenced [sic] builder on or before 29 November 2020 and this caused the loss of the building grant of $25,000 to the defendants.
118․The “Preliminary Agreement” referred to in paragraph 4 was not in evidence before me. I assume for present purposes that the Defendants have accurately described how the Second Third-Party signed the document.
119․I note that the breaches of the law which are alleged in paragraph 5 do not appear to be relied on by the Defendants to support a private right of action against the Second Third-Party but, rather, appear to be pleaded by way of context for the alleged misrepresentation that is relied on in paragraph 7. Paragraph 7, however, clearly does raise a claim that the Defendants seek to pursue, albeit that the Second Third-Party claim does not presently disclose a cause of action.
120․Paragraph 26 of the Second Third-Party claim alleges that the Defendants lost the home builder grant “as the second third-Party and the plaintiff did not have a valid licence at that time”. In paragraphs 4 and 7, the Defendants plead, in effect, that the Second Third-Party represented to them that he had a builder’s licence and that that representation was untrue, which resulted in the home building grant being refused.
121․As a matter of fact, the Defendants’ application for a home builder grant was refused because the Plaintiff did not have a valid builder’s licence. However, as discussed below in relation to the Third Third-Party claim, the Plaintiff’s regulatory obligations would relevantly be met (in general terms) by employing, or having as a director, an appropriately qualified individual. The Defendants appear to allege in paragraphs 4 and 7 that the Second Third-Party presented that he was an appropriately qualified individual.
122․Clearly, paragraphs 4, 7 and 26 do not specifically plead a cause of action for the purposes of rule 407, and do not provide adequate particulars of the Defendants’ claim for the purposes of rule 430 (and rule 432 if their claim is in negligence). Obvious issues that arise on the present pleading include:
(a)what the connection is between the Second Third-Party describing himself as the “Builder” in the “Preliminary Agreement” (if he did) and the Defendants making an application for the home builder grant;
(b)what representations the Second Third-Party, or anyone else, made to the Defendants as to their eligibility for the home builder grant;
(c)the extent to which the Defendants relied on those representations in applying for the home builder grant;
(d)the extent to which the Defendants relied on those representations in deciding to enter into the First Contract; and
(e)why the Defendants say that the Second Third-Party was acting in a personal capacity when he made the alleged representation, and not merely in his capacity as a director of the Plaintiff.
123․The Second Third-Party claim does not enable the Second Third-Party to identify the case it has to meet. This deficiency is particularly acute in circumstance where the Third-Party notice filed by the Defendants does not identify any cause of action in relation to the representation allegedly made by the Second Third-Party.
124․However, the allegation that the Second Third-Party made a representation to the Defendants, which was untrue, and the misrepresentation was causative of a loss to the Defendants (being their ineligibility for the home builder grant), provides a sufficient basis for finding that the Defendants may be able to plead a cause of action in negligence if they address the defects in the present pleading. It is unclear whether such a claim is likely to succeed but it is not clearly untenable on the material before me. Accordingly, I consider that the Defendants should be given an opportunity to replead their claim if they wish to pursue a claim in negligence against the Second Third-Party with respect to the Grant Claim.
125․In paragraphs 8 and 13(i) of the Second Third-Party claim, the Defendants plead a representation made by the Second Third-Party, that “we will compensate you for the loss of the grant”, apparently made in support of the Second Third-Party’s request that the Defendants not cancel the First Contract because of the Defendants’ inability to claim the home builder grant.
126․Conceivably, the representation allegedly made by the Second Third-Party might amount to a contractual offer, which the Defendants accepted by not cancelling the First Contract. However, I do not consider that the Second Third-Party notice relies on the representation in this way. This is because:
(a)the allegation is not that the Second Third-Party personally made an offer, but that he said that “we” would compensate the Defendants. In context, this would appear to refer to the Plaintiff, with whom the Defendants had entered into the First Contract and of which the Second Third-Party was a director. There is nothing to suggest that the Plaintiff had the authority to bind anyone else in making the offer of compensation;
(b)the only breach of contract claim that is identified in the Second Third-Party notice is a breach of the “residential building contract” (which can only refer to the First or Second Contract, not any separate contract entered into with the Second Third-Party personally);
(c)as noted above, the loss that is pleaded in paragraph 26 of the Second Third-Party claim is that the Defendants “lost the ACT Home Builder Grant, $25,000 as the second third party and the plaintiff did not have a valid licence at the time”. This claim does not rely on any representation that the Second Third-Party (or anyone else) would compensate the Defendants; and
(d)the Defendants did not advance any claim at the hearing in relation to the Grant Claim.
127․If the Defendants wish to pursue any cause of action against the Second Third-Party with respect to his alleged representation that the Defendants would be compensated for the loss of the home building grant, they will need to bring a claim against the Second Third-Party which does that. In doing so, they will need to identify why they say the Second Third-Party was acting in a personal capacity, rather than in his capacity as a director of the Plaintiff, and they will also need to comply with the rules of pleading, as I have noted above.
The Expertise Misrepresentation Claim
128․The Defendants plead that the Second Third-Party made a representation that “I built my house and I have experience in construction” and that that representation was not true as another builder had built the Second Third-Party’s house.
129․However, the Defendants have not pleaded that they relied on the representation, nor identified whether they seek any remedy as a result of the alleged falsity of it, nor the cause of action they rely on for that remedy. I also note that the Defendants did not seek to identify any cause of action with respect to this claim at the hearing of the Third-Parties’ application.
130․In my view, the Second Third-Party claim does not disclose any cause of action with respect to the Expertise Misrepresentation Claim.
The Lounge Claim
131․It is unclear whether the Defendants seek any remedy in relation to the Lounge Claim and, if so, what cause of action the Defendants rely on. It is clear that the claim does not satisfy the requirements of rule 430(1) of the Court Procedures Rules.
132․More fundamentally, the Lounge Claim is in the nature of a personal injury claim arising from an agreement between the Defendants and the Second Third-Party for the storage of personal property. It does not seek relief that relates to, or is connected with, the original subject matter of the proceeding and is not substantially the same as any relief claimed by the Plaintiff.
133․Accordingly, the Lounge Claim cannot be pursued against a third-party in these proceedings because it does not satisfy the requirements of rule 302 of the Court Procedures Rules.
Defamation Claim
134․The Defamation Claim cannot be pursued through the Second Third-Party claim. Like the Lounge Claim, the relief that the Defamation Claim seeks is not related to, or connected with, the original subject matter of the proceeding, and is not substantially the same as any relief claimed by the Plaintiff. Accordingly, under rule 302 of the Court Procedures Rules, a third-party claim is not available to the Defendants with respect to the Defamation Claim.
135․Further, even if a third-party claim was available to the Defendants, the Defendants did not give the Second Third-Party a “concerns notice” (as defined in s 124A of the Wrongs Act) prior to commencing proceedings, as required by s 124B of the Wrongs Act. This would have required that the claim be struck out in any event.
136․I note that the notice that the First Defendant relies on (which did not meet the statutory requirements of a concerns notice in any event) was sent on 5 June 2023, after the Third-Parties filed their summary judgment application. The First Defendant confirmed at the hearing that he did not send anything other than the 5 June 2023 document.
137․While s 124B(3) of the Wrongs Act permits the Court to grant leave for proceedings to be commenced despite non-compliance with one aspect of s 124B(1) (that is, prior to the expiry of the applicable period for an offer to make amends had elapsed), there is no such provision for leave to be granted in the absence of a person having given the proposed defendant (or third-party, in this case) a concerns notice.
138․In M1 v R1 & Ors [2022] NSWDC 409 (M1 v R1), Gibson DCJ considered the equivalent NSW provisions to ss 124A and 124B of the Wrongs Act (ss 12A and 12B of the Defamation Act 2005 (NSW)). Her Honour found that, where a person fails to provide adequate particulars of serious harm in a concerns notice, the concerns notice may be invalid and, if that is the case, a fresh concerns notice will need to be served which contains proper particulars of serious harm. Her Honour found that leave could not be given to the plaintiff to do so, in order to retrospectively validate proceedings commenced in advance of a concerns notice having been served.
139․In Georges v Georges [2022] NSWDC 558, Abadee DCJ found at [55], relying on M1 v R1, that:
If adequate particulars of serious harm are not provided in the concerns notice, so that the concerns notice does not comply with s 12 of the Act, the effect is that no such particulars have been given, and this may render the notice invalid; in which case proceedings cannot be commenced at all. The statement of claim is liable to be struck out and the plaintiff would have to commence a fresh action.
140․Accordingly, I find the Defamation Claim against the Second Third-Party is clearly untenable.
Unlicensed Builder Supervision Claim
141․The Unlicensed Builder Supervision Claim is pleaded against the Second Third-Party in paragraph 18 of the Second Third-Party claim as a breach of the Second Contract. I note that the Defendants did not make any submissions at the hearing that the Second Third-Party owed the Defendants a personal duty of care.
142․As the Second Third-Party is not a party to the Second Contract, I find this claim to be clearly untenable.
Remaining claims - Remedial Retaining Wall Claim, Retaining Wall Cost Claim, Non-Compliance with Variation Process Claim, Incomplete Works Claim, Front Retaining Wall Claim, Liquidated Damages Claim
143․The remaining claims that are made in the Second Third-Party claim are expressed in relevantly the same terms as they are pleaded in the First Third-Party claim. For the reasons as I have set out above in relation to the First Third-Party claim, I find they are clearly untenable against the Second Third-Party.
Disposition of application in relation to the Second Third-Party claim
144․For the reasons set out above, it is my view that the Second Third-Party claim discloses no reasonable cause of action and, accordingly, it is appropriate to strike out the claim.
145․However, I consider that it is appropriate to give the Defendants an opportunity to replead a claim in negligence with respect to the Grant Claim if they wish to pursue it.
Third Third-Party claim
146․The Third Third-Party claim does not disclose a reasonable cause of action against the Third Third-Party.
147․The Defendants plead in paragraph 13 that the Third Third-Party failed to carry out the Works in a proper, skilful and workmanlike manner. While the claim does not clearly identify the source of the Third Third-Party’s obligation to do so, it appears that the allegation is based, at least in part, on a breach of the Second Contract.
148․As noted above, the Third-Party notices allege that each of the First to Third Third-Parties failed to carry out the Works in a proper, skilful and workmanlike manner. In the First and Second Third-Party claims, the source of that obligation is identified as being clause 1(a) of the Second Contract. To that extent, it is clearly untenable because the Third Third-Party was not a party to the Second Contract.
149․At the hearing, the Defendants also submitted that the Third Third-Party owed the Defendants a duty of care arising from his role as the nominated builder for the Works. This allegation is not explicitly pleaded in the Third Third-Party claim, however the Third Third-Party claim does allege in paragraph 5 that the Third Third-Party “was not adequately supervising the construction services being provided by the plaintiff, and certainly not in accordance with the [Licensing Regulation]. Paragraph 8 also alleges that the Third Third-Party did not supervise the Works in accordance with the Licensing Regulation.
150․Pursuant to subsections 28(1) and (2) of the Construction Occupations (Licensing) Act 2004 (ACT) (Licensing Act), the Plaintiff was eligible to be licensed if it had a nominee appointed by it who was responsible for the supervision of the construction services provided by it and able to adequately supervise the Plaintiff’s construction services.
151․The Third Third-Party was the Plaintiff’s nominee. However, pursuant to subsection 28(5) of the Licensing Act, the Plaintiff was only able to appoint an eligible individual to be its nominee, being (under subsection 28(7)) a person who is eligible under the regulations and who agrees in writing to be appointed as a nominee. Pursuant to regulation 19 of the Licensing Regulation, an eligible individual for a corporation is an individual who is a director or employee of the corporation. The Defendants assert that the Third Third-Party was not an eligible individual until 9 July 2022.
152․Pursuant to paragraph 31(2)(a) of the Licensing Act, the nominee commits an offence if the nominee fails to adequately supervise the relevant construction services. The maximum penalty for an offence against paragraph 31(2)(a) is 50 penalty units ($8,000).
153․Accepting, for the purposes of determining the Third-Parties’ summary judgment application, that the Defendants’ allegations in the Third Third-Party claim are correct, this may raise an issue as to the Plaintiff’s compliance with the Licensing Act (whether it was eligible to be licensed prior to 9 July 2022). If the Third Third-Party was validly the Plaintiff’s nominee at any stage, there may also be an issue as to whether the Third Third-Party has committed an offence.
154․However, what duty the Third Third-Party owed directly to the Defendants, and how that duty was breached, is not identified in the Third Third-Party claim. In particular:
(a)no facts are pleaded as to how the Third Third-Party came to be nominated as the Plaintiff’s builder in the commencement notice of 25 June 2021 (that is, what actions or omissions are alleged against the Third Third-Party in this respect);
(b)there is no allegation that the Third Third-Party agreed in writing to be the Plaintiff’s nominee;
(c)it is not made clear what supervisory obligations the Third Third-Party had in circumstances where it appears, at least prior to 9 July 2022, he could not be validly appointed as the Plaintiff’s nominee, and what the source of those obligations were; and
(d)the Defendants have not identified, at the point where the Third Third-Party was the Plaintiff’s nominee, what the Third Third-Party did or did not do, which is said to constitute the breach of the Licensing Regulation. Paragraph 8 simply pleads that the alleged failings of the First and Second Third-Parties “clearly demonstrates that the third third-party did not supervise the work in accordance with the regulations”.
155․Clearly, the Third Third-Party claim does not specifically plead a cause of action for the purposes of rule 407, and does not provide adequate particulars of the Defendants’ claim for the purposes of rule 430 and rule 432. The Third Third-Party claim does not enable the Third Third-Party to identify the case it has to meet. Accordingly, I consider that the claim should be struck out.
156․However, the Defendants have pleaded a failure on the part of the Third Third-Party to adequately supervise the works, both generally and by reference to an alleged breach of the Licensing Regulation, and they have identified the context in which they say his supervisory obligation arose, being his appointment as the Plaintiff’s nominee for the Works. In my view, this provides a sufficient basis for finding that the Defendants may be able to plead a reasonable cause of action for a breach of a statutory duty or a claim in negligence.
157․It is unclear whether either claim is likely to succeed, however neither claim is clearly untenable on the material before me. Accordingly, I consider that the Defendants should be given an opportunity to replead their claim if they wish to pursue a claim against the Third Third-Party for breach of a statutory duty or a claim in negligence (or both).
Fourth Third-Party claim
158․The Fourth Third-Party claim is focused on the False Witness Claim. In my view, there is no merit to this claim.
159․As I have found in relation to the First Third-Party claim, the False Witness Claim does not give rise to a cause of action relevant to these proceedings. While the addition of the Fourth Third-Party’s signature may amount to a misrepresentation, no dispute is raised by the Third-Party claims as to the terms of the Second Contract, nor any suggestion that the copy of the Second Contract (that was provided by the First Third-Party to the Defendants on 24 May 2021) is not a copy of the contract that was signed by the parties in April 2021.
160․The fact that the Fourth Third-Party later added her signature to a copy of the contract cannot have any bearing on its validity or enforceability in circumstances where there was no requirement for the Second Contract to be witnessed in order for it to be legally effective.
161․In my view, the Fourth Third-Party’s misrepresentation is legally meaningless in the circumstances of the Third-Party claims. Further, I do not accept that the Defendants have suffered any legally compensable damage as a result of the actions of the Fourth Third-Party, including for any pain and suffering.
162․At the hearing, the First Defendant said that the addition of the Fourth Third-Party’s signature made no difference to him as a person, and that his complaint was that his house is under investigation. I note that there is no suggestion in the material before me that any investigation in relation to the Defendants’ dwelling has anything to do with the Fourth Third-Party’s signature on the copy of the Second Contract that was provided to the Defendants in December 2022.
163․In my view, the False Witness Claim discloses no reasonable cause of action and is frivolous. There is a clear lack of substance to the claim.
Costs
164․In circumstances where the Third-Parties have been successful in their application to strike out the Third-Party claims (albeit that the Defendants have leave to replead certain claims that arise from the Third-Party claims), I consider that it is appropriate that the Defendants pay their costs of, and incidental to, the application.
Orders
165․For the above reasons, I make the following orders:
(1)The First Third-Party statement of claim is struck out.
(2)The Second Third-Party statement of claim is struck out.
(3)The Third Third-Party statement of claim is struck out.
(4)The Fourth Third-Party statement of claim is struck out.
(5)Leave is granted to the Defendants to file an amended Third-Party notice (or notices) and an amended statement of claim (or claims), pleading any or all of the following causes of action:
(a)Any action in negligence against the Second Third-Party, arising from the Second Third-Party’s alleged representation that he held a building licence, with respect to the Defendants’ loss of an opportunity to claim the ACT Home Builder Grant.
(b)Any statutory cause of action with respect to the Third Third-Party’s alleged failure to comply with the Construction Occupations (Licensing) Regulation 2004 (ACT).
(c)Any action in negligence with respect to the Third Third-Party’s alleged failure to adequately supervise the construction of the Defendants’ dwelling.
(6)Leave is granted to the Defendants to file an amended Third-Party notice raising an action in negligence against the First Third-Party with respect to the First Third-Party’s alleged failure to adequately supervise the construction of the Defendant’s dwelling.
(7)The Defendants are to pay each of the Third-Parties’ costs of, and incidental to, the Third-Parties’ application in proceeding.
(8)The Third-Parties’ costs are not recoverable until the conclusion of the proceedings.
| I certify that the preceding one-hundred and sixty-four [164] numbered paragraphs are a true copy of the Reasons for Decision of his Honour Magistrate Temby Associate: Mason Britton Date: 4 August 2023 |
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