Rimhart Nominees Pty Ltd v Glenent Pty Ltd (No 4) - [2008] SASC 224

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
RIMHART NOMINEES PTY LTD v GLENENT PTY LTD (No 4)
[2008] SASC 224
Reasons of Judge Withers a Master of the Supreme Court
18 August 2008
PROCEDURE
Joinder of additional defendant.
Supreme Court Act 1935 (SA) s 27; Supreme Court Civil Rules 2006 (SA) r 73, r 74 and r 232, referred to.
Ceneavenue Pty Ltd & Ors v Martin & Ors [2008] SASC 158; Bryan v Maloney (1994-1995) 182 CLR 609; Woolcock Street Investments Pty Ltd v CDG Pty Ltd & Anor (2003-2004) 216 CLR 515; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, discussed.
Review Australia Pty Ltd v Redberry Enterprise Pty Ltd [2003] FCA 1009; Universal Music Australia Pty Ltd v Cooper [2004] FCA 78; Re Androma Pty Ltd (1987) 2 Qd R 134; Massart v Blight & Anor 82 CLR 423; Robins v Goddard [1905] 1 KB 294; Building and Construction Contracts in Australia Dorter and Sharkey (2nd ed), p 2693; Equity Doctrines & Remedies Meagher, Gummow and Lehane (4th ed), par 6-520, considered.

RIMHART NOMINEES PTY LTD v GLENENT PTY LTD (No 4)
[2008] SASC 224

JUDGE WITHERS. By interlocutory application filed 3 December 2007 – FDN 9 – the plaintiff (“Rimhart”) sought various interlocutory orders including:
2ALeave to join Baulderstone Hornibrook as a defendant to make consequential amendments to the Statement of Claim dated 19 November 2007.
The interlocutory application was further amended on 13 December 2007 – FDN 12 – but those amendments have no relevance to application 2A which is the joinder issue presently before me.
An affidavit of Peter James Rimington, who is the sole director of the plaintiff company – FDN 8 – was filed in support of the application on 4 December 2007.
A brief overview of the background to this matter is that the plaintiff in December 2004 entered into an agreement with the defendant Glenent for the purchase of an entertainment complex at the foreshore at Glenelg after that complex had been built. The defendant was a company equally owned and controlled by the proposed additional defendant, Baulderstone Hornibrook Pty Ltd (hereafter “Baulderstone”), and Urban Construct Pty Ltd (hereafter “Urban”).
Baulderstone is and was a builder that was substantially engaged in the development and construction of a foreshore development at Glenelg over a number of years. Mr Rimington and the plaintiff and Baulderstone had been involved in various agreements and arrangements regarding a particular aspect of the proposed development since 2001. That aspect was the acquisition of the original entertainment complex and business known as the Magic Mountain and its eventual replacement – see proposed amended statement of claim – FDN 22a – paragraphs 5E to 5U.
The agreement that Rimhart entered into with Glenent is Exhibit “PJR 3” to the affidavit of Mr Rimington filed 19 November 2007 – see Document 3c. That agreement provided inter alia that Glenent would carry out or cause to be carried out building works and fitout works to create the proposed premises which were replacement premises for the Magic Mountain. Those works were to be completed in a proper workmanlike manner by 15 December 2005. That agreement was executed in November and December 2004.
Some months before that by an agreement in writing dated 9 July 2004 (hereinafter the “construction contract”), Glenent had agreed with Baulderstone for Baulderstone to carry out the proposed works on behalf of Glenent (see Document 27a or Exhibit “MS 1” to the affidavit of Mr Selley filed 2 July 2008). Baulderstone warranted as part of that construction contract to undertake that work with due care, skill and diligence – see clause 4.1 of the construction contract. Baulderstone further warranted that the work would render the building fit for the stated purpose and comply with all requirements of the building contract – clause 4.1 – and pursuant to clause 3 of Annexure B to that construction contract that the building would be free of defects and accurate in all respects and suitable for its intended purpose and of high quality.
The plaintiff pleads in its proposed amended statement of claim (“PASOC”) that Glenent or Baulderstone commenced those works in February 2005. Settlement under the commercial agreement between Rimhart and Glenent did not occur until 13 October 2006.
Disputes occurred between Rimhart and Glenent. Prior to the October 2006 settlement those parties entered into a deed on 23 June 2006 recording the terms of resolution of those disputes. That deed is Exhibit “PJR 4” to the affidavit of Mr Rimington filed 19 November 2007 or Document 3d.
The plaintiff sought that the Court take into account in its consideration of its application the affidavit of Mr Hamilton and its exhibit filed 19 June 2008 – FDN 22, the affidavits of Mr Rimington filed 19 November 2007 – FDN 3 – and 4 December 2007 – FDN 8 – and their exhibits, and an affidavit of Mr Selley and its exhibits – FDN 27 – filed 2 July 2008. The plaintiff lodged an outline of submissions in support of its application on 23 June 2008.
The proposed defendant Baulderstone lodged an outline of submissions in opposition to the application on 27 June 2008 – FDN 24. An affidavit of Mr Clarke, the solicitor for Baulderstone, was filed exhibiting various extracts from the agreements. That affidavit was not received as part of the material before the Court on the application as the full documents from which the extracts were taken were otherwise exhibited.
The defendant provided an outline of submissions opposing the plaintiff’s application to join Baulderstone filed 2 July 2008 – FDN 26. The matter was argued on that day.
The plaintiff’s application is to join an additional defendant. Rules relating to joinder are set out in Supreme Court Civil Rules 2006 (SA) R 73 and R 74. Rule 73 provides as follows:
[6R 73] Action may include multiple parties
73(1) …
(2) A single action may be brought against two or more defendants if—
(a)the claim against each arises out of the same or similar facts; or
(b)the claim against each involves the determination of a common question of law or fact; or
(c)the Court gives its permission.
Rule 74 provides for the circumstances in which the Court may choose to exercise its discretion. Rule 74(1) is in the following terms:
[6R 74]   Joinder and disjoinder of parties
74    (1)     The Court may, on application or on its own initiative, order that a person who is not a party to the action be joined as a party if satisfied that—
(a)     the person has an interest in the subject matter of the action or in a question of law or fact involved in the action; or
(b)     the Court may require the person’s cooperation in order to enforce a judgment; or
(c)     the person has a right to joinder as a party under an Act or rule; or
(d)     the person should be joined as a party to ensure that all matters in dispute in the action are determined; or
(e)     the person should be joined as a party in order to enable determination of a related dispute and thus avoid multiplicity of proceedings.
Notice of the application was provided to the intended new defendant pursuant to the provisions of R 74(3).
The plaintiff argued that its claim to join Baulderstone fell within the provisions of R 74(1)(a) and (e). Similarly, it argued that the proposed action against Baulderstone fell within the provisions of R 73(2)(a) and (b).
I note that s 27 of the Supreme Court Act 1935 provides as follows:
27 The court in every cause or matter pending before it shall have power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as it deems just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of every legal or equitable claim properly brought forward by them respectively, in such cause or matter, so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided.
In his commentary on that section, Judge Lunn at SCA s 27.1 says:
… The section does not confer any additional jurisdiction on the court, but merely enables it to avoid any multiplicity of proceedings: [authorities not cited]. The object of the section is to avoid multiplicity of proceedings and the court will enforce adherence to this principle: … Wherever possible the court seeks to ensure that there is not a multiplicity of proceedings where a single proceeding would suffice: [authority not cited].
Baulderstone’s Arguments
Baulderstone opposed being joined as a defendant on a number of grounds. The first ground was that there was no contractual claim that continued to exist that could benefit the plaintiff as against Baulderstone. Baulderstone had not entered into any contract with the plaintiff. Baulderstone did not owe any contractual duty to the plaintiff. Baulderstone had entered into a contract with Glenent. It was Glenent that had entered into a contract with the plaintiff.
In any event, Baulderstone argued that the defects liability period under the commercial contract between the plaintiff and Glenent had expired on 17 August 2006. This ended any contractual liability by Glenent to the plaintiff. Further the defects liability period under the contract between Glenent and Baulderstone had expired on 19 May 2007. This ended any contractual liability that Baulderstone had to Glenent. Thus no contractual rights against Baulderstone survived for the benefit of the plaintiff or Glenent.
Secondly, Baulderstone argued that the plaintiff had entered into a deed of indemnity with Glenent in June 2006 which on its proper construction released any contractors or sub-contractors of Glenent from any liability to the plaintiff. That release benefited Baulderstone.
Thirdly, in response to a claim by the plaintiff that it was entitled to the benefit of an assignment of warranties owed by Baulderstone to Glenent under the construction contract between those two bodies, Baulderstone argued that assignment could not be effected without Baulderstone’s consent which had neither been sought nor given.
In relation to the alleged assignment of warranties, Baulderstone argued that the provision in the commercial contract between the plaintiff and Glenent that provided for warranties to be assigned did not on its proper construction extend to a warranty in relation to the construction of the building or the fitout. Rather “warranties” as used in that clause was limited to those relating to equipment installed in the premises.
Baulderstone argued that there could be no contractual claim available to the plaintiff against Baulderstone unless the plaintiff was to succeed on its assignment argument. Even if that occurred Baulderstone’s liability had ended with the end of the defects liability period benefiting Glenent in May 2007. Glenent’s defects liability period benefiting the plaintiff had ended in June 2006.
In addition to its proposed claim in contract against Baulderstone the plaintiff also sought to bring a claim against it for damages for pure economic loss. It alleged that Baulderstone owed it a duty of care which it had breached and that this breach had caused the plaintiff loss. The plaintiff relied for this claim on a decision of Bryan v Maloney in the High Court of Australia (1994-1995) 182 CLR 609. In reply Baulderstone asserted that a decision in the High Court of Woolcock Street Investments Pty Ltd v CDG Pty Ltd & Anor (2003-2004) 216 CLR 515 was authority against that proposition and the proper application of the principles therein espoused precluded the plaintiff from any claim in tort against Baulderstone.
Baulderstone argued that as a consequence of these various deficiencies in the plaintiff’s proposed claim permission should not be given for it to be joined as a defendant to the proceedings. Any claim against it was futile. Baulderstone asserted that if joined it would be bound to succeed on an application for summary judgment under 6R 232.
Defendant’s Arguments
Counsel for the defendant argued that permission to join Baulderstone should be refused for two reasons. The first reason was that the proposed amended statement of claim did not disclose an arguable cause of action against Baulderstone. The second reason was that the proposed amended statement of claim contained so many deficiencies and inconsistencies that it was incomprehensible. Accordingly the Court could not be satisfied that the requirements of R 74 that the two actions involve the same evidence or the same issues had been met. There was no persuasive evidence that a refusal to permit joinder would result in any multiplicity of proceedings.
The defendant argued that the intended claim in tort against Baulderstone was not appropriately pleaded or established on the affidavits. There was no satisfactory plea of any breach of duty or any loss flowing from that breach of duty. Similarly on the warranty claim for contract even if there was an arguable case for an equitable assignment of the warranty there was no pleaded breach of warranty or pleaded loss attributable to that breach.
Reliance was placed on the decision of Woolcock and on the lack of vulnerability of the plaintiff as therein discussed. It was asserted from the bar table that the plaintiff was a sophisticated company well able to look after itself with the aid of a coterie of lawyers, accountants and other advisers.
Counsel for the defendant argued that the claims for relief under an equitable assignment of warranty and for breach of duty of care were mutually exclusive. If the plaintiff was entitled to an equitable assignment of warranty then it could hardly argue that it fell into the vulnerable category for the purpose of establishing a duty of care at common law.
The Law
There are a number of areas within this argument that require some comment on the applicable law.
Joinder of Parties
I have earlier set out in these reasons the relevant provisions of R 73 and R 74 and s 27 of the Supreme Court Act. The Rules support one of the objectives of the Court which is to avoid a multiplicity of suits. A judicial officer considering whether or not to grant an application for joinder will take avoidance of multiplicity of suits into account as one of the issues to be considered on the application.
A principal argument put against joinder was that the plaintiff’s intended claim against Baulderstone was futile as if joined Baulderstone would be bound to succeed on an application for summary judgment against the plaintiff pursuant to 6R 232.
I was referred to decisions on joinder by counsel for the defendant. The first of those was Review Australia Pty Ltd v Redberry Enterprise Pty Ltd [2003] FCA 1009, where at [5] Heerey J in considering an application for joinder under the Rules of the Federal Court said:
[5] It was common ground that Review [the plaintiff] needs to show an arguable case against the proposed respondents, at least to the standard of being able to resist an application for summary judgment by the proposed respondent had he or she been sued in separate proceedings: [authorities not cited and italics mine].
A further authority cited by the defendant was Universal Music Australia Pty Ltd v Cooper [2004] FCA 78. In that case in considering the same rules for joinder of parties under the Federal Court Rules, Tamberlin J said at [6] and [7]:
[6] The rules confer a discretion and should be construed liberally so that a determination of related disputes is achieved. The applicant on a joinder application must show that there is an arguable case sufficient to resist the entry of summary judgment by the respondent sought to be joined: [reference was therein made to the Review Australia case].
[7] The threshold test to be applied in relation to an application for joinder of a party is whether summary judgment could be entered by the respondent sought to be joined. The test is that stated by Barwick CJ at 128-129 in General Steel. His Honour there said that the claim must be “so obviously untenable that it cannot possibly succeed”, or that it is “manifestly groundless” or “such that it does not admit of argument.” …
I accept that if the plaintiff’s proposed claim against Baulderstone is such that Baulderstone if joined would inevitably succeed on an application for summary judgment against the plaintiff, then joinder would be futile and permission ought not be given.
In South Australia the Supreme Court Civil Rules 2006 somewhat change the position in relation to summary judgment for defendants from that which existed before. This matter was canvassed at length by the Full Court in the matter of Ceneavenue Pty Ltd & Ors v Martin & Ors [2008] SASC 158. In that matter Debelle J analysed the effect of R 232. Duggan and Anderson JJ agreed with his analysis.
Rule 232 provides as follows:
232 (1) The Court may, on application by a party, give summary judgment for that party.
(2) Summary judgment may only be given if the Court is satisfied that–
(a)if the applicant is a plaintiff – there is no reasonable basis for defending the applicant’s claim; or
(b)if the applicant is a defendant – there is no reasonable basis for the claim against the applicant.
In reviewing the authorities, Debelle J noted at [87] that the observations of the High Court in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 were compatible with R 232. In the matter of Fancourt the High Court in considering the power to order summary judgment expressed concern that that power should not be exercised where there is a real question to be tried. At 99 the High Court said:
… The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: …
In [87] in Ceneavenue, Debelle J said:
… While the objective of the 2006 Rules of this court, like the UCPR [Uniform Civil Procedure Rules] in Queensland, is to avoid all unnecessary delay and promote efficiency in the resolution of civil disputes, the court must be careful that the interests of justice are not sacrificed on the altar of efficiency and expedition.
His Honour found that the test that a defendant now had to satisfy under R 232(2)(b) when seeking summary judgment against a plaintiff was less onerous than that which applied under the former Rules. That differed from the application of R 232(2)(a) where there was no significant departure from the previous practice in relation to an application for summary judgment by a plaintiff on the ground that the defendant has no arguable defence – see [92].
In considering the requirements for an application by a defendant for summary judgment against a plaintiff, his Honour said at [94]:
… All that paragraph (b) of Rule 232(2) does is substitute a new test different from the test that had hitherto existed. Paragraph (b) was not intended to invoke the considerations that guided applications for urgent or immediate relief. … The only question to be considered is whether there is a real question to be tried and whether that question has reasonable as distinct from fanciful prospects of success. Once the court concludes that there are reasonable prospects of success, it must dismiss the application for summary judgment.
In [83] in considering earlier authorities, his Honour said at the end:
… The distinction drawn by the Court of Appeal between real prospects of success and fanciful prospects of success serves to emphasise that the court is considering whether there is a real question to be tried, that is to say, a claim or defence that is arguable and whether it has reasonable prospects of success. [Italics mine.]

In my view that is the test that is now applicable to applications by defendants for summary judgment under R 232(2)(b). If a proposed defendant disputing a joinder application is able to demonstrate on the material that it would be entitled to summary judgment under R 232(2)(b) using that criteria then joinder of that proposed defendant would be futile. In those circumstances the discretion of the Court on joinder should be exercised to disallow the application.
The plaintiff argued that the only relevant test for this Court to consider on a joinder application was that under R 193 and not the test under R 232(2)(b). Rule 193 provides:
193   The Court may dismiss proceedings if–
(a)     the pleadings disclose no reasonable cause of action; or
(b)     the proceedings are frivolous, vexatious or an abuse of the process of the Court.
I reject that argument. In my view that is not the only relevant test to be applied on an application for joinder of an additional defendant. It is a test in the sense that if the proposed pleadings disclose no reasonable cause of action or otherwise fall within R 193, then the Court would ordinarily not allow joinder. However it is not the only test that is to be applied by the Court in considering how to exercise its discretion. The Court should also be mindful of not allowing joinder against a defendant where the action proposed to be pleaded against that proposed defendant is futile because it would be bound to fail on a summary judgment application by that defendant if joined.
I turn now to the plaintiff’s proposed claims against Baulderstone.
The Plaintiff’s Proposed Claim in Contract
The first of those claims is in contract. The plaintiff claims that it is an equitable assignee of warranties provided by Baulderstone to Glenent. Clause 9 of the commercial contract between the plaintiff and Glenent provides as follows:
9.HANDOVER AND ASSIGNMENT OF GUARANTEES AND WARRANTIES
After the expiration of the Defects Liability Period, the Vendor will as soon as reasonably practicable after receiving a written request from the Purchaser, deliver and, if possible, assign to the Purchaser all warranties, certificates, records and operating manuals and any other drawings and documents called for under this Agreement.
Clause 7.2 of that contract provides:
7.2The Vendor will complete or cause to be completed the construction of the Development and the Vendor’s Building and Fitout Works in a proper and workmanlike manner generally in accordance with the Plans to the satisfaction of each relevant Authority and in compliance with the Development Approval.
The plaintiff by letter dated 18 June 2008 (see Document 27b) from the plaintiff’s solicitors to the defendant’s solicitors forwarded a Deed of Assignment for execution by the defendant. That Deed related to the assignment of warranties under clause 9. The defendant has neither executed nor returned the Deed and has declined so to do – see Document 27c. The plaintiff asserts in these circumstances that it is an equitable assignee of any warranty held by the defendant in relation to the property.
Under the construction agreement warranties were given by Baulderstone to Glenent that the work would be executed with due skill, care and diligence, by suitably qualified and experienced persons, and that the work under the contract would be completed such that the premises would be fit for their stated purpose and comply with the contract – see clause 4.1. In an annexure to the contract, being Part B, in clause 3 those warranties were further expanded by the addition of a large number of undertakings.
The plaintiff asserts in its PASOC that it is entitled to the benefit of those warranties and undertakings on assignment from the defendant. As the defendant has not yet completed the Deed of Assignment and has in fact declined so to do, the plaintiff asserts that it stands in the position of an equitable assignee. The plaintiff relied on paragraph 5.730 of Dorter and Sharkey, Building and Construction Contracts in Australia (2nd ed), p 2693 and on Meagher, Gummow and Lehane, Equity Doctrines & Remedies (4th ed), paragraph 6‑520. In Dorter and Sharkey at paragraph 5.730 it is said:
… For a chose in action to be assigned in equity, the assignor must clearly manifest an intention to assign the right to the assignee: [authorities not cited].
In Meagher, Gummow and Lehane at paragraph 6‑520, the learned authors discuss the need in some circumstances for the assignor to remain a party to any action to enforce the right assigned in equity. Thus if the plaintiff is in law an equitable assignee from Glenent of warranties from Baulderstone to Glenent then Glenent would likely be a necessary party in any action by the plaintiff against Baulderstone.
In considering the principles for assignment or the creation of equitable ownership or interest in future property in the matter of Re Androma Pty Ltd (1987) 2 Qd R 134 at 149, McPherson J said:
It may be accepted that the principle is frequently stated in a form that refers to an assignment that is “present” or “immediate”; but to suggest that a contract to assign future property is not given effect in equity because it looks forward to execution at some future date of a mortgage effective at law is to mistake the very foundation of the doctrine. Its basis is a contract or agreement for valuable consideration to assign. The subject-matter being future property, it is impossible for a present assignment to take effect either at law or in equity. As was said by Dixon J in stating the “essential elements” in Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1, 27:
As the subject to be made over does not exist, the matter rests primarily in contract. Because value has been given on the one side, the conscience of the other party is bound when the subject comes into existence, that is, when, as is generally the case, the legal property vests in him.
Baulderstone argues that there can be no assignment as suggested by the plaintiff because, firstly, the assignment clause in clause 9 refers to different warranties which would not include any warranties given by it to Glenent and, secondly, in any event the assignment cannot be made without Baulderstone’s consent. Reference was made to clause 9 of the construction contract and in particular clause 9.1, which provided for prior written approval to be a prerequisite to any assignment of the contract or any other right, benefit or interest thereunder. The plaintiff relied on Massart v Blight & Anor, 82 CLR 423 at 440, as authority in support of its assertion the failure of Baulderstone to give consent was not fatal to any assignment. In any event Baulderstone argued that the defects liability period having expired there is nothing of value left to assign. I have earlier referred to the argument that the warranties referred to in clause 9 of the commercial contract do not include the warranties in clause 4 as expanded of the construction contract.
In my view the plaintiff’s claim to have the benefit of an assignment of warranties affecting Baulderstone raises a real question to be tried. It has a reasonable prospect of success in that it is not a spurious or fanciful claim and nor is it plain that it must clearly fail.
The plaintiff asserts that as the equitable assignee of warranties benefiting Glenent it has a claim against Baulderstone for breaches of those warranties and for damage occasioned by the plaintiff as a result of those breaches. The response of Baulderstone is that such a claim cannot exist as the defects liability period has expired under both contracts. The plaintiff therefore has no claim against Baulderstone even if it does hold by assignment from Glenent the warranties under clause 4.
In response to this the plaintiff argued that a defects liability period does no more than determine the period during which a contractor is obliged to return to the building site to remedy any identified defects. It does not expunge the contractor’s liability for damages in respect of defects or faulty work which caused the plaintiff economic loss and/or which were not discovered until after the expiration of the defects liability period. The plaintiff sought to rely on the decision of Robins v Goddard in the Court of Appeal [1905] 1 KB 294 at 303, where Stirling LJ in considering remedies set out in a contract for the treatment of defects said:
… What is there in the contract to make these remedies exclusive, so as to deprive the building owner of his remedy by an action for damages? I cannot find anything that can have that effect.
The decision in that matter flowed from the interpretation of that particular contract rather than demonstrated a principle of general application.
However the expiration of the defects liability period by itself seems to me not to necessitate a finding that the plaintiff is precluded from bringing an action for damages arising out of alleged breaches of the contract. That issue and the proper construction of the terms of the contract seem to me to be serious questions to be tried that are not fanciful or spurious and thus questions where the plaintiff has reasonable prospects of success.
Finally, the plaintiff asserted that it suffered damages and loss as a result of the alleged breach of warranties by Baulderstone. Again, in my view, those are serious questions to be tried that are not fanciful and they are matters on which the plaintiff has a reasonable prospect of success.
Accordingly, I find in relation to the claim based on contract that the plaintiff has raised an arguable case giving rise to serious questions to be tried on which it has a reasonable prospect of success and that the claim is not fanciful, spurious or bound to fail.
The Plaintiff’s Proposed Claim in Tort
I turn now to the plaintiff’s proposed claim in tort against the proposed defendant.
The plaintiff asserts that the relationship and arrangements between it and Glenent and Baulderstone were such that there was a duty of care owed by Baulderstone to the plaintiff to perform the construction and fitout work on the entertainment complex with due care and skill and in accordance with the requirements of the contract. The plaintiff asserts that Baulderstone breached that duty which breach has caused loss to the plaintiff.
The plaintiff relied on the High Court decision of Bryan v Maloney (supra). The plaintiff asserted that the circumstances in this case were very similar to those in Bryan v Maloney. Indeed the plaintiff’s assertion was that the factors supporting the existence of a duty of care are more compelling in this particular matter than they were in Bryan v Maloney.
In paragraph 5B of the PASOC the plaintiff asserts that Baulderstone owed it a duty of care. The duty was said to arise out of the facts and circumstances alleged in paragraphs 5C to paragraph 5EE. The plaintiff therein sets out a large number of asserted arrangements between the plaintiff and Baulderstone said to give rise to the duty of care. In essence it is pleaded that Baulderstone knew from its association with the plaintiff and persons connected with it over a number of years that the plaintiff was relying on Baulderstone to perform its work on the construction and fitout of the entertainment centre with reasonable care and skill and to meet the standards set out in the construction contract. Baulderstone knew or ought to have known that if that duty was not met then the plaintiff was likely to suffer economic loss. The plaintiff asserts that the work did not meet those reasonably expected standards and the consequence of that failure was economic loss to the plaintiff.
In Bryan v Maloney the majority of the High Court consisting of Mason CJ, Deane, Toohey and Gaudron JJ found that a builder owed a subsequent purchaser a duty to take reasonable care in the construction of the house and was liable to that purchaser in damages for an amount equal to the decrease in its value as a result of the builder’s poor work. The Court applied the concept of proximity as between builder and subsequent purchasers. It found that in the circumstances of that case the builder owed a duty of care to the first owner to take reasonable care to avoid any loss. That duty of care continued through to a subsequent purchaser who was unaware of any defect with the property because the defect did not become apparent until after the purchase. There were no applicable exclusions of liability or anything of that nature within the contract of purchase or in the arrangements between the builder and the first owner.
At p 617, the majority said:
The cases in this Court establish that a duty of care arises under the common law of negligence of this country only where there exists a relationship of proximity between the parties with respect to both the relevant class of act or omission and the relevant kind of damage. … In contrast [to settled cases for negligence], the field of liability for mere economic loss is a comparatively new and developing area of the law of negligence. In that area, the question whether the requisite relationship of proximity exists in a particular category of case is more likely to be unresolved by previous binding authority with the consequence that the “notion of proximity … is of vital importance” [San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340, at p 355].
After considering certain policy considerations that may militate against economic loss claims the Court said at p 618:
… The combined effect of those two distinct policy considerations is that the categories of case in which the requisite relationship of proximity with respect to mere economic loss is to be found are properly to be seen as special. Commonly, but not necessarily, they will involve an identified element of known reliance (or dependence) or the assumption of responsibility or a combination of the two.
In considering the requisite degree of proximity the Court noted that the resolution of that question “requires the articulation of both the factual components of the relevant category of relationship and the identification of any applicable policy considerations”.
The plaintiff’s proposed case in tort against Baulderstone is that the factual circumstances will support a finding of a requisite degree of proximity. It is alleged that Baulderstone knew or ought to have known of the plaintiff’s reliance on it undertaking the work in a proper and workmanlike manner and exercising all due care and skill. There was a breach of that obligation that caused the plaintiff loss.
Baulderstone in responding to this claim and with the support of the defendant argued that the decision of the High Court in Woolcock effectively precluded the plaintiff from having any reasonable prospects of successfully pursuing this proposed claim in tort.
It is to be noted that Woolcock was a decision of the High Court on appeal from the Court of Appeal in Queensland and that it involved consideration of a case stated on pleadings and on an agreed statement of facts. There had been no trial of the proceedings and no findings of fact. That lack of factual dispute and findings of fact distinguishes it from this case where the plaintiff proposes to allege a relationship between it and Baulderstone over a number of years in respect of this project and said to give rise to the requisite proximity and duty of care.
In Woolcock’s case, which was a claim by the purchaser of a commercial building against an engineering company that had designed the foundations of that building, an important factor influencing the decision was that the original owner of the building had refused to pay for engineering investigations recommended by the engineers despite the engineers having obtained a quote for those investigations. It was those engineering factors not investigated that led to the subsequent purchaser’s loss. The original owner placed neither reliance on the engineers’ advice in respect of those matters nor was there any assumption of responsibility by the engineering company. Accordingly the Court found that the engineering company did not owe a duty to take reasonable care to avoid economic loss to the original owner. Thus the approach taken by the Court in Bryan v Maloney did not occur. This is an example of the facts of the case determining whether the relevant relationship of proximity and vulnerability exist. Woolcock proceeded on an agreed statement of facts. There has been no determination of the facts in this matter.
In discussing Bryan v Maloney the majority, Gleeson CJ, Gummow, Hayne and Heydon JJ, said at [14]:
It is evident, then, that the conclusion that the builder owed a subsequent owner a duty to take reasonable care to avoid the economic loss which that subsequent owner had suffered depended upon conclusions that were reached about the relationship between the first owner and the builder. In particular, the decision in the case depended upon the anterior step of concluding that the builder owed the first owner a duty of care to avoid economic loss of that kind.
At [15], the majority said:
… At least in terms, however, the principles that were said to be engaged in Bryan v Maloney did not depend for their operation upon any distinction between particular kinds of, or uses for, buildings. They depended upon considerations of assumption of responsibility, reliance, and proximity. Most importantly, they depended upon equating the responsibilities which the builder owed to the first owner with those owed to a subsequent owner.
At [84], McHugh J said:
The present case proceeded by way of Case Stated. There is no agreed fact as to whether it is a common practice for builders and their sub-contractors to agree to obligations concerning the condition of premises that might be enforced by the first owner of the premises. Leading writers on Australian construction law suggest a prudent principal should enter into a collateral contract with sub-contractors that contains appropriate warranties. In Australia, professional institutions have endorsed particular contractual warranties whose purpose is to make the sub-contractor liable to the principal.
Baulderstone and the defendant relied on the discussions as to vulnerability. It was asserted from the bar table that the plaintiff was a commercially astute corporation which did not fit into the category of plaintiff in Bryan v Maloney but rather was well able to ensure that its interests were fully protected by contract. This was a factor that militated against there being any duty of care. This it was said was supported by the writings in Dorter and Sharkey at paragraph 5.630 on collateral warranties. The plaintiff could have sought a warranty from Baulderstone but chose not to. The plaintiff did not fall within the category of a vulnerable contractor and in the circumstances did not establish the necessary prerequisites to lay a foundation for a claim in tort.
In my view these issues are matters for evidence. The “vulnerability” of the plaintiff and whether or not it can establish requisite proximity will be a matter of considerable contest but that determination is one for trial. The case pleaded by the plaintiff raises issues that are serious and not spurious and fanciful. The issue of duty of care is a matter to be determined on the facts. It is a real question to be tried on which the plaintiff has a reasonable prospect of success.
The plaintiff’s PASOC contains a plea of breach of duty and consequential loss without providing significant particularity of those claims. Further particularity needs to be given. However, the essential issue is one of fact as to whether or not the plaintiff can bring itself on the evidence within the principles of Bryan v Maloney or whether it will be excluded from them by a lack of vulnerability such as that discussed in Woolcock. Nevertheless, it is still a matter of fact and in my view a matter fit for trial.

Baulderstone also argued that an indemnity agreement between plaintiff and defendant executed on 23 June 2006, which is Document 3d, and in particular clause 2.2.3 thereof, was fatal to the plaintiff’s claim. Clause 2.2.3 is in the following terms:
Rimhart confirms that other than disputes that may arise regarding defects in the works being carried out pursuant to the Sale Contract (which will be dealt with in accordance with the provisions of the Sale Contract), there are no further matters of dispute between Glenent, Glenent’s Contractors and Rimhart.
Baulderstone says that it was one of Glenent’s contractors and therefore is covered by that indemnity agreement. However, that clause in my view does not amount to a release at large. It contains its own qualification in relation to works being carried out pursuant to the sale contract. It cannot be effective other than as at the date when the agreement was signed. Baulderstone was not a party. In my view it is not an impenetrable barrier to the plaintiff’s claim.
Conclusion
I am satisfied that the proposed claims by the plaintiff against Baulderstone involve issues common to some of the claims by the plaintiff against Glenent. Some of those issues are whether the building and fitout in some aspects was defective or not built in compliance with the contract or with due care and skill. There is a common issue as to whether the plaintiff has suffered loss as a result of any contractual breach or breach of duty. In my view it is appropriate to give permission to join Baulderstone as a defendant pursuant to R 74(1)(a), (d) and (e) and such joinder meets the requirements of R 73(2). Such a course would also avoid a multiplicity of suits and thus meet the objectives of s 27 of the Supreme Court Act.
I am not satisfied that the proposed claims against Baulderstone are futile. The plaintiff faces a number of difficulties in its claims but in my view the circumstances presently before the Court would not result in the proposed defendant inevitably obtaining summary judgment in its favour. I am mindful of the High Court’s warning in Fancourt.
For the foregoing reasons there will be an order that the plaintiff has permission to join Baulderstone Hornibrook as a defendant to these proceedings. Permission is given to the plaintiff within 7 days to file and serve an amended summons and statement of claim in the form of that exhibited as “MEH 1” to the affidavit of Mr Hamilton sworn 19 June 2008. Further permission is given to the plaintiff to re-number the paragraphs in that proposed amended statement of claim to more sensibly incorporate and delineate the presently proposed amended paragraphs. The plaintiff is to provide in the amended statement of claim further particulars of the alleged breaches of duty and the alleged losses flowing therefrom.
I am presently minded to make an order that the costs of the application be costs in the cause but I will hear the parties on that issue if they seek to be heard. I certify fit for counsel.