Rednual Holdings Pty Ltd v Loule Pty Ltd
[2013] VCC 328
•28 March 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Not Restricted |
COMMERCIAL LIST
BUILDING CASES DIVISION
Case No. CI-12-03288
| REDNUAL HOLDINGS PTY LTD ACN 005 110 092 | First Plaintiff |
| CROMER PROPERTIES PTY LTD ACN 005 405 229 | Second Plaintiff |
| v | |
| LOULE PTY LTD ACN 088 287 165 BURTON PROJECTS PTY LTD ACN 087 918 634 MICHAEL MADEIRA | Defendants |
---
JUDGE: | HIS HONOUR JUDGE GINNANE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 March 2013 – Final written submission 14 March 2013 | |
DATE OF JUDGMENT: | 28 March 2013 | |
CASE MAY BE CITED AS: | Rednual Holdings Pty Ltd & Anor v Loule Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 328 | |
REASONS FOR JUDGMENT
---
BUILDING CASE - practice - joinder of additional defendants - whether concurrent wrongdoers – surveyors seeking to join builder and director – claims for contribution and indemnity - Wrongs Act 1958 ss 24AF,24AH,24AL; County Court Civil Procedure Rules r 9.06
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Andrew | Rodriguez Lawyers |
| For the Defendants | Mr D A Klempfner | Colin Biggers & Paisley |
| For the Proposed Joined Parties | Mr R G Squirrell | Hassall’s Litigation Services |
HIS HONOUR:
1 The defendants seek an order joining Brentwood Homes Pty Ltd and Gary Robert Mepstead as defendants to the proceedings pursuant to s24AL of the Wrongs Act 1958 (“the Act”) and/or Rule 9.06 of the County Court Civil Procedure Rule 2008. The plaintiffs and the proposed defendants oppose the application.
2 The plaintiffs’ claim in the proceeding relate to building surveying services provided by the existing defendants in relation to the construction a building in Black Rock, including a basement, three commercial units and three residential units. The plaintiffs claim that the building was built with a number of defects.
3 The proposed fourth defendant, Brentwood Homes Pty Ltd, was the builder and the proposed fifth defendant, Mr Mepstead, was a director of Brentwood Homes.
Provisions of the Wrongs Act 1958
4 The relevant provisions of the Wrongs Act are as follows:
Application of Part
24AF (1) This Part applies to-
(a)a claim for economic loss or damage to property in an action for damages (whether in tort or contract, under statute or otherwise) arising from a failure to take reasonable care; and
(b)a claim for damages for a contravention of section 18 of the Australian Consumer Law (Victoria).
Who is a concurrent wrongdoer?
24AH(1) A concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions caused, independently of each other or jointly, the loss or damage that is the subject of the claim.
(2)For the purposes of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up, has ceased to exist or has died.”
Joining non-party concurrent wrongdoer in the action
24AL(1) Subject to subsection (2), the court may give leave for any one or more persons who are concurrent wrongdoers in relation to an apportionable claim to be joined as defendants in a proceeding in relation to that claim.
(2) The court is not to give leave for the joinder of any person who was a party to any previously concluded proceeding in relation to the apportionable claim.
5 The phrase “the loss or damage that is the subject of the claim” is equivalent to the “same damage” in s23AB of the Act: St George Bank Ltd v Quinerts Pty Ltd.[1]
[1](2009) 25 VR 666 [68]
6 The first two defendants are pleaded to have carried on business together under the name “Group Four Building Consultants” (Group Four) as building consultants providing building surveying services and associated regulatory advice to builders and developers.
7 The third defendant, Mr Madeira, is pleaded to be a building practitioner registered with the Building Practitioners Board under the Building Act 1993 in the class and category of building surveyor number BS 15132, a private building surveyor, as defined in s 3 of the Building Act 1993 and a director and shareholder of the first defendant.
8 The plaintiffs allege that in or about September 2002, by their agent, they retained Group Four to provide building surveying services and regulatory advice in relation to the construction of the building. They rely on terms of the retainer and statutory warranties implied into it. They plead that Group Four nominated Mr Madeira, the third defendant, to act as relevant building surveyor for the Project and that on or about 10 April 2003, Group Four and Mr Madeira issued a building permit (stage 2) for the project to the plaintiffs’ agent.
9 The issuing of building permits is dealt with by ss 16 and 17 of the Building Act 1993 and Part 2 of the Building Regulations 1994 and Part 3 of the Building Regulations 2006.
10 The plaintiffs plead that, on or about 10 April 2003 Group Four and Mr Madeira stamped the Construction Documents as approved. They allege that in acting as a relevant building surveyor, Mr Madeira owed the plaintiffs a common law duty of care to perform his functions in a competent manner and to a professional standard and in accordance with the requirements of the Building Act 1993 and the Building Regulations 1994. They also allege that Mr Madeira owed them a statutory duty to perform his functions as relevant building surveyor in a competent manner and to a professional standard. The duty is said to arise pursuant to regulation 15.2 of the Building Regulations 1994.
11 The plaintiffs plead in paragraph 15 of the statement of claim that wrongly and in breach of their retainer, Group Four failed to provide building surveying services to them in a proper and professional manner and in accordance with the requirements of the Building Act and Building Regulations in that it failed to assess properly or, wrongly approved, the Construction Documents prior to issuing the Building Permit. They allege that the Construction Documents failed to provide effective fire resistance levels, waterproofing/drainage for the balconies and or failed to provide appropriate or sufficient information for drainage to prevent ingress of water into the building and/or discharge of storm water away from the building and basement drainage.
12 The plaintiffs allege that on or about 14 April 2004, Group Four approved the finished works and issued an Occupancy Permit for the Project stating inter alia that the building was suitable for occupation.
13 Occupancy permits are dealt with by s41 of the Building Act and Part 9 of the Building Regulations 1994 and Part 10 of the Building Regulations 2006.
14 The plaintiffs plead in paragraph 16 of the statement of claim that in carrying out his work as the relevant building surveyor for the Project, Mr Madeira breached his common law or statutory duty of care, in that he failed to assess properly the Construction Documents for approval prior to issuing the Building permit and/or wrongfully approved the Construction Documents.
15 They allege that Group Four approved the finished works and issued an Occupancy Permit for the Project stating, inter alia, that the building was suitable for occupancy in circumstances where the building had the features set out above.
16 The plaintiffs allege that by reason of Group Four’s breach of the retainer and Mr Madeira’s breach of duty, the plaintiffs have suffered the following loss and damage:
“(a) the Project was constructed for the Plaintiffs by a builder during the period April 2003 to 14 April 2004;
(b) but for the Defendants’ negligent and careless approval of the Construction documents and subsequent issuing of the Building Permit, the works would never have proceeded as they did;
(c) the Project as completed is seriously defective and non-compliant with the provisions of the Building Code of Australia;
(d) the Plaintiffs must now arrange for substantial remedial works to the building to make it safe for occupation and to prevent water ingress and damage to the balconies and basement structure.
…
By reason of the foregoing the Plaintiffs are entitled to damages for the following:
(a) costs to remedy the defective and non-compliant building work;
(b) loss or rent and/or damages to compensate the Plaintiffs’ tenants during rectification works.”
17 The defence of the existing defendants denies any breach of retainer or duty. Their defence includes the following pleadings:
“6. They:
(a) Say that Brentwood Homes Pty Ltd (the builder) engaged the Group Four Partnership to provide building surveying services in respect to the project by way of an application for a building permit (the application) dated 24 August 2002;
(b) The application stated that it was on behalf of the first plaintiff and ‘Cromer Consulting Pty Ltd’;
(c) Pursuant to that engagement and in accordance with Part 6 of the Act and the Building Regulations 1994 (‘the Regulations’) the third defendant was appointed the private building surveyor for the project;
(d) They otherwise deny each and every allegation contained in paragraph 6.
…
19. Further, the defendants refer to and repeat paragraphs 11-15 and say that in the circumstances, they discharged their obligations in accordance with the Act and Regulations, and exercised reasonable care in fulfilling their duties under the Act and Regulations.
20. Further, if the Court finds in favour of the plaintiffs in respect to their claims for loss and damage of any part thereof, then such loss and damage has been wholly caused by the builder.
Particulars
The plaintiffs’ claims arise from defective building works. The builder failed to construct the Project with due care and skill to be expected of a builder and in accordance with the terms conditions and warranties of the building contract between the plaintiffs and builder. The builder is liable in negligence and under the terms of the building contract. Further particulars will provided after discovery.
18 The defence also alleges that if they are liable to the plaintiffs, then the plaintiffs’ claim is an apportionable claim and the builder is a concurrent wrongdoer and their liability should be apportioned.
19 The affidavit in support of the application by the defendants’ solicitor, Mr R Donaldson, states that:
“On 1 November 2012 the plaintiffs served an expert report of Mr George Cross in respect to their claim. That is the only expert report served by the plaintiffs. The report of Mr Cross is an extensive document comprising in excess of 200 pages. It is evident from Mr Cross’s report that the plaintiffs complain of multiple and significant defects in respect of the project. By his report Mr Cross has estimated that the cost of rectifying these defects will exceed $1.2M.”
20 After referring to the defendants’ desire, if they are found liable to the plaintiffs, to seek the benefit of apportionment or contribution or indemnity against those also found responsible for the plaintiffs’ alleged loss and damage, Mr Donaldson stated:
“The plaintiffs’ statement of claim and expert report identify alleged defective or non compliant works which were performed by Brentwood and/or Mepstead, or with which they were involved. Those allegations, if accepted by the Court, provide an arguable basis for the joinder of Brentwood and Mepstead as having been responsible for at least part of the plaintiff’s alleged loss and damage.”
21 In a supplementary affidavit, Mr Donaldson exhibited copies of the building contract, which names Mr Mepstead as the registered building practitioner. He also exhibited a copy of the Application for a Building Permit dated 24 August 2002, which refers to Mr Mepstead as the registered building practitioner to be engaged in the building works for the Project. He also exhibited a copy of the Building Permit for the project dated 20 September 2002 showing Mr Mepstead as the nominated registered building practitioner.
22 Mr Mepstead made an affidavit detailing the history of the Project. He stated:
“I refer to the affidavit of Donaldson. At paragraph 16 he refers to ‘building works undertaken by Brentwood and Mepstead’. I did not undertake building works on the Project. All building works on the project were undertaken by Brentwood Homes by its employees, and contractors engaged by it for specific tasks. Apart from holding the registration required by Part 11 of the Building Act 1993 I do not enter into building contracts on my own behalf.”
23 Mr Mepstead also states that he did not assume any appointment as the builder or the supervisor of the builder. Plans for the Project were prepared and signed off by both the owners and Brentwood Homes. He states that Brentwood Homes complied with the requirements for the construction of the Project as set out in the engineering drawings of McFarlane & Partners. He also foreshadows that Brentwood Homes, if joined as a defendant, would rely on a limitation of actions defence.
The proposed defence
24 The existing defendants’ proposed defence, which would be relied on if the additional defendants were joined, pleads in relation to proportionate liability:
“21 Further, and alternatively, if the first, second and/or third defendants have any liability to the plaintiffs (or either of them)(which is not admitted but specifically denied):
(a) The plaintiffs’ claims against the first, second and/or third defendants are apportionable claims pursuant to Part 1VAA of the Wrongs Act 1958, being ‘a claim for economic loss in an action for damages arising from a failure to take reasonable care’ within the meaning of section 24AF of the Wrongs Act 1958;
PARTICULARS OF PARAGRAPH 21(a)
The first, second and third defendants refer to the allegations made in paragraphs 15 and 16 of the plaintiffs’ statement of claim dated 11 July 2012.
(b) The builder and Mepstead are each a ‘concurrent wrongdoer’ within the meaning of section 24AH of the Wrongs Act 1958, as they are each a person whose acts or omissions caused the loss or damage that is the subject of the plaintiff’s claim;
PARTICULARS OF PARAGRAPH 21 (b)
(i) The builder is and was at all relevant times a corporation duly incorporated at law.
(ii) Mepstead is and was at all relevant times:
(A) a building practitioner, registered with the Building Practitioners Board under the Building Act 1993 in the classes and categories of:
(1) Commercial Builder – Unlimited number CB-6312; and
(2) Domestic Builder – Unlimited Number DB-U 3106;
(B) a director of the builder;
(iii) By a contract made on or about 9 January 2001 between the builder and the plaintiffs, the builder agreed to complete the construction of the Project (as that term is defined in paragraph 6 of the plaintiffs’ statement of claim)for a contract sum of $820,000.00 (the Building Contract);
(iv) The builder and Mepstead owed the plaintiffs a duty of care to exercise reasonable care with respect to the Project and in the performance of the builder’s obligations under the Building Contract;
(v) The builder and Mepstead failed to exercise reasonable care with respect to the Project and in the performance of the builder’s obligations under the Building Contract. The first, second and third defendants refer to the building defects identified in the expert report (including appendices) prepared by George Cross of Bayside Building Surveyors Pty Ltd and filed on behalf of the plaintiffs in this proceeding.”
Pleading as to contribution or indemnity
25 The proposed defence in paragraph 22 alleges that, in the event that the plaintiffs’ claims against the existing defendants are not apportionable claims, then each of the builder and Mr Mepstead has a co-ordinate liability with the existing defendants in respect of any damage recoverable by the plaintiffs from the existing defendants. The existing defendants are said to be entitled to orders in the nature of indemnity or contribution from the builder and Mr Mepstead by way of equitable contribution on any amounts which the existing defendants may be ordered to pay to the plaintiffs.
26 The defendants also allege that they and the proposed defendants are liable to the plaintiffs in respect of the same damage within the meaning of s23B of the Wrongs Act and that they are entitled to orders in the nature of indemnity or contribution from the proposed defendants under ss 23B and 24 of the Wrongs Act in respect of any amounts which the existing defendants may be ordered to pay to the plaintiffs.
Consideration of application
27 I will deal first with the defendants’ application to join Brentwood Homes and Mr Mepstead as concurrent wrongdoers.
28 An apportionable claim has to be arguable in order for the Court to give leave to join the alleged concurrent wrongdoers, in the sense that the proposed causes of action might succeed once all the evidence has been led at trial: Atkins v Iterprac Financial Planning Pty Ltd and Crole (No 2).[2] In the ordinary course, the applicant for joinder must provide a pleading which raises an arguable case that the party sought to be joined is a concurrent wrongdoer.[3]
[2][2008] VSC 99 at [39]
[3](Supra) [6]
29 In Royal Brompton NHS Trust v Hammond,[4] which is a decision referred to in many of the Australian authorities on concurrent wrongdoers[5], Lord Bingham stated:
“When any claim for contribution falls to be decided the following questions in my opinion arise. (1) What damage has A suffered? (2) Is B liable to A in respect of that damage? (3) Is C also liable to A in respect of that damage or some of it? At the striking-out stage the questions must be recast to reflect the rule that it is arguability and not liability which then falls for decision, but their essential thrust is the same. I do not think it matters greatly whether, in paraphrasing these questions, one speaks (as the 1978 Act does) of ‘damage’ or of ‘loss’ or ‘harm’, provided it is borne in mind that ‘damage’ does not mean ‘damages’… and that B’s right to contribution by C, depends on the damage, loss or harm for which B is liable to A corresponding (even if in part only) with the damage, loss or harm for which C is liable to A. This seems to me to accord with the underlying equity of the situation: it is obviously fair that C contributes to B a fair share of what both B and C owe in law to A, but obviously unfair that C should contribute to B any share of what B may owe in law to A but C does not.”
[4][2002] 1 WLR 1397 at 1401-1402
[5]See Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109,122
Claim against Brentwood Homes
30 The defendants allege that Brentwood Homes and Mr Mepstead are liable to the plaintiffs in negligence and under the terms of the building contract. They argued that the surveyors played a back stop role and could refuse to issue an Occupancy Permit if the building was not constructed in accordance with the requirements of the Building Permit. They contend that the builder’s breach of contract and negligence left the owners with a defective building requiring repair, just as much as the surveyors’ negligence and breach of contract did in issuing an Occupancy Permit, when the building was not constructed in accordance with the requirements of the Building Permit.
31 The defendants relied on the provisions of s9(1) and s 16 of the Building Act. They provide:
“9 Incorporation by reference
(1) The building regulations may apply, adopt or incorporate, either wholly or in part and with or without any modification, any matter contained in the Building Code of Australia or any other document in force or as issued or published at a particular time or as in force or published from time to time.
16. Building permit required
(1) A person must not carry out building work unless a building permit in respect of the work has been issued and is in force under this Act and the work is carried out in accordance with this Act.
…
32 The defendants relied on the decision in Simpson v Andrew Maynard Architects Pty Ltd[6], which decided that an architect and a builder were arguably concurrent wrongdoers, in respect of payments made to the builder for defective work. Emerton J stated:
“ In my view, it is arguable that the economic interest represented by the progress payments was receiving the benefit of non-defective building works in return for the payments, and the harm to that interest was that payments were made, in effect, for defective works that were not rectified when they should have been.
The Architect caused the payments to be made for defective works by not giving a direction or making an adjustment in accordance with its obligations.
However, the damage comprising the making of payments for defective works could also be attributed to the builder in carrying out the defective works in breach of the building agreement.”
[6]Supreme Court of Victoria, Emerton J, Ruling, unreported 18 April 2012, p 4
33 The plaintiffs submitted that the builder and the surveyor were not concurrent wrongdoers and that the claim did not relate to the same damage. They argued that the concurrent wrongdoers must be both persons who had an arguable liability to the plaintiffs.
34 They argued that building surveyors do not perform the same work as a builder and could not be the cause of the same damage. The surveyor’s conduct occurred at a different time and in discharge of a different responsibility. Brentwood Homes had to comply with the Building Permit and that was not the task of the surveyor. Brentwood Homes was acting as the agent of the owner. The surveyor had to give an Occupancy Permit after a final inspection. The requirement of “same damage” was not established by the fact that a defective building was created. There were no facts pleaded that established at an arguable level that Brentwood Homes was a concurrent wrongdoer.
35 The proposed defendants largely adopted the submissions made by the plaintiffs on this issue, but made separate submissions in respect of the proposed third party proceedings. They submitted that Brentwood Homes and Mr Mepstead did not owe a duty of care to the plaintiffs.[7]
[7]See as to the surveyors duty of care Moorabool Shire Council v Taitapuni (2006) 14 VR 55
Consideration of submissions
36 I first consider whether this proceeding is a claim for economic loss or damage to property in an action for damages (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care within the meaning of s24AF.
37 The plaintiffs’ claim does not specifically use the words “failure to take reasonable care”, but in the case of the claim against Mr Madeira refers to a common law duty of care. That reference amounts to a duty to take reasonable care. The claim against the first two defendants, the Group 4 companies is, in substance, to the same effect. I consider that the proceeding arguably involves an allegation of a failure to take reasonable care.
38 I therefore consider that the requirements of s24AF are met.[8]
[8]See Dartberg v Wealthcare Financial Planning (2007) 164 FCR 450,458
39 I consider that the defendants have established that it is arguable that Brentwood Homes is a concurrent wrongdoer. The effect of their proposed defence would be to contend that, by breach of contract and failure to take reasonable care, Brentwood Homes caused the same damage as the surveyors’ breach of duty.
40 Mr Donaldson’s affidavit and it references to Mr Cross’ report provide support for the defendants’ factual allegations in the proposed defence to the degree required for a joinder application.
41 The conclusion that I reach is supported by the analysis in Simpson v Andrew Maynard Architects Pty Ltd[9]. To similar effect are the following observations of Mandie J in Surrowee Pty Ltd v Hansen Yuncken Pty Ltd[10] (where Spowers was the architect and the third parties were surveyors and engineers):
“To put it another way, the conduct of Spowers and the third parties gave rise to defects in the building thereby causing economic or pecuniary loss and damage suffered by the plaintiffs.”
[9]Supra
[10][2008] VSC 90 at [11]
42 The questions posed by Lord Bingham in the Royal Brompton Case[11] are answered in this case as follows. The plaintiffs (A) arguably have suffered the damage, loss or harm of a defective building and both the surveyors (B) and the builder (C) are arguably liable for the damage, loss or harm caused to (A) by that defective building, including the cost of rectifying it.
[11]Supra
43 However, I consider that the proposed defence does not properly plead the proportionate liability claim against Brentwood Homes in accordance with the pleading rules. In particular, Important allegations of fact are contained in particulars rather than being included in the paragraphs of the pleading. The document requires redrafting. It will also need to be altered from its draft form because, as I state below, I do not give leave to join Mr Mepstead as a party.
Claim against Mr Mepstead
44 The defendants argued that Mr Mepstead was engaged in the building work and referred to the provisions of Regulation 1502 of the Building Regulations 2006 which states:
“Professional Standards
A registered building practitioner must-
(a) perform his or her work as a building practitioner in a competent manner and to a professional standard; and
(b) immediately inform the client in writing if a conflict of interest arises or appears likely arise between his or her interest as a building practitioner and that of his or her client; and
(c) receive remuneration for his or her services as a building practitioner solely by the professional fee or other benefits specified in the contract of engagement or by the salary and other benefits payable by the building practitioner’s employer.”
45 A building practitioner who contravenes the requirements of regulation 1502 may be the subject of an inquiry under section 179 of the Building Act.
46 The defendants submitted that regulation 1502 did not create a statutory duty but created a benchmark or standard against which to assess a registered building practitioner’s conduct.
47 The plaintiffs argued that the proposed pleading did not allege that the regulation 1502 gave rise to a cause of action. There were no facts pleaded that, if accepted, would give rise to a duty of care owed by Mr Mepstead.
48 They argued that there was no authority establishing that a director of the builder owed a duty of care in the present circumstances to the client of the builder. Similarly, a subcontractor owes no duty of care to the client and is therefore not a concurrent wrongdoer with the head contractor.[12]
[12]Bevendale Pty Ltd v Equiset Construction (Epping) Pty Ltd [2010] VCC 0805
49 I received written submissions about the decision of the Victorian and Civil Administrative Tribunal in Korfiatis v Tremaine Developments Pty Ltd[13] on the issue of whether a director of a builder owed a duty of care to the client of the builder. While it appears that in that case, the claim against the director was exclusively put on a basis that his directorship created a duty of care, there is no suggestion in that decision that the director of a builder owes a duty of care to builder’s client, merely by being a director.
[13][2008] VCAT 403
50 I do not consider the cause of action pleaded against Mr Mepstead is arguable. There was no contractual relationship between Mr Mepstead and the plaintiffs. Therefore, any possible legal liability would need to be based on a duty of care owed by him to the plaintiffs. No facts were pleaded which might give rise to such a duty of care: see generally Woolcock Street Investments Pty Ltd v CDG Pty Ltd.[14]
[14](2004) 216 CLR 515; cf Astley v Austrust Limited (1999) 197 CLR 1
51 There were no facts pleaded to suggest that he assumed personal responsibility for the actions of Brentwood Homes. The fact that he was named as the registered building practitioner, to be engaged in the building works for the project, in the application for a Building Permit and in the Building Permit does not, even at an arguable level, create a duty of care. The building contract was made with Brentwood Home as builder.
52 The defendants have not established an arguable case that Mr Mepstead is a concurrent wrongdoer.
Contribution/indemnity
53 Because I have found that Brentwood Homes arguably is a concurrent wrongdoer, the foreshadowed contribution/indemnity claims would only concern Mr Mepstead.
54 In the normal course, a claim against a non-party, who is not a concurrent wrongdoer, for contribution or indemnity, would be made by issuing third party proceedings under Rule 11.
55 The plaintiffs submitted that the contribution/indemnity claim should be brought in a separate notice, but otherwise did not put an argument on this issue.
56 The proposed defendants argued that there was no legal basis for third party proceedings to be commenced.
57 As I understand it, the existing defendants did not seek an order, at this point, that Mr Mepstead to be joined as a third party. In any event, on the present materials, I see no basis for a claim against him for contribution or indemnity.
Conclusion
58 I give leave to the defendants to join Brentwood Homes Pty Ltd as a defendant to allege that it is a concurrent wrongdoer and to seek associated orders arising from that joinder. An amended defence should be delivered in accordance with the pleading Rules setting out the facts relied on to establish the proportionate liability claim, insofar as it concerns Brentwood Homes.
0
9
0