Perpetual Trustees Australia Limited v OneSteel Trading Pty Ltd
[2007] VSC 370
•28 September 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 9979 of 2005
| PERPETUAL TRUSTEES AUSTRALIA LIMITED (ACN 000 431 827) AND ORS (According to the Schedule) | Plaintiffs |
| v | |
| ONESTEEL TRADING PTY LTD (ACN 007 519 646) AND ANOR (According to the Schedule) | Defendants |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 11 and 18 MAY 2007 and WRITTEN SUBMISSIONS: 25 and 30 MAY and 6 JUNE 2007 | |
DATE OF JUDGMENT: | 28 SEPTEMBER 2007 | |
CASE MAY BE CITED AS: | PERPETUAL TRUSTEES AUSTRALIA LIMITED v ONESTEEL TRADING PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 370 | |
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Practice and Procedure – Application to strike out statement of claim, alternatively for summary judgment for defendants – Rolling up into the one generalised allegation complaints about pipework installed in the fire protection systems at 16 shopping centres owned by the ten plaintiffs held to be inappropriate – Plaintiffs’ claims should be pleaded separately – Insufficient material facts and particulars pleaded – Statement of claim struck out with leave to replead – Factual matters relied on by defendants did not raise defence to whole claim – Premature to decide on this pleading whether defendants owed plaintiffs a duty to take reasonable care not to cause them pure economic loss – Application for summary judgment dismissed – Supreme Court (General Civil Procedure) Rules 2005, r.13.02, r.13.10, r.23.01, r.23.02, r.23.03, r.23.04.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr GP Harris | Gadens Lawyers |
| For the Defendants | Mr TJ Walker with Mr BF Quinn | Freehills |
HIS HONOUR:
In this proceeding, a generally endorsed writ was issued on 16 December 2005. It was not, however, served on the defendants until 12 December 2006. A statement of claim was filed and served on 15 February 2007.
By a summons filed on 19 March 2007, the defendants sought an order pursuant to r.23.02 of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”), alternatively the inherent jurisdiction of the Court, that the statement of claim be struck out on the grounds that its terms:
(a) did not disclose a cause of action;
(b) might prejudice, embarrass or delay the fair trial of the proceeding;
(c) were otherwise an abuse of process; and/or
(d) did not comply with the terms of Orders 13.02 and/or 13.10 of the Rules.
On 26 April 2007, the defendants filed an amended summons which sought an additional order, namely that pursuant to r.23.01 and/or r.23.03 of the Rules, alternatively the inherent jurisdiction of the Court, the statement of claim be struck out on the same grounds set out in (a), (b) and (c) of paragraph 2 above.
The Statement of Claim
The statement of claim pleaded that one or more of the ten plaintiffs was the owner of the land and improvements comprising each of the 16 shopping centres described in a schedule in the statement of claim.[1] According to the schedule, five of the shopping centres were in Victoria, five in New South Wales, four in Queensland and one in each of South Australia and Tasmania.
[1]Paragraph 13 and schedule 1. It should be noted, however, that according to the schedule, Permanent Trustee Australia Limited, which is not one of the ten plaintiffs, was said to be the sole owner of two shopping centres and the joint owner of another two shopping centres with the fifth plaintiff, Commonwealth Bank Officers Superannuation Corporation Pty Ltd.
It was then pleaded that, between 1994 and 2002, certain development or redevelopment works were undertaken at each of the shopping centres,[2] during which fire protection and fire sprinkler and hydrant systems and services were installed at each of the shopping centres.[3] The plaintiffs alleged that the fire protection system installed at each of the shopping centres included pipework and hydraulic services constructed from light gauge galvanised steel piping known by the brand or trade name “Firelite”,[4] which was designed, manufactured, marketed, distributed and/or sold or supplied for sale in Australia by the first defendant, OneSteel Trading Pty Ltd (“OneSteel Trading”), and/or the second defendant, OneSteel Limited.[5] It was pleaded that consultants, described as “construction contractors, engineers and other contractors”, were involved in designing, providing advice about, and installing the fire protection systems at the shopping centres.[6]
[2]Paragraph 14.
[3]Paragraph 15.
[4]Paragraph 16.
[5]Paragraph 24.
[6]Paragraph 35.
The plaintiffs alleged that the Firelite used in the fire protection systems installed at the shopping centres did not comply with a 1994 fire hydrant standard (AS 2419.1) in that the wall thickness of Firelite was less than the minimum wall thickness prescribed by the hydrant standard, namely 3.04 mm and 3.4 mm for 100 mm and 150 mm piping respectively, and that it suffered from defects in that it was “highly susceptible” to various forms of accelerated corrosion, particularly around electrical resistance welds, and thus was “highly susceptible” to developing leaks.[7] It was pleaded that the Firelite used in the fire protection systems installed at the shopping centres had developed these various forms of corrosion, particularly around electrical resistance welds, and had developed leaks,[8] with the result that the Firelite was unable to perform its intended function of providing pipework and hydraulic services required to permit the fire protection systems to operate effectively and reliably and that they do not do so and do not provide an effective or reliable means of protection against the risk of injury to persons and damage to property in the event of fire.[9]
[7]Paragraph 17.
[8]Paragraph 18.
[9]Paragraph 19.
The plaintiffs also alleged that relative to any medium wall pipe which was available in the Australian market for use in fire protection systems at the time of installation in each of the shopping centres, the Firelite suffered from the defects referred to above[10] and that, as a consequence, the service life of Firelite was substantially shorter than the service life of competing medium gauge piping, which was 25 to 30 years.[11] It was then pleaded that, by reason of the defects, it had been or was now necessary for each of the plaintiffs to replace the Firelite used in the fire protection installed in their respective shopping centres with a medium wall pipe at a substantial cost to the plaintiffs.[12]
[10]Paragraph 20.
[11]Paragraph 21.
[12]Paragraph 23.
The plaintiffs’ causes of action were for damages in negligence[13] and for misleading conduct in contravention of the Trade Practices Act 1974 (“the TPA”).[14] The negligence claim alleged that, at the time the defendants designed, manufactured, marketed, distributed and sold or supplied for sale the Firelite installed as part of the fire protection system at each of the shopping centres, they knew or ought reasonably to have known of certain matters, including the above defects, and that the service life of Firelite would be substantially shorter than the service life of the competing piping and that it would be necessary to replace the Firelite after installation at substantial cost.[15] It was further alleged that each of the plaintiffs was vulnerable to the risk of suffering substantial loss and damage, including replacing the Firelite, as a consequence of the above defects in that there were no reasonable steps available for them to take in order to ascertain the existence of the defects before installation of the Firelite or to protect themselves from suffering such loss and damage.[16] The plaintiffs further alleged that they were members of a determinate class who had suffered determinate loss and damage over a determinate period of time.[17] The plaintiffs alleged that each of the defendants therefore owed each of the plaintiffs a duty of care to take reasonable care in designing, manufacturing, marketing, distributing and selling or supplying for sale the Firelite to ensure that the plaintiffs did not suffer loss and damage as a consequence of Firelite being used in the fire protection system installed at each of the shopping centres,[18] and that each of the defendants had breached the duty of care in respect of each of the above aspects,[19] as a consequence of which the fire protection system installed at each of the shopping centres included Firelite and each of the plaintiffs had suffered or would suffer loss and damage.[20]
[13]Paragraphs 24 to 34.
[14]Paragraphs 35 to 48.
[15]Paragraph 25.
[16]Paragraph 26.
[17]Paragraph 27.
[18]Paragraph 28.
[19]Paragraphs 29 to 33.
[20]Paragraph 34.
The TPA claim alleged that before the fire protection system using Firelite was installed at each of the shopping centres, the defendants published and distributed to construction contractors, engineers and other contractors, involved in designing, providing advice about, and installing the fire protection systems at the shopping centres, marketing material regarding Firelite.[21] Three brochures, the Firelite general brochure, the Firelite ILG brochure and the Firelite HDG brochure, were identified in the particulars. Certain express representations were said to be contained in the Firelite marketing material,[22] including an express representation that Firelite complied with AS 4118.[23] It was also alleged that the Firelite HDG brochure contained an express representation by the defendants that Firelite HDG complied with the 1994 fire hydrant standard (“the hydrant standard representation”).[24] Certain implied representations were said to be found in the Firelite marketing material,[25] including representations that Firelite did not suffer from any material defects or deficiencies that were not disclosed in the Firelite marketing material,[26] and that there were no disadvantages in using Firelite rather than the competing piping in commercial fire protection systems.[27]
[21]Paragraph 35.
[22]Paragraph 36.
[23]Paragraph 36(e).
[24]Paragraph 37.
[25]Paragraph 38.
[26]Paragraph 38(h).
[27]Paragraph 38(i).
The plaintiffs alleged that some of the express representations were false[28] and that the hydrant standard representation[29] and the implied representations[30] were incorrect. The plaintiffs then pleaded that insofar as the false express representations and the implied representations were representations with respect to future matters, the defendants had no reasonable grounds for making them.[31]
[28]Paragraph 39.
[29]Paragraph 40.
[30]Paragraph 41.
[31]Paragraph 42.
The plaintiffs alleged that in publishing and distributing the Firelite marketing material and in thereby making the false express representations, the hydrant standard representation and implied representations:
(a)each of the defendants engaged in conduct in trade and commerce that was misleading and deceptive or was likely to mislead or deceive in contravention of s.52 of the TPA;[32]
(b) each of the defendants falsely represented that Firelite
(i)was of a particular standard, quality, value or grade in contravention of s.53(a) of the TPA;
(ii)had performance characteristics, uses or benefits that it did not have in contravention of s.53(c) of the TPA.[33]
[32]Paragraphs 43 and 44.
[33]Paragraphs 45 and 46.
Finally, the plaintiffs pleaded that by reason of
(a) one or more of the false express representations;
(b) the hydrant standard representation; and/or
(c) one or more of the implied representations
Firelite was installed in the fire protection system at each of the shopping centres,[34] as a result of which each of the plaintiffs had suffered and would suffer loss and damage.[35]
[34]Paragraph 47.
[35]Paragraph 48.
The Material relating to the Application
Pursuant to r.23.04(1) and (2), it is permissible to take into account the affidavit evidence for the purpose of the application under r.23.01 or r.23.03, but not the application under r.23.02. In all cases, however, the Court is entitled to look at any of the documents referred to in the pleading.[36] The relevant factual material will be referred to, when appropriate.
[36]Day v William Hill (Park Lane) Ltd [1949] 1 KB 632 at 639 per Singleton LJ; Castlemaine Perkins Ltd v Queen Street Hotels Pty Ltd [1968] Qd R 501 at 507 per WB Campbell J; Galoo Ltd (in liq) v Bright Grahame Murray (a firm) [1994] 1 WLR 1360 at 1382 per Glidewell LJ; Hong Kong Bank of Australia Ltd v BPTC Ltd (in liq) (1995) Aust Torts Reports 81-358 at 62,634 per Batt J.
The Application under r.23.02
In respect of the application under r.23.02, Mr Harris of counsel, who appeared on behalf of the defendants, submitted that the way in which the plaintiffs had rolled up each of their claims into one generalised allegation meant that pleading to it was embarrassing. He further submitted that the pleading was deficient in that, contrary to r.13.02(1)(a), not all material facts had been pleaded, and, contrary to r.13.10(1), it did not contain the necessary particulars of the pleaded facts.
Mr Walker of counsel, who appeared with Mr Quinn of counsel on behalf of the plaintiffs, submitted that the way in which the statement of claim had been pleaded was appropriate. He further submitted that the statement of claim was not lacking material facts. He argued that if the defendants needed further information it could have been provided by way of particulars but that, as none had been sought by the defendants before making the application, they could not succeed in their strike out application. He further submitted that, in some cases, what the defendants were seeking was evidence, not material facts or particulars. Mr Walker disputed that the pleading was so “fundamentally” defective that it should be struck out either in part or as a whole. He submitted that the defendants were not embarrassed in pleading to it.
Rule 13.02(1)(a) provides that every pleading shall “contain in a summary form a statement of all the material facts on which the party relies, but not the evidence by which those facts are to be proved”. A material fact is one which is necessary to constitute a complete cause of action or defence.[37] The purpose of the pleading is to state the facts necessary to enable the opposite party to understand, as a matter of procedural fairness, the nature of the case it has to meet.[38]
[37]Philipps v Philipps (1878) 4 QBD 127; Bruce v Odhams Press Ltd [1936] 1 KB 697; Rubenstein v Truth v Sportsman Ltd [1960] VR 473.
[38]Philipps v Philipps (1878) 4 QBD 127; Rubenstein v Truth & Sportsman Ltd [1960] VR 473; Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J.
Rule 13.10(1) provides that “every pleading shall contain the necessary particulars of any fact or matter pleaded”. Rule 13.10(2) provides that without limiting paragraph (1):
particulars shall be given if they are necessary –
(a)to enable the opposition party to plead; or
(b)to define the questions for trial; or
(c)to avoid surprise at trial.
In my opinion, the pleading of the statement of claim was deficient for the reasons submitted by counsel for the defendants. It seems to me to be quite inappropriate for the plaintiffs to have rolled up into the one generalised allegation that between 1994 and 2002 Firelite had been installed in the fire protection systems at each of the 16 shopping centres owned by one or more of the plaintiffs, that the Firelite was defective and that, as a result, each of the plaintiffs had suffered or would suffer loss and damage. In my opinion, not only should the claim in respect of each shopping centre have been pleaded separately, but many more material facts should also have been pleaded in respect of each plaintiff’s separate claim. It was no answer for the plaintiffs to argue that the defendants could have asked for particulars because it is not the function of particulars to fill gaps in a statement of claim from which a material statement has been omitted.[39]
[39]Bruce v Odhams Press Ltd [1936] 1 KB 697; Rubenstein v Truth & Sportsman Ltd [1960] VR 473; Mitanis v Pioneer Concrete (Vic) Pty Ltd (1997) ATPR 41-591 at 44,153 per Goldberg J; Gunns Ltd v Marr [2005] VSC 251 at [18] per Bongiorno J.
Thus, in my opinion, at least the following matters should have been pleaded separately in respect of the claim relating to each shopping centre:
(a)when, and pursuant to what contractual arrangements, the relevant plaintiff(s)[40] became the owner of the land and of any, and what, improvements;
(b)what, if any, contractual arrangements the plaintiff(s) had with the construction contractors, engineers and other contractors involved in the design and installation of the fire protection system;
(c)when the fire protection system including Firelite was installed;
(d)how it came about that Firelite was installed, that is, on whose advice or recommendation and to whom that advice or recommendation was given;
(e)which defendant breached which duty to take reasonable care to ensure that the relevant plaintiff(s) did not suffer loss and damage and when each of those events occurred;
(f)which representation by which defendant was relied on, when the representation was relied on and by whom it was relied on;
(g)when defects in the Firelite used in the fire protection system first occurred or became manifest; and
(h)whether, and when, the Firelite used in the fire protection system had been replaced.
[40]According to the schedule, five of the shopping centres are jointly owned by two plaintiffs.
If these matters were all pleaded separately in respect of each claim then the defendants would know whether the plaintiff(s) purchased the land and through its contractors constructed the shopping centre, or whether the plaintiff(s) purchased an existing shopping centre with the fire protection system, including Firelite, already installed. The defendants would also know the relevant parties involved in the contractual chain between the sale by them of the Firelite and its installation in the shopping centre and how it was being put that each defendant’s conduct caused the plaintiff(s) to suffer loss and damage. The defendants would also know whether they had any arguable limitation defence or some other defence arising out of the relevant dates of this particular claim.
In my opinion, the above defects in the pleading were such that it would have been appropriate, on this ground alone, to have made an order striking out the statement of claim. I do not accept Mr Harris’ submission that I should also dismiss the proceeding because the plaintiffs had not proffered an amended pleading (or filed more material contradictory of the defendants’ factual material.) In my opinion, in respect of this part of the application, the just course is to allow the plaintiffs the opportunity to mend their hand, by striking out the statement of claim but giving them leave to replead.
Counsel for the defendants, however, advanced further criticisms of the pleading of the statement of claim, some of which are considered below. Other criticisms are probably best dealt with in the context of the new pleading, if the same points reappear in the new statement of claim.
In respect of the negligence claim, Mr Harris submitted that the pleading of the actual and constructive knowledge on the part of each defendant[41] was simply a bald assertion, without any facts being pleaded to support the conclusion in respect of each of the matters listed nor the date(s) on which each defendant possessed that knowledge. This is a particularly important point in respect of the allegation that each of the defendants knew or should have known of the Firelite defects and the Firelite comparative defects.
[41]Paragraph 25.
In my opinion, this is a valid criticism as the plaintiffs must do more by way of pleading material facts rather than asserting an unsupported conclusion,[42] at least in respect of “the Firelite defects” and “the Firelite comparative defects” (as they are called in the statement of claim). I do not accept the plaintiffs’ submission that this would require them to plead “the evidence by which those facts are to be proved”, contrary to r.13.02(1)(a). Nor do I accept their submission that the knowledge of the defendants of the relevant matters is an inescapable inference from the facts pleaded in paragraph 24 of the statement of claim. If, as I consider should be done, the statement of claim is repleaded, dealing with each plaintiff separately, it may be easier for the plaintiffs to show that the defendants knew of the defects as complaints about the Firelite were progressively brought to their attention. But, at present, there is no pleading of when the first pipe failed or when the first complaint about Firelite was made to OneSteel or any other factual basis for the allegation that each of the defendants knew of these defects.
[42]H1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181 at 186 per Northrop J; Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 114 per Fisher J.
Mr Harris also submitted that the plaintiffs had not pleaded why they were vulnerable, rather than simply alleging that they were.[43] Vulnerability is a “plaintiff’s inability to protect itself from the consequences of a defendant’s want of care, either entirely or at least in a way which would cast the consequences of loss on the defendant.”[44] Mr Harris submitted that no facts were pleaded in the statement of claim which showed that the plaintiffs could not have protected themselves against the economic loss they allege. They simply pleaded a conclusion by restating the proposition of vulnerability.
[43]Paragraph 26.
[44]Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at [23] per Gleeson CJ, Gummow, Hayne and Heydon JJ.
Again, I consider that there is validity in this criticism. Just why it is said that the plaintiffs were unable to ascertain the existence of the defects before installation of the Firelite or to protect themselves from suffering such loss and damage is not pleaded. It is not clear whether the inability to protect themselves is said to have resulted from, in the words of McHugh J in Woolcock Street Investments Pty Ltd v CDG Pty Ltd,[45] “ignorance or social, political or economic constraints”. No doubt the identification of the basis for the allegation of vulnerability on the part of each particular plaintiff will be easier when a new statement of claim dealing with each plaintiff separately is repleaded. Certainly, it will at least be possible to ascertain whether each particular plaintiff falls into the category of first owner, or subsequent purchaser, of the shopping centre.[46]
[45](2004) 216 CLR 515 at [80].
[46]Woolcock at [81]-[86] per McHugh J.
In respect of the TPA claims, Mr Harris submitted that the essential requirement of reliance on the misleading conduct that caused the loss and damage claimed was not pleaded.[47] He submitted that in order for the representation to be linked relevantly to the actual damage caused, there must be set out in the pleading which person relied on which representation in which brochure, as must the causal connection between that person’s reliance and the damage suffered.[48] This meant that the role a particular representation played in the person’s reliance must also be pleaded, so that it is clear whether it is being alleged that each and every separate piece of misleading conduct was a cause of the relevant decision, or rather that it was the aggregate of all of the representations, or only some combination of them, which induced the decision.[49] Mr Harris also submitted that it should be pleaded whether it was a consultant who was misled when making a particular decision such as to use Firelite, or the plaintiff(s) who made the decision based on the advice from the consultant(s) who had been misled or whether it was the plaintiffs themselves who had been misled. Further, if a consultant were involved then the advice or recommendation given by the consultant to the plaintiff(s) and the reaction to that advice should be pleaded.[50]
[47]Kabwand Pty Ltd v National Australia Bank Limited (1989) ATPR 40-950 at 50,378 per Lockhart, Hartigan and Hill JJ; Kaze Constructions Pty Ltd v Housing Indemnity Australia Pty Ltd (1990) ATPR 41-017 at 51,316 per Von Doussa J.
[48]Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222 per French J; Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41-691 at [43]-[46] per Drummond J; McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 at [25]-[26] per Weinberg J.
[49]Cadence Asset Management Pty Ltd v Concept Sports Limited, Unreported, Finkelstein J, 23 December 2005, at [15].
[50]Cadence at [16].
Mr Walker submitted that the plaintiffs were not required to prove reliance and that the existing causation plea was sufficient. He argued that whether the plea was to be established by proof of reliance by a particular contractor or plaintiff upon the pleaded conduct was a matter of evidence and inferences drawn from the evidence at trial. Alternatively, it was said to be a matter for particulars that have not been sought.
I do not agree. Without identification of the person who is alleged to have been misled by a particular representation, and if that is not the plaintiff, without identification of how the misleading of the consultant led to the decision to use Firelite, the defendants simply do not know the case they have to meet. It is well established, in my opinion, that the matters outlined by Mr Harris must be pleaded. Evidence can be given at the trial and inferences can then be drawn in respect of the factual basis set out in the pleading.[51]
[51]Gould v Vaggelas (1985) 157 CLR 215 at 235 per Wilson J.
Mr Harris next submitted that the implied representations pleaded in (h) and (i) of paragraph 38 of the statement of claim were not properly pleaded. He argued that the “material defect or deficiencies” and the “disadvantages” should be spelt out and that it should be pleaded how the disclosure of any of them would have affected the relevant decision. Instead, in paragraph 41 it was simply alleged that Firelite did suffer from “material defect and deficiencies” not disclosed in the Firelite marketing material and that there were “disadvantages” in using Firelite, none of which were specified.
Again, I consider that there is validity in this submission. If, as the plaintiffs asserted in their submissions, the defects, deficiencies and disadvantages are “simply the Firelite defects and the Firelite comparative defects”, then that should have been stated in the statement of claim. It should not have been left up to the defendants to guess or request particulars.
One final issue was whether s.51A of the TPA should have been pleaded in paragraph 42 of the statement of claim if the plaintiffs were relying on its provisions. In my opinion, the defendants are entitled to know, as a matter of procedural fairness, whether s.51A is relied on and the simplest way to meet that requirement is to say so.[52]
[52]O’Neill v Medical Benefits Fund of Australia Ltd (2002) 122 FCR 455 at [15]-[16] per Carr, Moore and Marshall JJ, and the cases cited therein.
For all of the above reasons, I consider that the defendants’ application under r.23.02 should succeed and that the statement of claim should be struck out, with leave to replead.
The Application under r.23.01, r.23.03 and the inherent jurisdiction
The traditional statement of when a court can summarily determine a proceeding by, for example, staying the proceeding or a claim in the proceeding, under r.23.01, on the ground that it does not disclose a cause of action has been expressed in a variety of ways. In General Steel Industries Inc v Commissioner for Railways (NSW),[53] Barwick CJ summarised past approaches. His Honour said:
The test to be applied has been variously expressed; “so obviously untenable that it cannot possibly succeed”; “manifestly groundless”; “so manifestly faulty that it does not admit of argument”; “discloses a case which the Court is satisfied cannot succeed”; “under no possibility can there be a good cause of action”; “be manifest that to allow them' (the pleadings) 'to stand would involve useless expense”... so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or “so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument”; “so to speak apparent at a glance”.
[53](1964) 112 CLR 125 at 129
Summarily dismissing a claim rather than allowing it to proceed to trial is not a course ordinarily followed. Such an order should not be made “except in the clearest of cases”.[54] In Dey v Victorian Railway Commissioners[55] Dixon J, as his Honour then was, said:
A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner … But once it appears that there is a real question to be determined whether of fact or law and that the right of the parties depend upon it, then it is not competent for the Court to dismiss the action … [U]nder cover of the inherent jurisdiction to stop abuse of process litigants are not to be deprived of the right to submit real and genuine controversies to the determination of the courts by the due procedure appropriate for the purpose.
A similar warning was sounded by Barwick CJ in General Steel:[56]
It is essential that great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal.
[54]Agar v Hyde (2000) 201 CLR 552 at [57] per Gaudron, McHugh, Gummow and Hayne JJ.
[55](1948) 78 CLR 62 at 91-92.
[56](1964) 112 CLR 125 at 130.
Although it has been doubted whether the power given by r.23.03 adds anything to those contained in r.23.01, the question under this head of the application is whether the defendants show a good defence on the merits.[57]
[57]State Electricity Commission of Victoria v Rabel [1998] 1 VR 102 at 109 per Ormiston JA.
The first argument by the defendants under this part of the application was that certain undisputed facts established by the evidence before the Court led to the conclusion that the claims against the second defendant could not succeed.
Mr Harris drew attention to the fact that examination of the brochures, referred to in the statement of claim, revealed that the first one, the Firelite general brochure, was stated to be “Effective October 1993”; the date of the second one, the Firelite ILG brochure, was unknown; and the third, the Firelite HDG brochure, was stated to be “Effective April 1995. Revision 2”. The Firelite general brochure contained a reference to “Tubemakers”. The Firelite ILG brochure displayed the business name “Tubemakers Piping Systems” and the Australian Company Number (“ACN”) of OneSteel Trading. The Firelite HDG brochure displayed the business names “Tubemakers Piping Systems” and “Northgard Piping Systems” and the ACN of OneSteel Trading.
ASIC searches revealed that OneSteel Trading was, until August 2001, known as Tubemakers of Australia Limited. Tubemakers Piping Systems and Northgard Piping Systems were business names owned by that company. Mr Harris therefore accepted that the material demonstrated that OneSteel Trading had played a role in the publication of the three brochures relied on by the plaintiffs.
Mr Harris submitted, however, that the same could not be said about the second defendant. Again, ASIC searches revealed that OneSteel Limited was previously known as AWI Holdings Pty Ltd and before that Australian Wire Industries Pty Ltd. It only became the ultimate holding company of OneSteel Trading in about 2000, according to that company’s 2000 Annual Report, presumably when the OneSteel Group of companies were split off from the BHP Billiton Group of companies. The previous ultimate holding company of OneSteel Trading was BHP Billiton Limited. Therefore, it was submitted that OneSteel Limited could have no liability for anything done before some date in 2000, because until then it was not associated in any relevant way with OneSteel Trading.
Although these facts arguably rule out six years of the eight or nine year period alleged in the statement of claim, it does not, in my opinion, provide a complete defence for OneSteel Limited at this stage, as relevant allegations may still be able to be pleaded against it in respect of its conduct during the two or three year period since it became associated with OneSteel Trading by becoming its ultimate holding company. In the circumstances, it seems to me that this part of the application can progress no further at this stage, because summary judgment cannot, in my opinion, be entered in favour of a defendant for part of the plaintiffs’ rolled up claim.[58] Indeed, I did not understand Mr Harris, in the end, to be contending to the contrary because the plaintiffs’ generalised allegation meant that he was not able to point to any particular claims which had arisen before the relevant date in 2000.
[58]HIH Casualty & General Insurance Limited (In Liq) v SGIC General Insurance Limited [2004] VSC 519.
Mr Walker submitted that, in any event, the second defendant would not be entitled to judgment because what was relevantly alleged against OneSteel Limited was on the basis of it actually engaging in the relevant conduct. The pleading did not depend on the corporate relationship.
This situation is, therefore, a good example of why the statement of claim should contain, separately for each shopping centre, the matters referred to above. Until the dates relevant to each claim and the specific acts alleged against the second defendant are pleaded, one cannot know whether or not there remains any arguable claim against the second defendant. The plaintiffs are now on notice, however, of the second defendant’s factual contentions, which I did not understand the plaintiffs to be disputing. No doubt, account will be taken of them in the repleading of the statement of claim. Consideration will also have to be given to what misleading conduct is alleged against OneSteel Limited when all three (or at least two of the three) brochures relied on by the plaintiffs appear to have been published well before 2000.
The second factual matter arose out of the allegations that the defendants had misrepresented compliance by Firelite with various Australian standards, the relevant parts of which were in evidence before me. Australian standard fire hydrant installations (AS2419.1) was published on 18 July 1994. It specified requirements for the installation of fire hydrants. Clause 6.2.1(a) said that steel tubes and pipes had to comply with one of the appropriate Australian standards – AS1074, AS1579, AS1769 or AS4041. The clause also stated:
Pipes shall be at least equivalent to medium grade steel tube complying with AS1579, AS4041 (subject to a minimum wall thickness of 4.76 mm), or with AS1074.
It was common ground that the thickness of the 100 mm sized Firelite pipe was 2.11 mm and of the 150 mm sized Firelite pipe was 2.77 mm.
Australian standard AS2419.1 was amended on 5 October 1996. Clause 6.2.1(a) was amended by the addition of another standard, AS4118.2.1, in the list of appropriate Australian standards and by the deletion of the statement about pipes being equivalent to medium grade steel tube quoted above. The standard was amended again on 10 December 2004 by, amongst other things, the substitution of a new clause 6.2, which introduced for the first time for “light steel pipe”:
(a)a minimum wall thickness of 3.04 mm for pipe diameters up to and including DN 100 mm; and
(b)a minimum wall thickness of 3.4 mm for pipe diameters greater than 100 mm and up to DN 150 mm.
Thus, Mr Harris submitted, it was only the 2004 amendment that introduced the minimum wall thicknesses of 3.04 and 3.4 mm respectively, which were the thicknesses relied on by the plaintiffs in their pleading of the breach of the hydrant standard, AS2419.1. Yet 2004 was outside the relevant period pleaded by the plaintiffs, namely 1994 to 2002.
The plaintiffs responded by arguing that in 1994 there had to be compliance with AS1074. That standard required a wall thickness for light wall pipes of 3.6 mm for 100 mm diameter pipe and did not permit a light wall pipe for 150 mm diameter pipes. Under that standard, the wall thickness for 150 mm medium pipes was 5.0 mm. There was, therefore, the plaintiffs submitted, a requirement under AS2419, at least between 1994 and 5 October 1996, that the minimum wall thickness be greater than the respective Firelite thicknesses.
Mr Harris then submitted that even that was not the case because AS4118.2.1 was a standard first published on 5 April 1995. It defined a light-wall pipe as “a mild steel pipe with a nominal wall thickness less than that of medium wall thickness as specified in AS1074”. Clause 3.1.1. of the standard provided that:
pipes with a lesser wall thickness may be used if complying with the requirements of this Section and the relevant Standards listed in Clause 1.3, and are specifically approved for use in fire protection systems.
According to clause 3.1.2 of AS4118.2.1, the required wall thicknesses of above ground pipes (100 mm and 150 mm) were 2.11 mm and 2.77 mm respectively, which Firelite met. Further, clause 3.4 provided that “lightwall steel pipes and pipe systems” that had been “listed by Scientific Services Laboratory (SSL) in – SSL Register of Accredited Products Fire Protection Equipment shall be deemed to satisfy the requirements of this Standard”. Part of the evidence before me was such a document by SSL dated 23 June 1994 stating that Firelite complied with the draft AS4118.2.1.
The result of the above, according to the defendants, was that between 23 June 1994 and 5 October 1996 there was an issue about whether or not there was a misrepresentation, made in a brochure distributed in that period and relevantly relied on, in relation to compliance with an Australian standard. A further issue might be whether, even in that limited period, it was understood that the representation referred to the draft standard that was in circulation from 23 June 1994.
Whether or not the defendants’ argument is correct in respect of the period after 5 October 1996, it seems to me that there are arguable issues about the relevant period before that, particularly if that period commenced prior to 23 June 1994. Thus, once again, the defendants’ submissions do not demonstrate a complete defence in respect of this issue. Therefore, this part of the application cannot succeed. In the circumstances, I do not consider it appropriate to venture into the dispute between the parties about the proper construction of the wording of these Australian Standards or their application to the facts of this case.
I turn then to the final argument advanced by the defendants, which was that the negligence claim should be summarily dismissed. Mr Harris submitted that the claim was for pure economic loss, the cost of having to replace the fire protection system earlier than expected. There was no complaint about Firelite causing personal injury or damage to property. He submitted that no duty of care was owed by a designer or manufacturer to a consumer for a defect in a product causing pure economic loss. He further submitted that the tortious responsibility was not absolute and that want of merchantable quality did not necessarily arise from any act of negligence on the part of the designer or manufacturer and particularly not from any act of negligence on the part of the marketer, distributor or seller of the product.
Mr Walker submitted that there was no absolute exclusionary rule such as that contended for by the defendants. He submitted that whether a duty of care to avoid economic loss existed was always a fact-sensitive analysis and that the particular circumstances of each case had to be carefully considered. Mr Walker argued that the defendants’ submission flew in the face of two recent decisions of the High Court of Australia, Perre v Apand Pty Ltd[59] and Dovuro Pty Ltd v Wilkins,[60] which, he contended, supported the plaintiffs’ claim in negligence in this case.
[59](1999) 198 CLR 180.
[60](2003) 215 CLR 317.
Mr Harris referred, in particular, to four decisions which, he submitted, demonstrated why the plaintiffs’ claim in negligence must fail.[61] In Minchello v Ford Motor Company of Australia,[62] the lessee and lessor of a truck sued the manufacturer over alleged defects in the truck, including that it vibrated excessively at high speed. The negligence claim failed because the Court of Appeal held that a manufacturer of a product does not owe a general duty to the ultimate consumer of the product to take reasonable care to guard against economic loss to the consumer arising out of a defect in the product rendering it unmerchantable or useless. Mr Harris submitted that this was binding authority requiring dismissal of the plaintiffs’ claim.
[61]Apart from the decisions discussed below, reference was also made to D&F Estates Ltd v Church Commissioners for England [1989] AC 177 and Murphy v Brentwood District Council [1991] 1 AC 398.
[62][1995] 2 VR 594 at 595-599 per Brooking J and at 618-620 per Ormiston J. Fullagar J agreed with Ormiston J.
In CBD Investments Pty Ltd v Ace Ceramics Pty Ltd,[63] Giles J of the Supreme Court of New South Wales refused an application to amend a statement of claim to include a claim in negligence by an owner of a building against the supplier of allegedly defective tiles to the contractor who agreed to supply and fix the floor tiles in the building. His Honour held that no duty of care was owed by the supplier to the owner of the building. Mr Harris submitted that this case was virtually on all fours with that which I am considering.
[63][1994] 10 BCL 437.
In Nitrigin Eireann Teoranta v Inco Alloys Ltd,[64] a specialist pipe maker supplied steel alloy tubing for the plaintiffs’ chemical factory. Two years later, in 1983, a pipe cracked and was repaired. In 1984 the pipe again cracked and burst, causing an explosion which damaged the factory. In a proceeding commenced in 1990 a preliminary question was tried, namely, when had the plaintiff’s cause of action arisen. May J held that since the cracking to the pipe in 1983 had been a defect in the quality of the pipe itself which had not caused personal injury or damage to other property and since the relationship between the defendant and the plaintiffs was not such as to give rise to a special duty of care, no cause of action had then arisen and the loss resulting from that cracking had been economic loss and irrecoverable in negligence. Thus, the claim was not statute barred. Mr Harris pointed out the close similarity between the facts in that case and this case.
[64][1992] 1 WLR 498.
Finally, in Fletcher Insulation (Vic) Pty Ltd v Renold Australia Pty Ltd,[65] Byrne J held that no duty of care was owed by the supplier of a chain, which failed prematurely, to the subsequent purchaser of the chain when the loss suffered by the subsequent purchaser was purely economic loss.[66] However, his Honour reached this conclusion because he also held that the subsequent purchaser was not vulnerable in that it had the capacity to protect itself from such a loss.[67] Therefore, in my opinion, this case does not stand for the proposition that a designer or manufacturer of a product can never be liable to a consumer for a defect in the product causing pure economic loss.
[65][2006] VSC 269.
[66][2006] VSC 269 at [82].
[67][2006] VSC 269 at [81].
Mr Harris submitted that nothing said in Perre or Dovuro rendered incorrect the first three authorities referred to above, which were decided before the two High Court judgments.
In Perre, a duty of care to avoid economic loss was held to be owed by an importer and distributor of potato seed, that was afflicted with bacterial wilt, to a class of persons producing potatoes within a few kilometres of a property upon which the importer and distributor undertook trial plantings of the diseased potato seed. The economic loss suffered was that, because of the presence of the diseased potatoes on the neighbour’s property, the plaintiffs were prevented by Western Australian regulations from selling their potatoes into the more profitable market in that State. The matters upon which the duty of care depended were the combination of foresight of the likelihood of harm, knowledge or means of knowledge of an ascertainable class of vulnerable persons who were unable to protect themselves from harm, the fact that implying a duty would not impair the legitimate pursuit by the importer and distributor of its own commercial interests, and the fact that the damage flowed from the occurrence of activities within its control.
In Dovuro, a producer and distributor sold canola seed produced in New Zealand to a merchant who in turn sold it to a farmer. The seed also contained weed seeds. At the time of the sales there was no prohibition on the weeds whose seeds were included in the canola seed. Shortly after, declarations were made by the State Agriculture Protection Board the effect of which was to prohibit the introduction into Western Australia or movement within the State of those weeds and to require their eradication. It was held that the producer and distributor had not breached a duty of care owed to the farmer since at the time the seed was imported and sold in Western Australia, it was not known to be dangerous and had not been prohibited. Hence, it was not reasonably foreseeable that buyers of the seed would suffer damage by reason of the weeds subsequently being prohibited.
Mr Walker particularly emphasised the following statement by McHugh J in Dovuro:
It is beyond doubt that a manufacturer of any product owes a duty to a consumer to take reasonable care to prevent the product causing injury or loss to the consumer. As the facts in other judgments demonstrate, Dovuro's position was identical in principle with that of such a manufacturer. … This was not a case where there was any basis for contending that the losses suffered by the consumers might fall outside the ordinary duty owed by a manufacturer to a consumer. It was not a case where the Wilkins interests could succeed only on proof of a special duty to prevent economic loss to them.[68]
[68](2003) 215 CLR 317 at [29].
Mr Harris submitted that it was clear from the High Court’s decision in Woolcock, which came after both Perre and Dovuro, that where the damage arose through a chain of contracts, the requisite type of vulnerability would not arise as the law assumed that contract provided an effective mechanism for protecting the plaintiff from that damage. Mr Walker disputed that the law made any such assumption. He submitted, correctly in my opinion, that the question whether a plaintiff has, or could reasonably have, taken steps to protect itself from loss is a question of fact in the particular case. In Woolcock, the purchaser of a warehouse and office complex, constructed some years previously, sued an engineering company and one of its employees, who had acted as the project manager in respect of the design and construction of the building, for negligence in its design or the supervision of its construction, when it became apparent that the building was suffering substantial structural distress due to the settlement of its foundations or the material below them or both. It was held that neither defendant owed a duty of care to the purchaser to avoid the economic loss the purchaser alleged it had incurred. Neither the facts stated in the statement of claim nor those set out in the case stated showed that the subsequent purchaser was vulnerable to the economic consequences of negligence in the engineers’ design of the foundations. Mr Walker therefore submitted that the facts of the particular case were important to deciding the question of vulnerability.
In my opinion, it is not necessary, at this stage, to consider further the excellent detailed submissions made by counsel, on a number of issues, both in support of, and in opposition to, the claim made by the plaintiffs that they were owed a duty of care by the defendants to take reasonable care in designing, manufacturing, marketing, distributing and selling or supplying for sale the Firelite to ensure that the plaintiffs did not suffer economic loss and damage as a consequence of the Firelite being used in the fire protection system installed at each of the shopping centres. This is because I have already decided that the pleading of the present statement of claim is deficient and that it should be struck out, with leave to replead. Therefore, it would be premature, in my opinion, to summarily determine this proceeding on the current state of the pleading rather than first seeing how the plaintiffs put their repleaded claim. That is, I am not persuaded, at this stage, on the basis of the above consideration, that the plaintiffs’ claim, however, it is pleaded, is so obviously untenable that it cannot possibly succeed. That question will be able to be assessed better in the context of a properly pleaded statement of claim.
Mr Walker made two further points in support of his submission that the plaintiffs’ claim in negligence for recovery of pure economic loss was arguable. First, he submitted that the principles relating to the recognition of a duty of care to avoid pure economic loss were far from settled and that a court ought not to stifle the development of the law by summarily determining a claim which depended for its success upon the application of legal principles that remained unsettled or uncertain. The members of the Court in Woolcock clearly accepted that this area of the law was in a state of development, with all the uncertainty that that involved.[69]
[69](2004) 216 CLR 515 at [7] per Gleeson CJ, Gummow, Hayne and Heydon JJ, at [45] and [48] per McHugh J and at [138] and [157] per Kirby J.
Secondly, Mr Walker submitted that it was generally unsafe to summarily determine a fact-sensitive legal question such as the existence of a duty of care. Again, support for this proposition was to be found in recent decisions of the High Court such as Agar v Hyde[70] and Woolcock.[71]
[70](2000) 201 CLR 552 at [64] per Gaudron, McHugh, Gummow and Hayne JJ.
[71](2004) 216 CLR 515 [7] per Gleeson CJ, Gummow, Hayne and Heydon JJ, at [96] per McHugh J and at [123] and [138] per Kirby J.
These points may take on greater significance when a properly pleaded statement of claim is produced by the plaintiffs.
The Appropriate Order
Accordingly, the order which I would propose making, once the parties have had the opportunity to consider these reasons, is that, pursuant to r.23.02, the plaintiffs’ statement of claim filed on 15 February 2007 be struck out, with leave to replead by a certain date, and that otherwise the defendants’ amended summons filed on 26 April 2007 be dismissed.
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