Makrenos v Papaioannou
[2008] VSC 83
•31 March 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 6763 of 2007
IN THE MATTER of Section 148 of the Victorian Civil and Administrative Tribunal Act 1998
| STEVEN MAKRENOS AND STAM MAKRENOS | Appellants |
| V | |
| KONSTANTINOS PAPAIOANNOU, EVRIDIKI PAPAIONNOU AND BARNABAS PAPAIONNOU | Respondents |
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JUDGE: | KAYE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 March 2008 | |
DATE OF JUDGMENT: | 31 March 2008 | |
CASE MAY BE CITED AS: | Makrenos & Anor v Papaioannou & Ors | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 83 | |
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TRADE PRACTICES – Misleading or deceptive conduct – Fair Trading Act 1999 (Vic) s 9(1) – Causation of damages – Appeal from decision of Victorian Civil and Administration Tribunal – Decision of Tribunal refusing leave to appellants to amend claim to allege loss caused by misrepresentation made to third party – Whether claim arguable.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Mr D Collins SC and A Herskope | Noble Lawyers |
| For the Respondents | Mr J Twigg | Giannakopoulos Solicitors |
HIS HONOUR:
This is an appeal against a decision of a senior member of the Victorian Civil and Administrative Tribunal made on 31 May 2007, refusing to grant leave to the appellants to amend their points of claim against the first and second respondents. The appeal was brought under s 148(1)(b) of the Victorian Civil and Administrative Tribunal Act 1998, and pursuant to leave given by a master.
Background
In January 2003, the appellants entered into a contract for the construction of a home at their property at 109 Ponyara Road, Mount Martha. The builder was described in the contract as “Arista Construction Barney Papaioannou”. On 13 May 2005 the appellants issued proceedings in the tribunal against the three respondents to this appeal, Konstantinos Papaioannou, Evridiki Papaioannou and Barnabas Papaioannou. By their points of claim, dated 16 May 2005, the appellants alleged that the respondents were carrying on business as partners under the unregistered trading names of “Arista Construction” and “K, E and B Papaioannou”, that the first named respondent was registered with the Building Commission as a registered building practitioner, and that the appellants had entered into a building contract with the respondents engaging the respondents to construct a house at their property at 109 Ponyara Road, Mount Martha. The points of claim alleged a number of breaches by the respondents. The appellants claimed damages, consisting of the costs of rectification then estimated at $200,000, less the outstanding contract sum.
On 8 August 2005, the respondents delivered a document entitled “points of defence and counterclaim”. Relevantly, by that document, all three respondents admitted the allegations that they were carrying on business as partners under the unregistered trading names of Arista Construction and K, E and B Papaioannou, and that the appellants had entered into a building contract with them engaging them to build the house. Subsequently, the appellants delivered “amended points of claim”, the principal purpose of which was to amend the amount of damages claimed to $311,646.70. In response, the respondents delivered “amended points of defence”. By that document, the respondents again admitted that they conducted business in partnership together, and that they had entered into the contract alleged with the appellants. Subsequently, the respondents delivered a further “amended points of defence” making the same admissions.
In July 2006, the respondents, by new solicitors, made application for leave to withdraw their counterclaim and to amend their defence. The application was supported by an affidavit sworn by the first respondent deposing that he and the second respondent, his wife, at no time had conducted any partnership with the third respondent, who was their son. The first respondent denied that his wife and he had entered the building contract relied upon by the appellants. He further denied that his wife and he had instructed the respondents’ former solicitors to make the admissions to which I have referred.
The third respondent also swore an affidavit supporting the affidavit of the first respondent. He stated that he had used the building registration number of the first respondent (his father) in the building contract because he believed that he was part of that registration. The third respondent stated that the first and second respondents were not involved in the building contract with the appellants, and that he alone had provided instructions to the former solicitors to act for all three respondents.
On 27 July 2006, a senior member of the tribunal gave leave to the respondents to withdraw the admissions contained in their points of defence, to withdraw their counterclaim, and to file proposed amended points of defence. In addition, the senior member, on the application of the first respondent, joined Combined Building Consultants Pty Ltd as a “joined party” to the proceeding. Consequently, the appellants filed and served points of claim against the joined party, alleging negligence by it in its capacity as the responsible building surveyor in respect of the construction of the dwelling.
As a consequence of the orders of the tribunal granting leave to the first and second respondents to withdraw their admissions that they were parties to the building contract, the appellants applied for leave to file further amended points of claim against the three respondents. The senior member granted the appellants leave to amend the amended points of claim in relation to the third respondent, but refused the application by the appellants for leave to amend the amended points of claim “as regards the first and second respondents”. It is against that decision that the appellants bring this appeal.
The proposed further amended points of claim
By paragraphs 1 to 8 of the proposed further amended points of claim, the appellants alleged that they had entered into the building contract with the third respondent. Further or alternatively (in paragraphs 8.1 to 8.6), the appellants alleged: that the third respondent had represented to them that he was registered as a building practitioner in the class and category of domestic builder limited, that that representation was made in trade and commerce; that the representation was false, misleading and deceptive; that by making the representation the third respondent had engaged in misleading and deceptive conduct in breach of s 9 of the Fair Trading Act 1999; that the appellants had entered into the contract in reliance on the representation; and that, as a consequence, they had suffered loss and damage.
It is paragraphs 8.7 to 8.15 of the proposed amended points of claim which are the subject of this appeal. I shall set out those paragraphs in extenso, but shall omit the particulars which are subjoined to paragraphs 8.7, 8.8, 8.9 and 8.12, as they do not affect the outcome of this appeal. Those paragraphs state:
“8.7Further, on or about 6 April 2002, the First Second and Third Respondents represented to the statutory warranty insurer, Vero, that for the purposes of the domestic builders warranty insurance required under the Building Act there was a business known as ‘K. E. B Papaioannou’ and that:
(a)it traded as a partnership; and
(b)the partners were Kon, Evridiki and Varnava Papaioannou. (“the representations”)
8.8By reason of each of the representations alleged in paragraph 8.7 above, Vero issued a certificate of insurance in the name of K E and B Papaioannou for the works at the owners land (“the certificate of insurance”).
8.9But for the issue of the certificate of insurance in the names of the First Second and Third Respondents the Third Respondent would not have been able to obtain the Building Permit that was issued by the Fourth Respondent on 18 December 2003 and to illegally conduct business as a domestic builder notwithstanding that he was not registered as a building practitioner and was not entitled or eligible to obtain domestic builders warranty insurance.
8.10But for the issue of the Building Permit, the Third Respondent could not have carried out the works.
8.11Each of the representations alleged in paragraph 8.7 were made in trade or commerce within the meaning of section 9 of the Fair Trading Act 1999.
8.12Each of the representations alleged in paragraph 8.7 above were false, misleading and deceptive within the meaning of section 9 of the Fair Trading Act 1999 in that the First Second and Third Respondents have never been in partnership together and have never traded as K E and B Papaioannou.
8.13By making the representations alleged in paragraph 8.7 the First Second and Third Respondents engaged in false, misleading and deceptive conduct within the meaning of section 9 of the Fair Trading Act.
8.14By reason of the breaches of section 9 of the Fair Trading Act 1999 alleged in paragraph 8.13 the owners have suffered loss and damage.
Particulars
By reason of the false, misleading and deceptive conduct of the First, Second and Third Respondents, the Third Respondent has been able to procure domestic builder’s warranty insurance and obtain building permits on behalf of various building owners including the owners and illegally conduct business as a domestic builder as a result of which he was thereby able to enter into the contract and carry out the defective building works as alleged herein and as a result of which the owners have suffered the loss and damage set out in the particulars subjoined to paragraph 8 hereof.
8.15But for the false misleading and deceptive conduct as alleged, the owners would have entered into the contract with a registered building practitioner.”
Amendment – legal principles
The tribunal is not a court of pleading. Nonetheless, in determining the appropriate approach of the tribunal to proposed amendments of points of claim or points of defence, it is useful to bear in mind the principles which apply to applications for amendment to pleadings in courts of higher jurisdiction. In such cases, the guiding principle is that a court should permit amendments in order to enable the real questions in controversy between the parties to be determined upon a full hearing of the case at trial. A proposed amendment to a pleading will only be disallowed if it would be futile, in the sense that it would have been struck out if it had appeared in the original pleading.[1] The power to strike out summarily an action, or a substantive cause of action, is exercised sparingly in courts of higher jurisdiction. It is only invoked where it is clear that the action, or the cause of action, is so untenable that it cannot possibly succeed.[2]
[1]Commonwealth of Australia v Verwayen (1990) 170 CLR 394, 456, 464 (Dawson J); Howarth v Adey [1996] 2 VR 535, 542 to 3 (Winneke P); Horton v Jones(No 2) (1939) 39 SR (NSW) 305, 310 (Jordan CJ).
[2]General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, 128 to 30 (Barwick CJ); Dey v Victorian Railways Commissioners (1949) 78 CLR 62, 91 (Dixon J).
Since, as I have observed, the tribunal is not a court of pleading, those principles need to be qualified when considering applications before the tribunal to amend the manner in which a party proposes to put its claim or defence. Clearly, the rules of pleadings, which bind higher courts, do not apply to the tribunal. Section 98(1)(b) of the Act requires the tribunal to proceed “with as little formality and technicality” as the requirements of the Act permit. On the other hand, as Ashley J (as his Honour then was) pointed out in Barbon v West Homes Australia Pty Ltd[3], the fact that the tribunal is not a court of pleading does not warrant the conclusion that “Rafferty’s Rules” should prevail. Clearly they should not. Section 97 of the Act requires the tribunal to act fairly and according to the substantial merits of the case in all proceedings. Section 98(1)(a) requires the tribunal to be bound by the rules of natural justice. Section 102(1) requires the tribunal to allow a party a reasonable opportunity to call or give evidence, to examine, cross-examine or re-examine witnesses, and to make submissions to the tribunal. Thus, other than in a simple case, it is appropriate that the tribunal should require a party, making a claim, to properly spell out the ambit of that claim, so as to give appropriate notice of it to the respondent to the claim. Similarly, it is appropriate that the tribunal should require a respondent to a claim to set out, in sufficient detail, the points upon which the respondent proposes to defend the proceeding.
[3][2001] VSC 405, [16, 17].
The question, then, for the senior member was whether the proposed amendments were so obviously bad in law that it would be futile to permit them to be included in the appellants’ claim. That question was to be addressed by the member, bearing in mind that the appellants were not required to frame the proposed amendments in accordance with rules of pleadings, nor with the precision or specificity required of pleadings. The decision by the senior member to disallow the proposed pleading was, strictly speaking, an exercise by that member of the discretion of the tribunal, under s 127(1) of the Act, to amend documents. Thus, in order to succeed, the appellant must establish that the senior member erred in his exercise of that discretion, in refusing to allow the proposed amendments to the points of claim in respect of the first and second respondents.[4] In essence, the appellants must satisfy me that the senior member erred in holding that the cause of action, relied on by the appellants in the proposed amendments, had no demonstrable prospect of success.
[4]Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621, 627 (Kitto J); House v The King (1936) 55 CLR 494, 504, 505 (Dixon, Evatt and McTiernan JJ).
The senior member’s reasons for decision
With those principles in mind, I turn to the reasons for decision of the senior member. The relevant parts of the reasons are contained in paragraphs 16 and following of those reasons. In paragraph 17, the senior member noted that each of paragraphs 8.9, 8.10 and 8.15 of the proposed pleading are expressed in terms of “but for”, as a matter of causation. The senior member stated that those paragraphs confused what he described as “necessary conditions” with “contingent conditions” (such as in paragraph 8.15). He observed that the proposed pleading thus sought “ … to elevate this confusion into the pleading of a material fact. In reality it is not a fact which is sought to be pleaded but merely a speculative circumstance … These are impermissible leaps in logic which go to the heart of the proposed amendments”.
Pausing there, I observe that Mr Twigg, who appeared for the respondents, did not seek to sustain the decision of the member on the basis of the passage of the reasons to which I have just referred. In my view, Mr Twigg was on sound ground in not seeking to defend the decision on that basis. An allegation in a pleading (or points of claim) that, “but for” false, misleading and deceptive conduct by a respondent, a claimant would not have entered into a contract or a transaction, is an allegation of fact, and, in a court of pleading, may be an allegation of a material fact necessary to provide a link between an alleged wrong, and damage which is alleged to have been sustained as a consequence. Thus, the proposed amended points of claim do not involve any “confusion” as maintained by the senior member.
The senior member (in paragraph 18) then noted that the appellants did not seek to make a case that they were misled or deceived by the respondents into believing that the first respondent was the registered builder who would be carrying out the works. The senior member stated that if such a representation was made to the insurer, then there was no allegation in the points of claim as to how such a representation caused the works to occur, and, as alleged, caused them “to be carried out shoddily”. Further (at paragraph 19), the senior member noted that the date of the contract (18 May 2003) was earlier than the date of the certificate of insurance (26 November 2003), and thus that the misrepresentation, which induced the issue of the certificate of insurance, could not have brought about the entry by the applicants into the building contract with the third respondent. The senior member concluded (at paragraphs 20, 21) that the failings in the proposed amendments were so fundamental that they should not be allowed, as they were not even “slightly arguable at the base level” at which the senior member must decide the question.
Submissions
Mr D Collins SC, who appeared with Mr A Herskope for the appellants, commenced by submitting that, in order to succeed in a claim for damages, under s 159 of the Fair Trading Act, in respect of a contravention by a respondent of s 9 of that Act, it is not necessary that the claimant has relied on the conduct which is alleged to have been misleading or deceptive or likely to mislead or deceive. Rather, what is required is that there be demonstrated an appropriate causal connection between the impugned conduct and the damage complained of by the claimant. Further, Mr Collins submitted that it is necessary to determine that question by reference to the purpose of the relevant statutory prohibition expressed in s 9 of the Fair Trading Act. In support of that proposition, Mr Collins referred me to the decision of the High Court in Travel Compensation Fund v Tambree & Anor[5]. Mr Collins submitted that the alleged misleading conduct by the first and second respondents enabled the third respondent, as an unregistered builder, to assume the guise and status of a registered builder. This enabled the third respondent, under a “colour of legality”, to enter into the building contract with the appellants and carry out the building works which are the subject of the proceeding. Thus, he submitted that the alleged misleading and deceptive conduct by the first and second respondents, in applying for an insurance certificate from Vero, had a necessary causal nexus with the issue of the building permit to the third respondent, which, in turn, enabled the third respondent to carry out the building works in respect of which the appellants now claim loss.
[5](2005) 224 CLR 627.
In response, Mr J Twigg, who appeared for the respondents, made three main propositions in support of the decision which is under appeal. First, he submitted that there was an hiatus in the alleged chain of causation pleaded by the appellants in their proposed amended points of claim. In particular, he pointed to paragraphs 8.8 and 8.9. He noted that it was alleged that the insurance certificate, issued in consequence of the alleged misrepresentation by the first and second respondents, was issued in the names of the first, second and third respondents. On the other hand, the building permit (referred to in paragraph 8.9) was issued in the name of the third respondent as the proposed builder. However, the insurance certificate (issued to the first, second and third respondents) could only have entitled the building surveyor, under s 24A(1)(a) of the Building Act 1993, to issue the building permit to a registered builder. Thus, the building surveyor was only entitled to have issued the building permit to the first respondent (as the registered builder) or, alternatively, (under s 29 of the Domestic Building Contracts Act 1995) to the partnership (K. E. & B Papaioannou) of which the registered builder (the first respondent) was a member. Accordingly, it was submitted, the issue of the building permit to the third respondent by the building surveyor was not a consequence of the issue of the insurance certificate, which was alleged by the appellants to have been brought about by the misrepresentation made by the first and second respondents to Vero.
The second submission by Mr Twigg was based on the terms of the application for insurance dated 6 April 2006, which is alleged by the appellants to contain the misrepresentation relied upon as the basis for the claim under s 9 of the Fair Trading Act. Mr Twigg pointed out that that application, by its terms, contained an acknowledgment by the applicants that the completion or acceptance of the application did not create a contract of insurance, but that a separate application must be made in relation to each residence which was to be constructed by the applicant builder. Thus, it was submitted the misrepresentation complained of did not, on its terms, give rise to the issue of the insurance certificate in the names of the three respondents, as alleged in paragraph 8.8 of the points of claim.
Finally, Mr Twigg submitted that, even if the allegations contained in paragraphs 8.7 to 8.13 were to be accepted, nonetheless the facts so alleged did not play a causative role in the carrying out of defective works by the third respondent in respect of the appellants’ premises at Mount Martha. Mr Twigg sought to support that part of the reasons of the senior member which stated that it was not demonstrated that the issue of the building permit had relevantly caused the building works to be carried out in a defective manner.
Causation – legal principles
In determining the issue raised by this appeal, the starting point is, I consider, the proposition, relied upon by Mr Collins, that, in a claim under s 9 of the Fair Trading Act (or under s 52 of the Trade Practices Act 1974 (Cth)), it is not necessary that a claimant prove that it was induced by, or relied upon, the misleading and deceptive conduct alleged, provided that the claimant is able to demonstrate a sufficient causal connection between that conduct and the loss which the claimant seeks to recover. That proposition is well supported by a number of authorities to which I was referred in argument, including the decisions of the Full Court of the Federal Court in McCarthy v McIntyre[6]; Unit Eleven Pty Ltd v Sharpe Partners Pty Ltd[7] and Finishing Services Pty Ltd v Lactos Fresh Pty Ltd[8]. Further, the judgments of the High Court in Travel Compensation Fund v Tambree[9] establish that the question of causation, in a case such as this, must be determined bearing in mind the scope and objects of the relevant legislation in question and taking into account the purpose for which the recipient of the allegedly misleading information required that information.
[6][1999] FCA 784, especially at [48] to [51].
[7][2006] FCAFC 43, especially at [21] (Lee J).
[8][2006] FCAFC 177, especially at [30] to [37].
[9](2005) 224 CLR 627.
In Tambree[10], the appellant plaintiff, the Travel Compensation Fund, sought to recover damages from the respondents who had, respectively, prepared and audited accounts of a travel firm conducted by one Ms Fry, and which had been submitted to the Fund in support of the firm’s continued participation in the Fund’s compensation scheme. The relevant legislation required that all travel agents must be licensed, and in order to obtain such a licence, the agent must be a participant in a compensation scheme. Based on the accounts prepared by the first respondent, and audited by the second respondent, the Fund accepted Ms Fry’s agency as a participant in its scheme. The trial judge found that the respondents, by preparing and auditing those accounts, had engaged in misleading conduct in contravention of the relevant provisions of the New South Wales Fair Trading Act (s 42). In February 1999, following complaints from creditors, the Fund terminated Ms Fry’s participation in the scheme. However, for the next two months, Ms Fry (and her father) continued to conduct the travel agency. The question with which the High Court was concerned related to the entitlement of the Fund to recover, from the respondents, payments which it had made to clients of the agency who had sustained losses as a result of dealing with the agency during the period between the termination of its participation in the Fund (February 1999) and the day on which it doors were ultimately compulsorily closed (April 1999). The trial judge held that those payments were recoverable as damages by the Fund from the respondents. The Court of Appeal reversed that decision, holding that the illegal conduct by Ms Fry in continuing to operate the agency, after its participation in the Fund had ceased, had broken the relevant chain of causation. The High Court unanimously upheld the appeal of the Fund.
[10]Ibid.
In reaching that conclusion, Gleeson CJ[11] stated that the answer to the question of causation, in a case based on s 52 of the Trade Practices Act, was to be found in the purpose of the statute as related to the purposes of a particular case. By the terms of its trust deed, the Fund was exposed to the risk of claims for compensation by people who dealt with a travel agent who was no longer a participant in the Fund, and who was operating following the loss of a licence. To protect itself against that risk, as well as to protect the public, the appellant had required information about the financial position of participating agents, and had acted in reliance on that information. The Chief Justice pointed out that where the reliance, alleged by a claimant in such a case, involves undertaking a risk, and the information which was misleading had been provided for the purpose of inducing that reliance, then it was consistent with the purpose of the Act to treat any loss, which materialised as a result of such a risk, as being consequential upon the misleading conduct.
[11]Ibid, [30] to [33].
In similar terms, Callinan J pointed out:
“That the trading after the termination of the licence was illegal was incidental only. What is to the point are the facts that Ms Fry had been given a licence to trade, that it had been renewed, that she had traded under it, that it had been given a number, that the quotation of the number was probably necessary for continued trading in the travel business, that the licence had to be displayed at the place of business, and in particular after the licence was terminated, that Ms Fry used it, and the number allocated to it, to continue to trade. Underlying these, and directly and naturally contributing to them, including the subsequent, incidentally illegal trading, were the negligent accounting and auditing, and the representations consequent upon them.”[12]
[12]Ibid, [84]; see also at [44], [45] per Gummow and Hayne JJ.
Conclusion
I turn, then, to the relevant parts of the proposed amended points of claim, by which the appellants sought to assert a causal connection between the alleged misleading conduct by the respondents (paragraph 8.7) and the loss claimed by the appellants. The first link in the causal chain relied upon by the appellants was that stated in paragraph 8.8 of the proposed pleading, namely, that, by reason of the misleading representations alleged to have been contained in the application to Vero for insurance on 6 April 2002, Vero issued a certificate of insurance in the name of K E and B Papaioannou for the works at the appellants’ land. It is true, as Mr Twigg has pointed out, that, by its express terms, the application stated that completion of it, and acceptance of it by the insurer, did not give rise to a contract of insurance between Vero and the alleged partnership. However, it is clear that, by its terms, the completion of that application, together with an accompanying deed of indemnity signed by each of the respondents, was a necessary prerequisite to the issue of the certificate of insurance. Ultimately, the question whether or not the alleged misrepresentation contained in the application dated 6 April 2002 caused, or contributed to, the issue of the certificate of insurance in the name of K E and B Papaioannou, will be a question of fact. However, for the purposes of this appeal, it is sufficient for me to conclude that the argument by Mr Twigg, on this aspect of the case, does not of necessity contradict the assertions of fact made in paragraph 8.8 of the proposed amended points of claim.
The next step, in the chain of causation relied upon by the appellants in the proposed amended points of claim, is that stated in paragraph 8.9, namely that “but for” the issue of the certificate of insurance in the names of the first, second and third respondents, the third respondent would not have been able to obtain the building permit issued by the building surveyor (the fourth respondent) on 18 December 2003. On this aspect of the case, Mr Twigg made the submission, to which I have already referred, that the building permit was issued in the name of the third respondent as the proposed builder. However, the insurance certificate, which had been issued to all three respondents, would only have entitled the building surveyor to issue the permit either to the first respondent (as the registered builder) or, alternatively, to the partnership (K. E. & B Papaioannou). Thus, Mr Twigg submitted that the issue of the building permit to the third respondent was not, and could not have been, the consequence of the issue of the insurance certificate to the partnership, K. E. & B Papaioannou.
The application for building permit identified the “builder” as “Barney Papaioannou”, and the “building practitioners” as “K. E. & B Papaioannou”. The building permit was issued to the first appellant as the owner, and noted that the “builder” was “Barney Papaioannou”. It also noted that the “building practitioner” was “Papaioannou Konstantinos” and noted the registration number of the first respondent. It may well be that the building permit should have noted the builder as “K. E. & B Papaioannou”, rather than the third respondent (Barney Papaioannou). However, that point does not, of its own, necessarily mean that the issue of the insurance certificate to K. E. & B Papaioannou did not play a causative role in the issue of he building permit as alleged by the appellants in paragraph 8.9 of the proposed amended points of claim. Under s 24A(2)(a) of the Building Act 1993, the building surveyor was not permitted to issue a building permit unless the work was to be carried out by a builder who was “covered by the required insurance”. The form of application for building permit, which was completed by the third respondent, required the builder to attach details of the required insurance. The building permit, under the heading “Details of Domestic Building Work Insurance” contained the notation “The issuer or provider of the required insurance policy is – H O W” (which I understand to be Home Owners Warranty). Again, ultimately, the question, whether the issue of the insurance certificate by Vero in the name of K. E. & B Papaioannou caused or contributed to the issue of the building certificate on 18 December 2003, is a question of fact. However, I do not consider that the point made by Mr Twigg necessarily contradicts the assertion made by the appellants in paragraph 8.9 of the proposed amended points of claim, to which I have referred.
It thus follows that the submissions made by Mr Twigg do not necessarily contradict the propositions made in paragraphs 8.7 to 8.9 of the proposed amended points of claim, namely, that the alleged misrepresentation by the three respondents to Vero caused or contributed to the issue of the insurance certificate by Vero, which, in turn, caused or contributed to the issue of the building permit. As I have stated, ultimately, each of those steps in the chain of causation, sought to be relied upon by the appellants, are questions of fact. Nothing which has been put by Mr Twigg has persuaded me that those questions of fact must, of necessity, be determined against the appellants.
The next, and final, link in the chain of causation relied upon by the appellants, is that alleged in paragraphs 8.14 and 8.15 of the proposed amended particulars of claim, namely, that but for the misleading conduct of the first, second and third respondents, the third respondent would not have been able to enter into the building contract with the appellants, and would not have been able to carry out the defective building works as alleged. The senior member relied upon two points to find that such a “link” in the chain of causation was not arguable. First, the senior member noted that, although the building contract was entered into on 18 May 2003, the certificate of insurance was not issued until some five months later, on 26 November 2003. Thus, he considered that the misrepresentation relied upon could not have played a causative role in the entry into the building contract.
The point made by the senior member does not, in my view, have the consequence that the “third link” in the chain of causation sought to be alleged by the appellants is not arguable. First, it is question of fact whether the alleged misleading conduct of the respondents, in applying for the certificate of insurance, played a causative role in the third respondent entering into the building contract with the appellants. That is, the causal connection between the misleading conduct, and the entry by the third respondent into the building contract, will be a matter in issue for evidence. Secondly, and more significantly, the appellants also rely on that misleading conduct as playing a causative role in the third respondent carrying out the building works in respect of which they make complaint. Again, that is a question of fact. It is not, I consider, unarguable that the third respondent required the issue of a certificate of insurance, and thus of a building permit, in order to clothe the building works with a veneer of legality. In this respect, the arguments relied upon by the appellants would receive some support from the decision of Deputy President McNamara in Hill v Bastecky[13], to which I was referred by Mr Collins. For present purposes, it is sufficient for me to identify the question as one of fact, the answer to which will depend on the evidence which is to be adduced on that issue.
[13][2006] VCAT 2663, especially at [41] to [43].
Finally, the senior member rejected the proposed amendments because, he considered, the alleged misrepresentation, and the issue of the building permit, could not be said to have played a causative role in the carrying out of defective works by the third respondent. The senior member observed:
“Moreover if, as alleged, the third respondent could not have carried out the works but for the issue of a building permit, how is it that the issue of the latter caused the works to occur and, as alleged, caused them to be carried out shoddily?”
In my view, the response to that proposition is to be found, in part, in the provisions of the Building Act. Under s 16, a person must not carry out a building work, unless a building permit has been issued in respect of that work. Section 24A(2)(a) provides that a building surveyor may only issue a building permit if satisfied that the work is to be carried out by a registered builder. Section 170(1) of the Act provides for the registration of an applicant as a builder if the Building Practitioners Board is satisfied that the applicant (inter alia) holds an appropriate qualification and is of good character. Section 24A(2)(a) also provides that the building surveyor is not to issue a building permit unless satisfied that the builder is covered by the required insurance. It is evident that the two requirements for the issue of a building permit for a domestic building work – that the builder is registered and that the builder is insured – are designed to protect the consumer against the risk of defective or inadequate works.
It is in this context that the approach of the High Court in Travel Compensation Fund v Tambree & Anor[14], to which I have referred, is relevant. In this case, the representation made to the insurer, for the purposes of obtaining the insurance certificate, was that the proposed builder would be a registered builder. That representation was made in relation to a condition, stipulated by the Act, which is intended to protect consumers, such as the appellants, against the risk of being exposed to defective or incompetent workmanship. If the appellant establishes that there was misleading or deceptive conduct constituted by that application, and if the appellant is able to establish that that conduct played a relevant causative role in the issue of the certificate of insurance and in the issue of the building permit, it is, in my view, arguable that the misrepresentation thus played a causative role, not just in the third respondent carrying out the works, but also in exposing the appellants to defective work undertaken by the third defendant. The question whether that causal connection may be established is essentially a question of fact. However, in light of the provisions of the Building Act, and the purposes for which the relevant representation, relied on by the appellants, was made to the insurer, in my view the senior member was in error in holding that the cause of action, in paragraphs 8.7 to 8.15 of the proposed amended points of claim, is unarguable.
[14](2005) 224 CLR 627.
Thus, for the reasons which I have set out above, I have reached the conclusion that the senior member of the tribunal did err in holding that the cause of action sought to be relied upon by the appellants, in paragraphs 8.7 to 8.15 of the proposed amended points of claim, had no demonstrable prospect of success. In my view, it cannot be held that the proposed cause of action is unarguable or necessarily doomed to failure. It therefore follows that the senior member should have given leave to the appellants to make the proposed amendments to the points of claim relied on by them.
Orders
Subject to hearing from counsel, I therefore propose to make the following orders:
1.The appeal be allowed.
2.Paragraph 9 of the order of the senior member made on 31 May 2007 be set aside.
3.In lieu thereof it is ordered that:
(a)the appellants have leave to amend the amended points of claim in regards to each of the first, second and third respondents in accordance with the document marked with the letters “DJN 1” exhibited to the affidavit of Darren John Noble sworn 2 May 2007 in the proceedings in the tribunal;
(b)the question of any costs thrown away by reason of that amendment be reserved.
4.The first and second respondents pay the appellants’ costs of the appeal.
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