Murray v Shire of Kojonup - [2000] WADC 269

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: MURRAY -v- SHIRE OF KOJONUP & ORS [2000] WADC 269

CORAM: WISBEY DCJ

HEARD: 16 OCTOBER 2000

DELIVERED : 27 OCTOBER 2000

FILE NO/S: CIV 1909 of 1998

BETWEEN: SEAN ANDREW MURRAY
Plaintiff
AND
SHIRE OF KOJONUP
Defendant
R J RULE PTY LTD
First Third Party
TREVOR PHILLIP YOUNG
Second Third Party

Catchwords:

Practice and procedure - Application to strike out third party notice and/or give interlocutory judgment on third party issue - Claim against company director in respect of tort committed by company - Alleged assumption of personal liability by surveyor/director

Legislation:

Nil

Result:

Application refused

Representation:

Counsel:

Plaintiff:     No Appearance
Defendant:     Ms F C Davis
First Third Party           :     No Appearance
Second Third Party       :     Mr M Cuerden

Solicitors:

Plaintiff:     Stables Scott
Defendant:     Phillips Fox
First Third Party           :     Hammond Worthington
Second Third Party       :     Hammond Worthington

Case(s) referred to in judgment(s):

Fancourt v Mercantile Credits (1983) 154 CLR 87
Hawkins v Clayton (1998) 164 CLR 539
Hazart Pty Ltd v Rademaker (1973) 11 WAR 26
Ilievska-Dieva v SGIO Insurance Ltd & Ors [2000] WASCA 61
Punjab National Bank v de Boinville & Ors (1992) 3 All ER 104 at 118
Williams v Natural Life Health Foods Pty Ltd (1998) 2 All ER 577

Case(s) also cited:

Agar v Hyde [2000] HCA 41
Bride v Peat Marwick Mitchell [1989] WAR 383
Dennis Wilcox Pty Ltd v FCT (1988) 79 ALR 267; 14 ACLR 156
Donnelly v Edelstein (1994) 121 ALR 333
Fairlane Shipping Corporation v Adamson [1975] QB 180
Henderson v Merrett Syndicates Ltd [1994] 1 All ER 506 (HL)
Hospitals Contribution Fund of Australia v Hunt (1983) 44 ALR 365
Kimberley Down Pty Ltd v Western Australia, unreported; SCt of WA; Library No 6414; 25 August 1986
King v Milpurrurru (1996) 136 ALR 327
Perre v Apand Pty Ltd (1999) 164 ALR 606
Trevor Ivory Limited v Anderson [1992] 2 NZLR 517

WISBEY DCJ: This is an appeal from the decision of Deputy Registrar Hewitt made in chambers on 11 April 2000, refusing the second third party's application by summons dated 22 December 1999, for orders striking out the statement of claim and entering judgment for the second third party in the proceedings. The appeal is brought pursuant to O 6 r 11 of the District Court Rules and is a hearing of the application de novo: see Hazart Pty Ltd v Rademaker (1973) 11 WAR 26.
Consideration of the appeal requires an examination of the nature of the action. There have been a number of interlocutory applications and appeals therefrom, and it has proceeded on the basis of a forensic war of attrition. It would be more constructive to get the matter to trial and contest the real issues, with a view to achieving finality.
In the statement of claim the plaintiff alleges that:
(a)the Shire of Kojonup was at all material times the proprietor of a right of way contiguous with land held by the plaintiff in Kojonup (the land);
(b)in about September 1995 agreement was reached between the plaintiff and the Shire whereby for the sum of $200 and subdivisional costs the Shire would transfer the land to the plaintiff;
(c)in breach of the agreement the Shire failed to subdivide and transfer the land to the plaintiff within a reasonable time;
(d)by reason of the breach of the agreement the plaintiff was unable to construct a large shed on his land and the land, from which he proposed to conduct a spraypainting business, and by reason thereof sustained a loss of approximately $182,000.
By third party notice dated 3 August 1998 the Shire claimed against R J Rule Pty Ltd (the first third party) alleging that it was at all material times a licensed surveyor practising from premises in Katanning, and had agreed with the Shire to perform the services necessary to achieve subdivision and transfer of the land to the plaintiff.
The third party statement of claim alleged that the first third party failed to perform its obligations with the result that the subdivision and transfer did not occur and the land was not transferred to the plaintiff, giving rise to the plaintiff's alleged loss.
In its defence the first third party admitted that it carried on practice as a surveyor but denied that it was a licensed surveyor, saying that the licensed surveyor was at all material times the second third party, Trevor Young, who was a director of the first third party. The first third party admitted that the Shire requested it to carry out a subdivision and transfer of the right of way, and denied the terms of the contract set up by the Shire.
The Shire subsequently obtained orders allowing it to join Trevor Philip Young as second third party and to amend the third party statement of claim so that it consolidated and pleaded the case against each third party.
In respect of the second third party the statement of claim alleges that:
(a)he was at all material times a director of the first third party, and was a licensed surveyor who performed all functions and carried out all surveying work undertaken by the first third party;
(b)at all material times after 3 January 1996 all work performed by the first third party pursuant to the retainer was carried out or performed by the second third party and all correspondence sent by the first third party to the Shire was signed by the second third party;
(c)the second third party held himself out to the Shire as a qualified and licensed surveyor and assumed the responsibility to perform the first third party's obligations pursuant to the retainer in the knowledge that the Shire would rely upon his professional skill and expertise in performing the first third party's obligations under the retainer;
(d)the second third party owed the Shire a duty of care to ensure that the first third party's obligations under the retainer were properly and expeditiously performed.
In support of this application the second third party filed an affidavit sworn 24 February 2000 in which he stated that he was at all material times one of two directors and an employee of the first third party. He referred to the affidavit of Matthew Robert Miller George in support of the Shire's application for leave to join him as a second third party, and particularly to the correspondence passing between the Shire and the first third party concerning the subdivision and transfer. He stated:
"In all my dealings with the defendant, I acted on behalf of the first third party company. At no stage did I ever say or do anything to suggest to the defendant that I, as opposed to the first third party company, assumed personal responsibility to the defendant for the actions of the first third party company."
The affidavit of Matthew Robert Miller George sworn 19 March 1999 and filed in support of the application for leave to join the second third party, refers inter alia to the fact that:
(a)the second third party was at all material times a director of the first third party and a licensed surveyor under the Licensed Surveyors Act 1909, s 16 of which provides that only a licensed surveyor is authorised to carry out survey work;
(b)the second third party owed the Shire a duty of care because he necessarily assumed the responsibility of performing the authorised survey required to give effect to the Shire's instructions;
(c)the correspondence sent by the Shire to the first third party was in reality written to the second third party and the correspondence passing from the first third party to the Shire was in reality directed and signed by the second third party;
(d)such work as was done in connection with the survey and amalgamation had been carried out by the second third party.
The Shire also filed an affidavit of its Shire Clerk, Barrye Roy Thompson, sworn 28 March 2000, in which he deposed to the fact that he had personal dealings with the second third party prior to the events giving rise to the claim, having utilised his services on prior occasions. He relevant stated:
"5.I knew Trevor operated through his company, R J Rule Pty Ltd. I thought it was just the way he operated his practice, like an accountant or doctor or other professional person. I'd no reason to enquiry why Trevor traded under R J Rule Pty Ltd. …
6.Although he did have other employees working in the office, Trevor Young was the only consulting surveyor at R J Rule Pty Ltd. Whenever there was a surveying job for the Shire in which I was involved, I always spoke to Trevor. If I spoke to him about doing a job for the Shire, I would tell him I was sending him a job and asked if he could do it. If he could do it he would say words to the effect of 'yes I can'. It was my practise to telephone him and discuss what I wanted before sending him a formal order or putting anything in writing. …
8.On behalf of the Shire, I wrote to Trevor Young by letter dated 3 January 1996 confirming the instructions to carry out the survey work for the right of way. I addressed it to R J Rule Pty Ltd because that was Trevor's company and office address, but I wrote my salutation to Trevor because he was the person I dealt with and expected to do the work."
The substantial effect of Mr Thompson's affidavit is that he intended to and believed he was dealing with the second third party.
That is the factual background against which the application is to be considered.
In its submissions in support of the application to strike out the statement of claim and for summary judgment on the third party issue, the second third party relies upon an English decision Williams v Natural Life Health Foods Pty Ltd (1998) 2 All ER 577. It seems to be accepted by both parties that it is the only decision directly in point, and although it is a decision of the House of Lords and consequently not binding upon this Court, it clearly is of very persuasive consequence.
The Williams decision involved a claim for damages against the principal director of a company franchisor on the basis that he gave negligent advice to a franchisee causing it to suffer financial loss. The director argued that the franchisee at all times dealt with the franchisor company of which he was the principal director and that accordingly the franchisee's claim had to be against the company. It could not look behind the corporate veil to the principal director.
Their Lordships held that a director of a limited company would only be personally liable to plaintiffs for loss which they suffered as a result of negligent advice given to them by the company if he had assumed personal responsibility for that advice and the plaintiffs had relied on that assumption of responsibility. Whether there had been such an assumption of responsibility was to be determined objectively, so that the primary focus had to be on exchanges (including statements and conduct) between the director and the franchisees. Moreover the test of reliance was not simply reliance in fact but whether the plaintiffs could reasonably rely on the assumption of responsibility.
In the particular case their Lordships held that there had been no personal dealings between the director and the plaintiffs; no exchanges or conduct between them which could have conveyed to the plaintiffs that the director was willing to assume personal liability to them; and no evidence that the plaintiffs had believed that the director was undertaking personal responsibility to them.
Lord Steyn with whom the other law Lords concurred delivered the principal decision. He pointed out, and it is important to bear in mind, the fact that in that case all the material pre‑contractual documents were on the company's notepaper, and the plaintiffs did not know the director being sued and had no material pre‑contractual dealings with him.
His Lordship emphasised at 581i that:
"What matters is not that the liability of the shareholders of a company is limited but that a company is a separate entity, distinct from its directors, servants or other agents. … Whether the principal is a company or a natural person, someone acting on his behalf may incur personal liability in tort as well as imposing vicarious or attributed liability upon his principal but in order to establish personal liability under the principal of Hedley Byrne, which requires the existence of a special relationship between the plaintiff and tortfeasor, it is not sufficient that there should have been a special relationship with the principal. There must have been an assumption of responsibility such as to create a special relationship with the director or employee himself."
He pointed out at 582g:
"The touchstone of liability is not the state of mind of the defendant. An objective test means that the primary focus must be on things said or done by the defendant or on his behalf in dealings with the plaintiff. Obviously, the impact of what a defendant says or does must be judged in the light of the relevant contextual scene. Subject to this qualification, the primary focus must be on exchanges (in which term I include statements and conduct) which cross the line between the defendant and the plaintiff. … The inquiry must be whether the director, or anybody on his behalf, conveyed directly or indirectly to the prospective franchisees that the director assumed personal responsibility towards the prospective franchisees."
At 584g his Lordship said:
"Returning to the particular question before the House it is important to make clear that a director of a contracting company may only be held liable where it is established by evidence that he assumed personal liability and that there was the necessary reliance. There is nothing fictional about this species of liability in tort."
At 584j - 585a his Lordship noted that in a small one man company the managing director will almost inevitably be the one possessed of qualities essential to the functioning of the company, but that by itself that factor did not convey that the managing director was willing to be personally answerable to those dealing with the company.
The second third party argues that all correspondence was addressed to the first third party, and that it, not the second third party, rendered an invoice. The second third party goes further and asserts that even assuming that the Shire could reasonably have relied upon an assumption of responsibility by the second third party, there is no evidence whatsoever that it actually relied upon such an assumption of responsibility.
For its part the Shire notes that it is a well established principle that issues should not be disposed of in a summary way, save in the clearest of cases. Fancourt v Mercantile Credits (1983) 154 CLR 87 at 99.
Further, that care needs to be taken not to summary disposal of litigation in circumstances where a party may thereby be prevented from pursuing a claim which, although relatively novel, might in the end by the judgment of the Court be successful. Ilievska-Dieva v SGIO Insurance Ltd & Ors [2000] WASCA 61.
The Shire argues that professional men employed by a company providing professional services, and who are entrusted with the whole, or nearly the whole, of the task which their employer undertakes, owe a personal duty of care. Punjab National Bank v de Boinville & Ors (1992) 3 All ER 104 at 118 and 119.
It is said that further support for that proposition is to be found in Hawkins v Clayton (1998) 164 CLR 539 at 578.
The Shire argues that in the present case the first third party's obligations pursuant to the retainer required professional care and skill which was reposed in the second third party by reason of s 16 of the Licensed Surveyors Act 1909. In the absence of external engagement it was not possible for the first third party to discharge its duties other than through the second third party.
There is considerable merit in the view expressed by the Deputy Registrar on the initial hearing that the case which the Shire seeks to establish against the second third party has shortcomings. That is not to say, however, that it is devoid of merit. Whether or not the second third party acted in such a manner as to establish the necessary degree of proximity between the Shire and himself such as to result in him having a duty of care to the Shire can only be determined upon the whole of the factual matrix being exposed, tested and established. Until that process has been undertaken it is not appropriate to form the view that no cause of action can be established in the claim by the Shire against the second third party.