Page v Built Vision - [2013] SADC 48

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PAGE & ANOR v BUILT VISION & ANOR
[2013] SADC 48
Judgment of His Honour Judge Costello
26 April 2013
PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS
The plaintiffs applied to amend their Claim to file a Sixth Statement of Claim - the defendants opposed the application - Claim sought damages in relation to a contract whereby the defendants agreed to prepare plans and supervise works in renovating and extending the plaintiffs' residence - in addition to sundry objections to particular proposed amendments the defendants complained that the proposed Statement of Claim sought to claim damages for remedial works unlikely to be undertaken due to sale of the residence and a claim for damages for negligence for pure economic loss in the absence of a plea of vulnerability on the part of the plaintiffs. Held: Application to amend allowed.
Building Work Contractors Act 1995 (SA), referred to.
State of South Australia v Peat Marwick Mitchell [1997] SASC 6129; Harris Scarfe Ltd (in liq) v Ernst & Young (2005) 239 LSJS 126; Pavlovic v Commonwealth Bank (1992) 56 SASR 587; Woodhead Aust (SA) Pty Ltd v Paspalis Group of Companies (1991) 103 FLR 122; Sinclair v James [1894] 3 Ch 554; Brimson v Rocla Concrete Pipes Ltd (1982) 2 NSWLR 937; Northern Aboriginal Legal Aid Service v Bradley (2000) 136 NTR 1; MacDonnell Shire Council v Miller [2009] NTSC 46; Dresna Pty Ltd v Misu Nominees Pty Ltd [2003] FCA 1537; Commonwealth of Australia v Verwayen (1990) 170 CLR 394; Agar v Hyde (2000) 201 CLR 552; Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256; John Fairfax Publications v Hitchcock [2007] NSWCA 364; (2007) 70 NSWLR 484; Bellgrove v Eldridge (1954) 90 CLR 613; Wenham v Ella (1972) 127 CLR 454; Director of War Service Homes v Harris (1968) Qd R 275; De Cesare v Deluxe Motors Pty Ltd (1997) 67 SASR 28; Scott Carver Pty Ltd v SAS Trustee Corporation [2005] NSWCA 462; Westpoint Management Ltd v Chocolate Factory Apartments Ltd (2007) NSWCA 253; Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184; Perre v Apand (1999) 198 CLR 180; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; Bryan v Maloney (1995) 182 CLR 609; Abrook v Paterson (1995) SASC 4990; Holcon Aust Pty Ltd v Town of Walkerville & Anor (2007) SASC 437; Upper Hunter District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429; BP (Refinery (Westernport)) Pty Ltd v Shire of Hastings (1977) 190 CLR 266; Pavey Matthews Pty Ltd v Paul (1987) 162 CLR 221; Nunkuwarrin Yunti v AL Seeley Constructions Pty Ltd (1998) 72 SASR 21; David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, considered.

PAGE & ANOR v BUILT VISION & ANOR
[2013] SADC 48
Background

This matter has a somewhat unfortunate history. In or about late 2006 the plaintiffs retained the second defendant, Mr Grieve, a qualified architect to prepare plans and specifications to renovate and extend their residence. Thereafter the plaintiffs entered into a contract with Mr Grieve and/or his company (as to which entity remains the subject of dispute) to carry out the works.
The works were completed in or about mid 2008. In 2009 the plaintiffs instituted these proceedings which now claim damages for breach of contract for overcharging, defective works or as money paid under a mistake.
The matter was initially listed for trial in August 2011 before another Judge of this Court. On that occasion the trial was adjourned to enable the plaintiffs, inter alia, to file and serve an amended Statement of Claim.
The trial next came on for hearing before me in July 2012. The plaintiffs called two expert witnesses. The defendants successfully objected to the tender of each of their reports. The plaintiffs then applied to adjourn the trial to enable them to prepare fresh expert reports. The plaintiffs also sought to amend their Statement of Claim. I adjourned the trial to enable them to attend to these matters.
In December 2012 the plaintiffs filed a proposed Fifth Statement of Claim which was subsequently not pursued. In February 2013 the plaintiffs filed a proposed Sixth Statement of Claim. Unsurprisingly (bearing in mind the history of this matter) the defendants opposed the plaintiffs’ application to amend this Statement of Claim.
On the hearing of this application the plaintiffs filed another version of the Sixth Statement of Claim which incorporated still further changes to the proposed Sixth Statement of Claim.[1]
[1] This final version of the proposed Sixth Statement of Claim is appended to this judgment and set out in full as Schedule 1.
Discussion
Prior to dealing with the plaintiffs’ application and the specifics of the defendants’ objections, I make some general observations.
The function of Courts is to decide matters in controversy between parties. Accordingly, it is desirable that the pleadings enable all the issues to be identified and to be determined in the Action. A party to litigation should be able to advance – and, to that end, plead – each claim, or defence, which it wishes to maintain. In considering whether an amendment will be allowed, the Court will consider the interests of justice, the implications for the parties, the cost, the reasons why the amendment is sought and the impact of any amendment on case flow management principles.
In considering the defendants’ objections to the proposed amendment, I proceed on the basis that the factual allegations in the proposed pleading are to be accepted for the purposes of the application. I understand that that is orthodoxy.[2]
[2] State of South Australia v Peat Marwick Mitchell [1997] SASC 6129 at para 23.
If an arguable case is disclosed by a proposed amendment it is usually allowed.[3]
[3] Harris Scarfe Ltd (in liq) v Ernst & Young (2005) 239 LSJS 126;
Pavlovic v Commonwealth Bank (1992) 56 SASR 587;
Woodhead Aust (SA) Pty Ltd v Paspalis Group of Companies (1991) 103 FLR 122;
Sinclair v James [1894] 3 Ch 554.
That said, I also proceed on the basis that it is not the role of the Court at this stage of the proceedings to undertake any enquiry about the merits or the prospects of success of the plaintiffs in raising issues in the proposed pleading.[4] In MacDonnell Shire Council v Miller,[5] Mildren J put it this way:
In granting leave to amend, the Court is concerned with the raising of issues and not with their merits. Raising a claim which may appear not to have much chance of success is not a sufficient reason to refuse leave to amend. Provided the case is arguable, whether it ought to succeed or not is a question for the Judge at trial.
[4] Brimson v Rocla Concrete Pipes Ltd (1982) 2 NSWLR 937 at 941-3 and Northern Aboriginal Legal Aid Service v Bradley (2000) 136 NTR 1 at para 21.
[5] [2009] NTSC 46 at para 9.
It is no ground for refusing an amendment that it raises a claim or defence which ought not to succeed.[6] The position is as stated by Dawson J in Commonwealth of Australia v Verwayen,[7] namely:
Of course, an amendment which is futile because it is obviously bad in law will not be allowed. But it is no ground for refusing an amendment that it raises a claim or defence which ought not to succeed. That will be an issue upon trial.
[6] Dresna Pty Ltd v Misu Nominees Pty Ltd [2003] FCA 1537 at para 44 per Weinberg J.
[7] (1990) 170 CLR 394 at 456.
Time and time again Courts of the highest authority have cautioned against denying a party the opportunity to place his or her case before the Court, in the ordinary way. See, for example, Agar v Hyde[8] where Gaudron, McHugh, Gummow and Hayne JJ observed that contested issues should not be summarily decided except in the clearest cases.
[8] (2000) 201 CLR 552 at 575. See also Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 at 275 and John Fairfax Publications v Hitchcock [2007] NSWCA 364; (2007) 70 NSWLR 484 at 487, 490, 527, 528-529.
The Defendants’ Contentions
In opposition to the application, the defendants relied on two basic objections together with a number of complaints specific to particular paragraphs.
I propose to deal first with the two basic objections which, shortly stated, are:
·On the principles established by the High Court in Bellgrove v Eldridge,[9] it is not open to the plaintiffs to claim the costs of remedial works, which will not be carried out, in the absence of a plea that the works were both reasonable and necessary; and
·The proposed plea for damages for negligence is one for pure economic loss which cannot be maintained in the absence of an allegation of vulnerability on the part of the plaintiffs.
[9] (1954) 90 CLR 613.
Damages for Remedial Works Unlikely to be Undertaken
The defendants contend that the measure of damages for breach of contract is that sum which would put the innocent party in the position it would have been in had the contract been performed.[10] This much is uncontroversial.
[10] Wenham v Ella (1972) 127 CLR 454, 471.
However, the defendants go further and say that the plaintiffs cannot claim damages for the cost of remedial works where the great majority of the “remedial works” have not been carried out and are unlikely to be carried out in view of the fact that the property was sold “as long ago as August 2010”.
In the defendants’ submission it is necessary for the plaintiffs to plead (and ultimately prove) that the cost of these remedial/rectification works was both reasonable and necessary. In the absence of such a plea, a claim for damages on this basis cannot, it was submitted, be maintained.
I do not agree. In Bellgrove v Eldridge,[11] the High Court said:
It was suggested during the course of argument that if the respondent retains her present judgment and it is satisfied, she may or may not demolish the existing house and re-erect another. If she does not, it is said, she will still have a house together with the cost of erecting another one. To our mind this circumstance is quite immaterial and is but one variation of a feature which so often presents itself in the assessment of damages in cases where they must be assessed once and for all.
[11] (1954) 90 CLR 613, 620.
The High Court’s decision has been consistently followed in Australia. In Director of War Service Homes v Harris,[12] Gibbs J (as he then was) said:[13]
The fact that the building had been sold might be one of the circumstances that would have to be considered in relation to the question whether it would be reasonable to effect the remedial work, but assuming that it would be reasonable to do the work the owner would still be entitled to recover as damages the cost of remedying the defects on deviations from the contract (assuming of course that the contract price had been paid). In assessing those damages it would not be relevant whether the owner was under a legal liability to remedy the defects, or whether he had made a profit or a loss on the sale of the building …
[12] (1968) Qd R 275.
[13] Ibid at 278.
In South Australia, in De Cesare v Deluxe Motors Pty Ltd,[14] the Full Court considered the question as to the proper measure of damages where there has been incomplete and defective building work and concluded that, subject to the question of reasonableness, the usual remedy will be the cost of completing the works in accordance with the contract. The Court went on to say that the relevance of the sale of a building in these circumstances is limited to the question of whether it would be reasonable to effect the remedial work. Importantly the Court concluded that the performance of that work and a claim for the cost of doing it, does not cease to be reasonable merely because the building has been sold.
[14] (1997) 67 SASR 28; also see Scott Carver Pty Ltd v SAS Trustee Corporation [2005] NSWCA 462; Westpoint Management Ltd v Chocolate Factory Apartments Ltd (2007) NSWCA 253; Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184.
With the aforementioned principles in mind, I now turn to consider the defendants’ specific complaint.
First, I am conscious that this issue (as with others in the trial) is, to quote Mr Wells QC for the plaintiffs, likely to be a “fact-sensitive” one and that therefore the question of whether a claim for the cost of remedial works is ultimately reasonable may depend upon the nature of the evidence to be led at the trial. As a result, it is unlikely that it would be appropriate to rule that such a claim is unable to be advanced at the “pleading stage”.
Secondly, in so far as it was suggested that, to reimburse the plaintiffs for the cost of remedial works (when combined with the plaintiffs’ claim for damages for diminution in value), would result in the plaintiffs securing a windfall,[15] I observe that the claim for remedial works is put in the alternative to the claim for diminution in value.
[15] Defendants' Outline of Submissions - 11 Sepetember 2012 para 1.7.
Finally, the plaintiffs have submitted that in an effort to address the defendants’ concern on this issue, they would seek to explicitly plead reasonableness. If the plaintiffs made that application it would, in my opinion, be appropriate to permit it.
Accordingly, in my view, there is no foundation to the defendants’ complaint that the plaintiffs should not be permitted to advance a claim for the costs of remedial works in circumstances where the property has been sold. This, of course, is not to say that such a claim will necessarily be successful, but rather to acknowledge that, prior to a hearing on the merits, it is appropriate to allow such a pleading to be advanced.
Damages for Negligence for Pure Economic Loss where no Plea of Vulnerability
On this issue, the defendants contend that the plaintiffs “should not be permitted” to maintain a plea “for damages for negligence, being for pure economic loss”. In support of that contention the defendants submitted that “the Court has previously ruled that such a claim is not maintainable by the plaintiffs against the second defendant. Moreover, the paragraphs are defective since they contain no allegation of vulnerability”.[16]
[16] Defendants' Outline of Submission - 8.3.2013 - para 9.
Dealing with the first ground of complaint, it is true that an application, to amend a claim for damages for negligence for pure economic loss, was refused. However, the ruling related only to the form of the proposed plea. There was no ruling that such a plea in whatever form proposed, could not be maintained.
As to the second basis of objection, I note that in Perre v Apand,[17] McHugh J listed five factors or principles which His Honour thought were relevant to the determination of whether a duty of care exists in a case of pure economic loss. These factors were:
1reasonable foreseeability of loss;
2indeterminacy of liability;
3autonomy of the individual;
4vulnerability to risk; and
5knowledge of the risk and its magnitude.
[17] (1999) 198 CLR 180 at para 105.
However, His Honour did not intend this list of factors to be exhaustive, a point made clear by His Honour in his later judgment in Woolcock Street Investments Pty Ltd v CDG Pty Ltd.[18]
[18] (2004) 216 CLR 515 at para 75.
Furthermore, as the plurality in Woolcock Street said[19]:
Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. "Vulnerability", in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, "vulnerability" is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant.
…
In other cases of pure economic loss (Bryan v Maloney is an example) reference has been made to notions of assumption of responsibility and known reliance. The negligent misstatement cases like Mutual Life & Citizens' Assurance Co Ltd v Evatt and Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] can be seen as cases in which a central plank in the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided. And it may be, as Professor Stapleton has suggested, that these cases, too, can be explained by reference to notions of vulnerability. (The reference in Caltex Oil to economic loss being "inherently likely" can also be seen as consistent with the importance of notions of vulnerability.) It is not necessary in this case, however, to attempt to identify or articulate the breadth of any general proposition about the importance of vulnerability. This case can be decided without doing so.
[19] (2004) 216 CLR 515 at para 23.
The proposed Statement of Claim on this issue alleges facts which assert an assumption of responsibility by the second defendant in circumstances where the plaintiffs were reliant upon his skill and expertise.
In the plaintiffs’ submission, the pleaded facts relate to a “species of vulnerability” which has been recognised by the High Court[20] and Supreme Courts interstate. I have some difficulty with this submission. It is far from clear to me that their Honours in the High Court were intending to suggest that the combination of assumption of responsibility and known reliance is now to be recognised as a “species of vulnerability”. Rather, I would understand their Honours to suggest that this combination of factors is capable of giving rise to a duty of care, but only in circumstances where the plaintiffs are vulnerable, in the sense that they were unable to predict themselves by contract or otherwise.
[20] Bryan v Maloney (1995) 182 CLR 609.
Having said that, neither am I persuaded that the plaintiffs’ submission is clearly untenable. It is an argument which, in my view, is open to be pursued at this stage in the proceedings.
Furthermore, whatever may be said as to whether these allegations are capable of constituting a “species of vulnerability”, it is apparent that this part of the Claim is based on the assumption that there was no contract with the second defendant. In the absence of a contract with the second defendant, it is submitted that the plaintiffs would not have had the ability to take advantage of the protection afforded by e.g. the terms of a contract requiring the second defendant to exercise the appropriate level of care, a factor acknowledged to be relevant to the question of a plaintiff’s vulnerability by McHugh J in Perre v Apand[21] and Woolcock Street[22].
[21] (1999) 198 CLR 180 at paras 120-129.
[22] (2004) 216 CLR 515.
I am therefore satisfied that it is appropriate to permit the plaintiffs to submit a pleading in this form relying as it does on facts asserting assumptions of responsibility and reliance. It is unnecessary, in my view, for them to go further and assert that, as a result, the plaintiffs were “vulnerable”.
Paragraph Specific Objections
In considering the defendants’ specific objections, to individual paragraphs I bear in mind the observations of our Supreme Court that, all other things being equal, amendments should only be disallowed on grounds which would justify their being struck out under 6R104[23] and that the power, to strike out, is itself conditioned on judgments as to whether the pleading would prejudice the proper conduct of the action.[24]
Paragraph 9 – A Fixed Price Contract or a Cost Plus Contract
[23] Abrook v Paterson (1995) SASC 4990 at para 50.
[24] Holcon Aust Pty Ltd v Town of Walkerville & Anor (2007) SASC 437 at paras 38-44.

The defendants submit that the pleading in paragraph 9 effectively asserts that the contract is “a fixed price contract” which is fundamentally inconsistent with the plea, in paragraph 6, that it is a “cost plus” contract.
I accept that, if this submission was correct, the pleading in paragraph 9 could be embarrassing. However, the plaintiffs submit that the contract, under consideration, was a “cost plus” contract “based on an estimate” to which the second defendant was “to adhere to as nearly as possible”. Ultimately the question of the true nature and extent of this contract is better left to the trial. In any event, I am not persuaded that, understood in this way, the plea in paragraph 9 is objectionable.
The defendants also complain that the terms of paragraph 9 speak of “express terms” but then appear to allege an implied term in paragraph 9.2.2.
I do not agree. I accept that the paragraph 9.2.2 is intended to refer to terms that may be subject to interpretation[25] rather than terms that are implied in fact.[26]
Paragraph 11
[25] Upper Hunter District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429, 437.
[26] BP (Refinery (Westernport)) Pty Ltd v Shire of Hastings (1977) 190 CLR 266, 282-283.
The defendants complain that the plea is illogical given its apparent inconsistency with pleas in earlier paragraphs 6.2 and 10.1.
The plaintiffs’ case is that the contract contained the following terms:
i.)The consideration for the work would be at cost plus, but
ii.)The final consideration would not exceed the estimate or thereabouts (paragraph 9.1), and
iii.)Costs would be limited to those reasonably incurred (paragraph 10.1) as a result of exercising an effective system of cost control (paragraph 9.2).
Whilst I am not persuaded that there is an absence of logic in the plea, ultimately it will be a matter to be determined at the trial as to whether it is illogical.
Paragraph 12 – Who issued Invoices
The defendants complain that the plea “should not be permitted” because it is beyond dispute that the first defendant (not the second) issued the invoices. In answer, the plaintiffs submit that the invoices were issued in the name of the first defendant but on behalf of the second defendant. There is no basis to this objection.
Paragraph 18 – Diminution in Value
In relation to this paragraph, the defendants rightly complain that there is nothing in the filed witness statements supporting such a plea. In response, the plaintiffs submit that leave will be sought to file further witness statements should their application be successful. I have earlier addressed the other grounds of complaint on this paragraph under the Bellgrove v Eldridge heading.
Paragraph 19 – An alternative Case
A complaint is made as to internally inconsistent pleas. Although this paragraph pleads an alternative case, the Rules enable this to be done (see DCR 6R98).
Paragraphs 27-29 – Restitution – Money Paid under Mistake
The defendants contend that the allegations in these paragraphs “have no consequence” in light of the High Court’s decision in Pavey Matthews Pty Ltd v Paul.[27]
[27] (1987) 162 CLR 221 - Defendants' Outline of Submissions - 8.3.13 - paragraph 10.
In Pavey, the High Court concluded that although a licensed builder was prevented, by statute, from enforcing an oral contract he could still bring an action based upon quantum meruit. In this State an unlicensed builder (which the first defendant was) is precluded by statute[28] from recovering under a building contract but may in turn recover on a quantum meruit. In the plaintiffs’ submission a consequence of such an outcome is that the plaintiffs are entitled to receive any over-payment as money paid under a mistake.[29]
[28] Building Work Contractors Act 1995 (SA) - 3.6; See also Nunkuwarrin Yunti v AL Seeley Constructions Pty Ltd (1998) 72 SASR 21.
[29] David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353.
It is unnecessary on this application to determine whether or not the plaintiffs are correct as a matter of law. The matter is certainly arguable and as such the plea is unobjectionable.
Paragraph 30 – Plea Obviously Cannot Succeed
The defendants argue that this pleading should be struck out on the basis that it cannot possibly succeed, because the issue of the second defendant’s intention is irrelevant and because the plea is inconsistent with a witness statement.
I do not accept that the apparent inconsistency of a pleading with a witness statement is a proper ground of objection. Secondly, the plaintiffs assert that, the intention identified, is the intention to create legal relations. As such it is unobjectionable.
I do not therefore regard it as a plea with no prospect of success. Finally, and in any event, the plea is an existing plea and not a plea, the substance of which, the plaintiffs seek to amend.
Conclusions
For these reasons, I rule against the defendants on their objections, individually and collectively. I propose to allow the plaintiffs to file a Statement of Claim in the form of the Statement of Claim appended to these Reasons. Before doing so, I will hear the parties on any other orders which may be necessary as consequence of my decision.