Longworth Holdings Australia P/L v Peddle Thorpe and Walker P/L
[2007] FMCA 1938
•28 November 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LONGWORTH HOLDINGS AUSTRALIA PTY LTD & ANOR v PEDDLE THORPE & WALKER PTY LTD | [2007] FMCA 1938 |
| TRADE PRACTICES – Consumer protection – s.52 Trade Practices Act 1974. ESTOPPEL – Anshun estoppel – where cross-claim in District Court proceedings – where cross-claim abandoned – where substantial factual overlap – whether unreasonable not to have raised in District Court proceedings. |
| Trade Practices Act 1974 (Cth), ss.52, 82 Cheques Act 1986 (Cth), ss.71, 76(1) Civil Procedure Act 2005 (NSW), ss.90, 96 |
| Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1981) 147 CLR 589 Halsbury’s Laws of Australia, [190-165] |
| First Applicant: | LONGWORTH HOLDINGS AUSTRALIA PTY LTD |
| Second Applicant: | ROBYN SANDRA SCHNELLER |
| Respondent: | PEDDLE THORPE & WALKER PTY LTD |
| File number: | SYG 2273 of 2007 |
| Judgment of: | Raphael FM |
| Hearing date: | 15 November 2007 |
| Date of last submission: | 15 November 2007 |
| Delivered at: | Sydney |
| Delivered on: | 28 November 2007 |
REPRESENTATION
| Counsel for the Applicants: | Mr B.L. Jones |
| Solicitors for the Applicants: | Marsdens Law Group |
| Counsel for the Respondent: | Mr A.P. LoSurdo |
| Solicitors for the Respondent: | Kennedys Lawyers |
ORDERS
Proceedings dismissed.
Applicants to pay the respondent’s costs to be assessed in accordance with Rule 21.10 and Part 1 Schedule 1 of the Federal Magistrates Court Rules 2001.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2273 of 2007
| LONGWORTH HOLDINGS AUSTRALIA PTY LTD |
First Applicant
ROBYN SANDRA SCHNELLER
Second Applicant
And
| PEDDLE THORPE & WALKER PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
On 24 July 2007 the applicants commenced proceedings against the respondent in this court seeking damages under s.82 of the Trade Practices Act 1974 (Cth) (“the Act”) for an alleged infringement of s.52 of that Act, expressed to be a representation that the estimated cost of constructing forty townhouses on a site controlled by the second applicant but to be developed by the first applicant was $6,160,000.00. It is said that that representation was misleading and as a result the applicants suffered damage. There is no further pleading by the applicants but on 24 July 2007 the second applicant filed an affidavit in which she explained that she was the sole director and shareholder of the first respondent and, having heard that the State government intended to build a correctional facility in the town of Wellington, identified a piece of land which she thought was suitable for development to provide accommodation for the correctional service staff that would come into the town when the facility had been completed. The second applicant formed a company known as Queen Street Executive Estate Pty Ltd (“Queen Street”) which purchased the land. The second applicant intended that that company would also develop the land.
In September 2002 Ms Schneller had a conversation with Dianne Jones, an architect with Peddle Thorpe & Walker Pty Ltd (“PTW”), the respondents. The form of the conversation deposed to at paragraph 10 of Ms Schneller’s affidavit is as follows:
Schneller: I’ve never used a firm of architects before. How do your fees work?
Jones:We use the form of agreement from the Royal Australian Institute of Architects. It’s based on a percentage of the final construction cost. If we can get 40 units on the site, then the final construction cost would be $6.16 million and our fees for performing all of the work, the DA, construction drawings and managing the construction would be $354,200.00. There would also be landscape architect’s fees of about $26,000.
Ms Schneller says in her affidavit that she relied on the cost estimate made by Ms Jones and confirmed by a quantity surveyor, Mr Seib, to proceed with the purchase of the land. Although she says in her affidavit at paragraph 16 that on 15 October 2002 Queen Street exchanged contracts with the vendor, the copy contract contained in her affidavit at RSS1 Tab 5 is between the vendors and Henderson Investments Pty Ltd, another company Ms Schneller says she controlled. On 9 December 2002 Ms Schneller advised Ms Jones that Queen Street was the company that would be carrying out the development.
At paragraph 32 of her affidavit Ms Schneller says that on 2 May 2003 she caused the first respondent to be incorporated and for it to replace Queen Street as the construction company for the development of the land. DA approval was issued to the architects on 28 August 2003. Ms Schneller advised the architect of the change of developer and requested that invoices be reissued in the name of Longworth Holdings Australia Pty Ltd (“Longworth”). This appears to have been done and according to her affidavit Longworth paid PTW $180,160.88 and paid other consultants and advisors the sum of $185,382.12.
Ms Schneller deposes to the fact that the development did not proceed because she considered it to be economically unviable due to lending constraints.
On 9 July 2003 Ms Schneller wrote a cheque, apparently on behalf of Longworth, to the architects in the sum of $73,690.43. The cheque was dishonoured. On 24 October 2004 the architects commenced proceedings in the District Court of New South Wales claiming $73,000-odd dollars. The Statement of Claim was amended so that by the time the proceedings came to court in September 2005 it was an action on the cheque pursuant to ss.71 and 76(1) of the Cheques Act 1986 (Cth). Ms Schneller defended the claim and cross-claimed against Longworth for an indemnity. Longworth filed a cross-claim against the architects. On 4 March 2005, by consent, verdict and judgment was entered against Longworth on its cross-claim and that company and Ms Schneller were ordered to pay the architect’s costs of the cross-claim. The cross-claim had sought, inter alia, relief pursuant to s.52 of the Act and damages under s.82 of that Act as well as damages for negligence arising from the services provided by the architects to Longworth under the retainer. On 30 November 2004 Ms Schneller swore an affidavit in the District Court proceedings. Paragraph 6 of that affidavit is in the following form:
“On or about 4 November 2002, I met with Ms Jones and had a conversation with her to the following effect:
I said: “I’ve never used a firm of architects before. Howe do your fees work?
She said: We use the form of agreement from the Royal Institute of Architects. It’s based on a percentage of the final construction cost. We will charge 5.75% of the final construction cost. If we can get 40 units on the site, then the final construction cost would be $6.16 million and our fees for performing all of the work, the DA, construction drawings and managing the construction would be $354,200.00. There would also be a landscape architects’ fee of about $26,000.00”
No claim arising out of the representation referred to above was made in the Longworth cross-claim that was later dismissed by consent with orders for costs.
The substantive proceedings on the cheque were heard over three days in September and October 2005. Judgment was reserved and was delivered on 13 February 2006. It is accepted that the substantive hearing was in relation to the defence put on by Ms Schneller. That defence involved an alleged agreement whereby the cheque was not to be presented for payment until a correct calculation of fees due had been made and accepted. In his judgment McGuire DCJ says at [P5]:
“It is the Defendant’s [Ms Schneller] contention that the Plaintiff sought to, with justification, increase its fee entitlement relative to the increased estimate of construction costs. She was aware that the Plaintiff had performed design work on the basis of 35 town houses, however, the Plantiff’s invoice of the 18th June, 2003 was based on an estimated project cost updated to $7.5 million.”
He later states at [P9]:
“It is the Plaintiff’s position that fees were payable on the estimated construction costs of $7.5 million as was its entitlement under the agreed fee structure.”
For the reasons given his Honour preferred the evidence of the architects to that of Ms Schneller and gave judgment to the plaintiffs. I am advised that that judgment has been paid. Now Ms Schneller and Longworth seek damages under the Trade Practices Act for the expenses incurred as a result of their reliance upon the representation deposed to both in the affidavit before the District Court and in the affidavit before this court. I was not addressed upon the ability of Longworth to commence proceedings alleging reliance upon the representation made prior to its incorporation, and will respond in this judgment only to the case made by the architects that the proceedings should be dismissed because they offend against the principles adumbrated by the High Court in Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1981) 147 CLR 589.
Discussion
The legal principle of Anshun estoppel is not novel. It can be traced to the decision of Sir James Wigram VC in Henderson v Henderson (1843) 3 Hare 100 at 115 where his Honour said:
“I believe I state the rule of the Court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”
Halsbury’s Laws of Australia notes that the existence of the principle has been affirmed in Hoysted v FCT (1925) 37 CLR 290 at 303, where the above paragraph was cited with approval, and Brisbane City Council v A-G (Qld) [1979] AC 411 at 425 where the Privy Council affirmed the principle although it did not apply it. Halsbury’s definition is at [190-165]:
“The doctrines of res judicata and issue estoppel have been extended to apply to matters which were not raised in the prior proceedings but which could and should have been raised. There will be an estoppel where the matter relied upon in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it there. The principle is based on the policy that parties to litigation should bring forward their whole case and not seek to reopen issues in subsequent litigation, not only to avoid the possibility of inconsistent decisions but also to make efficient use of the court resources and judicial time. The test of unreasonableness is to be preferred to one that considers whether it would be an abuse of process to raise the matter in the second action. It is insufficient that the matter could have been raised in the earlier proceedings; it must have been unreasonable not to have done so. The principle applies to matters that could have been relied on in the former proceedings to ground a claim, a counter-claim or defence and applies whether the matter is relied upon in the second proceeding to ground a cause of action or by way of defence. It does not apply where the matter raised in the second proceeding could not have been raised in the first proceeding because it would not have been within the jurisdiction of the first tribunal where a party has behaved unreasonably in not raising a matter in the earlier proceedings, that party will generally not be permitted to litigate it later, unless there are special circumstances.”
It is accepted that the principle applies to cross-claims: Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287, where the court contrasted cross-claims that had little or no connection with the proceeding other than possibly an identicality of the parties, in which case it would be unreasonable to force a defendant to litigate in a forum that was not of their choice with a claim that was so intimately connected with that of the plaintiff:
“… in the sense that each arises, substantially out of the same matters of fact, there is every reason to require that both be litigated at the same time; thereby minimising costs and avoiding the possibility of inconsistent judgments.”
The views expressed in Bryant were confirmed in Wong v Minister for Immigration (2004) 146 FCR 10 at 17:
“Anshun estoppel arises where the issue, now raised for the first time, properly belonged to the subject of the earlier proceeding but, by negligence, omission or accident, was not raised in earlier proceeding. In essence where the issue was so relevant to the subject matter of the earlier action that it would be unreasonable not to have raised it at that time, it is an abuse of process to endeavour to raise that issue for the first time in a subsequent proceeding between the parties …
Nevertheless, where an issue has not actually been litigated and decided before, there must be exceptions to that general rule … As foreshadowed in Anshun, there will be instances where, even though there is every reason why the matter should have been raised earlier but was not, there are special circumstances that prevail to permit a party to raise the issue in a subsequent proceeding. The Court therefore has a discretion, if it determines that the special circumstances exist, to allow an issue to be raised, even where it is found that the point was unreasonable omitted from the earlier proceeding … However, the circumstances in which that would be permitted must, because of the principles referred to above, be exceptional, constituting ‘special circumstances.”
In Zavodnyik & Ors v Alex Constructions Pty Ltd (2005) 67 NSWLR 457 Handley JA (with whom Mason P and Latham J agreed) looked at the question of reasonableness in relation to the application of the principle. In that case a builder had been barred from recovering the contractual payment under a residential building contract because he was unlicensed when he entered into it. He had not included an alternative claim for restitution in the original proceedings. The headnote states:
“Alternatively, the District Court proceedings were barred by Anshun estoppel. In circumstances where the advantages of convenience, importance, economy of time and expense favoured including an alternative claim in restitution in the original pleading; where the builder had had an opportunity to amend its pleading in the earlier proceedings, where there was a substantial if not total overlap in the facts underlying both claims; and where the amount now sued for was comprised in the earlier claim, there was ever reason to require that both be litigated at one time.”
The matter had also been considered by the New South Wales Court of Appeal in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd & Ors (1996) 40 NSWLR 543 where Clarke JA said at 558:
“[T]he estoppel operates only where the new litigation involves a point or points which properly belonged to the first proceeding (Henderson) or unreasonable was or were not included in it (Anshun), and the appropriate order is a stay of proceedings.”
The respondent argues that the application must fail, firstly because Longworth was not a defendant to the respondent’s cause of action and secondly, because the facts were not intimately connected in both claims. It is true that Longworth was only brought into the District Court proceedings by way of a cross-claim for indemnity filed by Ms Schneller, but it was Longworth that issued the second cross-claim against PTW. That second cross-claim pleaded the arrangement between the architect and Henderson Investments Ltd commencing on 14 November 2002 to provide consultancy services to that company in respect of the proposed townhouse development at Wellington. It pleaded that the contract was later novated and it also pleaded at paragraph 10 that in late 2002 the architect had estimated the construction costs of the project at $5.3 million, which is presumably the same representation that is referred to in Ms Schneller’s affidavits. Longworth and Ms Schneller argue that the case that was heard was a proceeding on a cheque contained within a very narrow compass. All the plaintiff had to do in order to establish its right to recovery was to prove the existence of the cheque, that it was signed by the defendant in the proceedings and that it was given to the plaintiff. The fact that Longworth brought a cross-claim when it was not a defendant to that underlying cause of action, and could have brought the very cross-claim that is now the subject of the proceedings in this court, is not the test. The test is whether the issue was so relevant to the subject matter of the earlier action that it would have been unreasonable not to have raised it at that time. On the test for unreasonableness, it was said in Ling v Commonwealth (1996) 139 ALR 159 at 162 per Wilcox J (with whom Whitlam J agreed):
“In considering reasonableness, as it seems to me, consideration must be given to all aspects of the case. They include the extent of the overlap between the facts underlying each claim; the greater the overlap, the easier it is to argue that it was unreasonable not to raise the matter in the first case. They also include any difficulties that existed, or might reasonably have been perceived, in raising the matter earlier.”
This passage, as well as that of Bryant at ALR 297-298 extracted at [10] of these reasons, was quoted with apparent approval in Zavodnyik by Handley JA at [39].
It would be wrong to look just at the action which proceeded in September and October 2005 when deciding whether the test has been met. The existence of the original cross-claim, even though it was abandoned, must be taken into account. The cross-claim traversed issues relating to the arrangements between the parties and did not involve the alleged misrepresentation, but the alleged misrepresentation was known to both Longworth and Ms Schneller before the Longworth cross-claim was abandoned. The representation did not just feature in the affidavit, it must have been discussed in the evidence at trial because it was considered by McGuire DCJ in his judgment as extracted. If the cross-claim had been pursued successfully it would have formed a set-off to any judgment on the cheque and the New South Wales civil procedure rules make specific provision for situations where there is a claim by a plaintiff and a cross-claim by a defendant for a court to give judgment for the balance only of the sums of money awarded in the respective claims (s.90 Civil Procedure Act 2005 (NSW)). Under s.96 of the Act, which only applies to proceedings in the District and Local Courts, a judgment debtor in one judgment who is also a judgment creditor of another judgment may apply to the court to set-off one judgment against the other. It was suggested by the respondent architects that these provisions were created in aid of the Anshun principle.
The applicants rely on what fell from the High Court in Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 per Brennan and Dawson JJ at 346:
“A plaintiff who has an unadjudicated cause of action which can be enforced only in fresh proceedings … cannot be precluded from taking fresh proceedings merely because he could have and, if you will, should have counterclaimed on that cause of action in a forum chosen by the opposite party in proceedings in which the opposite party sued him. We do not read the majority judgment in Port of Melbourne Authority v Anshun Pty Ltd as holding the contrary, except in a case where the relief claimed in the second proceeding is inconsistent with the judgment in the first: see especially at pp.599-601.”
The applicants also rely on the ‘intimate connection’ statement made in Bryant and the views of Wilcox J in Ling v Commonwealth (1996) 68 FCR 181:
“The decision in Bryant does not mean that it will always be appropriate to apply the Anshun principle to cross-claims. Some cross-claims have little or no connection with the claim in the action. There may be no more than an identicality of parties. It is difficult to see any justification for applying the Anshun principle to a case of that kind. Some cross-claims overlap the facts of the principal claim but involve additional facts. Where this occurs, a question of degree arises. It would be wrong to say that the Anshun principle is excluded whenever there are additional facts; to go so far would be render it nugatory. However, where the additional facts are substantial, it may be appropriate to accept the reasonableness of separate proceedings.”
In Ling, the applicant was allowed to continue the proceeding because the facts of the claim he wished to prosecute were fundamentally different from those in the earlier claim. But in this case the issues all arise out of the same arrangement; namely, the retention by Ms Schneller and the companies she controlled of PTW as her architects for the development of the townhouses in Wellington. That is a constant fact. The claim PTW made related to their fees for doing that work and the cross-claim that Longworth originally filed related to the manner in which that work had been done and the basis of charging. The dissatisfaction that Ms Schneller and Longworth expressed at the work done by PTW had its basis in the fact that the number of townhouses originally proposed could not be built for the amount of money that the architect had first suggested. All these facts existed at the time Longworth abandoned its cross-claim. They were known and referred to in evidence. These issues properly belong to the subject of the earlier proceeding. That they were not raised there was clearly done by choice and to my mind the failure to raise it was unreasonable. The applicants in their submissions do not give any reason as to why it was reasonable not to raise these issues. If they had been raised all issues between the parties could have been concluded in that one hearing before Judge McGuire. As it is, separate proceedings have been commenced and separate costs have been incurred. The forum has been chosen, but a fundamental issue canvassed by Ms Schneller, the mind behind Longworth, in her affidavit in the first proceedings will be the subject of the second proceedings. That, to me, constitutes the abuse of process that Anshun sets out to prevent. The proceedings should be dismissed and the applicants in those proceedings should be made to pay the costs of the respondent.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 28 November 2007
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