Superline Enterprises Pty Ltd v Palassis Architects (A Firm)
[2021] WASC 430
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: SUPERLINE ENTERPRISES PTY LTD -v- PALASSIS ARCHITECTS (A FIRM) [2021] WASC 430
CORAM: SMITH J
HEARD: 3 NOVEMBER 2021
DELIVERED : 6 DECEMBER 2021
FILE NO/S: CIV 2941 of 2015
BETWEEN: SUPERLINE ENTERPRISES PTY LTD
Plaintiff
AND
PALASSIS ARCHITECTS (A FIRM)
First Defendant
BCA CONSULTANTS PTY LTD
Second Defendant
PM WHITE & PARTNERS (AUST) PTY LTD
Third Defendant
AVONLANE PTY LTD
Fourth Defendant
CENTIGRADE MECHANICAL CONTRACTING PTY LTD
Fifth Defendant
OBERIX GROUP PTY LTD
Sixth Defendant
SAMSON PLUMBING & GAS PTY LTD
Seventh Defendant
Catchwords:
Practice and procedure - Application for summary judgment or strike out plaintiff's claim against first defendant
Partnerships - Capacity of first defendant - Whether arguable case that first defendant was a partnership when each of the causes of actions alleged to have accrued - O 71 r 1 and when a cause of action accrues considered
Partnerships - Whether open to plead holding out and estoppel by conduct as a bar to the first defendant's defence that it was and is not a partnership
Pleading - Causes of action in contract, negligence and misleading and deceptive conduct - Misleading and deceptive conduct claim struck out as liability not pleaded against first defendant
Legislation:
Australian Consumer Law
Competition and Consumer Act 2010 (Cth)
Partnership Act 1895 (WA)
Rules of the Supreme Court 1971 (WA)
Result:
Summary judgment application dismissed
Claim of misleading and deceptive conduct struck out
Category: B
Representation:
Counsel:
| Plaintiff | : | J Moore |
| First Defendant | : | J M Healy |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
| Fourth Defendant | : | No Appearance |
| Fifth Defendant | : | No appearance |
| Sixth Defendant | : | No appearance |
| Seventh Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | MP Commercial Lawyers |
| First Defendant | : | Barry Nilsson Lawyers (WA) |
| Second Defendant | : | Sparke Helmore Lawyers |
| Third Defendant | : | Moray & Agnew Lawyers |
| Fourth Defendant | : | HWL Ebsworth Lawyers (Perth) |
| Fifth Defendant | : | Tottle Partners |
| Sixth Defendant | : | Wotton + Kearney Lawyers (Perth) |
| Seventh Defendant | : | Searle Construction Lawyers |
Cases referred to in decision:
Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] QB 84
Babcock & Brown Pty Ltd v Anderson [2010] QSC 287
Central Electricity Board v Halifax Corporation [1962] 3 WLR 1313
Central Exploration Pty Ltd v Zuks [2020] WASC 46
Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415
Coburn v Colledge [1897] 1 QB 702
Cooke v Gill [1873] LR 8 CP 107
Diedler v Borowiec [2021] WASC 394
Do Carmo v Ford Excavations Pty Ltd [1984] HCA 17; (1984) 154 CLR 234
English v Vantage Holdings Group Pty Ltd [2021] WASCA 47
Lynch v Stiff [1943] HCA 38; (1943) 68 CLR 428
Read v Brown (1888) 22 QBD 128
Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505
Steria Ltd v Hutchison [2007] ICR 445
Superline Enterprises Pty Ltd v Palassis Architects [2019] WASC 414
Trower & Sons Ltd v Ripstein [1944] AC 254
Vantage Holdings Group Pty Ltd v Donnelly [No 4] [2019] WASC 398
Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514
Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598
Western National Bank of City of New York v Pérez, Triana & Co [1891] 1 QB 304
Williams v Milotin [1957] HCA 83; (1957) 97 CLR 465
Zaghloul v Bayly [2021] WASCA 125
Table of Contents
1.0 The applications and the result
2.0 Background
2.1 The factual background alleged by Superline in its case against the first defendant that is relevant to these proceedings
2.2 Procedural history of the proceedings insofar as it relates to the first defendant
3.0 Principles
3.1 Applications for summary judgment by a defendant
3.2 Strike out applications
4.0 The plaintiff's pleaded case against the first defendant
4.1 The plaintiff's pleaded case that the first defendant is a partnership, has held itself out as a partnership or should be estopped from denying that it is a partnership
4.2 The plaintiff's claims against the first defendant of breach of contract, negligence, and misleading and deceptive conduct
4.2.1 Breaches of contract
4.2.2 Negligence
4.2.3 Misleading and deceptive conduct - s 18 of the Second Schedule of the Competition and Consumer Act 2010 (Cth)
5.0 Principles - Liability of partners and O 71 r 1 and the plaintiff's claim against Mr Palassis
5.1 Order 71 r 1 and when a cause of action accrues
6.0 When did each of the causes of action accrue, and is it pleaded that the partnership was in existence at the time of accrual
7.0 The consequence of pleading the misleading and deceptive conduct claim only against Mr Palassis personally
8.0 Should the breach of contract claims and the negligence claims be struck out against the first defendant?
8.1 Principles - Holding out and estoppel
8.1.1 Holding out
8.1.2 Estoppel by conduct
9.0 Disposition of the summary judgment and strike out application
SMITH J:
1.0 The applications and the result
The first defendant, Palassis Architects (a firm), applies for summary judgment to be entered against the plaintiff, Superline Enterprises Pty Ltd, insofar as its claim concerns the first defendant, pursuant to O 16 r 1 of the Rules of the Supreme Court 1971 (WA) (Rules), or alternatively to strike out Superline's further re-amended substituted statement of claim filed on 14 June 2021 (statement of claim), pursuant to O 20 r 19(1)(a), (b) and (c) of the Rules:
(a)in its entirety; or
(b)alternatively pars 2A, 2, 2C, 2D, 2E, 2F, 11A(i), 12, 13, 14, 15, 17, 18, 19, 20, 21, 22, 23, 24, 25, 25A, 26, 27, 28 and the prayer for relief;
without leave to amend.
The short point raised in the application is Superline has sued a partnership trading as Palassis Architects, but the first defendant contends that no such partnership has ever existed.
Although on Superline's and the first defendant's pleaded cases there is no dispute that until 10 April 2008, Kevin Palassis traded as Palassis Architects as a sole trader, the first defendant claims that on and from 10 April 2008, Magenta (WA) Pty Ltd traded as Palassis Architects, and at no material time did Kevin Palassis and Magenta carry on a partnership in the name of Palassis Architects.
For the reasons given below, the first defendant's application for summary judgment should be dismissed. However, I am of the opinion that pars 27 and 28 of the statement of claim should be struck out, on the basis that the matters pleaded in these paragraphs are not pleaded against the first defendant. Consequently, it is not necessary to consider whether leave should be given to Superline to replead.
2.0 Background
2.1 The factual background alleged by Superline in its case against the first defendant that is relevant to these proceedings
The writ of summons in this matter was filed on 4 December 2015.
Superline's claims concern building works on adjacent lots, lot 828 Parry Street, East Perth and lot 829 Newcastle Street, East Perth, and the construction of two, four storey office buildings with two levels of car parking. Superline is the registered proprietor of the land upon which the buildings were constructed.
Superline is a special purpose vehicle associated with the Manios family. Mr Palassis has had a long-term commercial relationship with the Manios family pursuant to which he has, for reward, provided architectural and construction supervision services to companies and parties associated with the Manios family.
On 28 May 2008, Superline entered into construction contracts with Morago Nominees Pty Ltd as trustee for Gavin Homes Unit Trust trading as Gavin Constructions (builder) for building contracts to construct the four story buildings on each lot, whereby Palassis Architects were specified in each contract as the name of the architect who was appointed to administer the contract, and the architect's representative was specified as Mr Palassis. [1]
[1] Affidavit of Panagioths Nikos Eustratios Manios sworn 1 November 2021, Annexure PM-1, 16 and 98.
The writ instituted proceedings against seven defendants who each entered into contracts to carry out work on the construction of the buildings, none of whom were the builder.
The works comprising the construction of the buildings were undertaken from in or about May 2008.
It is pleaded in the indorsement in the writ filed on 4 December 2015 that Superline claims damages from Palassis Architects (a firm) arising as a result of:
(a)breaches of a contract dated in or about 2007 for the provision of architectural services by the first defendant to Superline in relation to the construction and maintenance of the buildings, namely breaches in relation to:
(i)the design, specification and certification of the buildings;
(ii)management and supervision of the construction and maintenance of the building;
(iii)the administration of building contracts in respect of the building contracts (that is, construction contracts entered into with the builder);
(b)negligence in respect of each of the matters referred to in (a); and
(c)misleading and deceptive conduct, contrary to s 18 of the Australian Consumer Law, in relation to the matters referred to in (a).
It is Superline's case that:
(a)in or about May or June 2007, Superline through its director, Mr Panagioths Nikos Eustratios Manios, and Mr Palassis entered into a contract whereby it was agreed that Mr Palassis would provide architectural services, the terms of which were oral or by conduct, and those architectural services were provided for the design and supervision of the construction of the two buildings on the adjacent lots;
(b)it was a requirement of the architect agreement that the design and construction of the building would achieve an outcome that the buildings would be classified under the Australian Building Greenhouse Rating system as 4.5 Stars, Green Star Rating 4 star and the Property Council of Australia Rating as 'A' Grade (4.5 Star/A Rating);
(c)the buildings were constructed and reached practical completion on or about December 2009 and reached completion in or about 31 March 2012; and
(d)the buildings have not achieved the requisite 4.5 Star/A Rating and as a result Superline has suffered a loss.
2.2 Procedural history of the proceedings insofar as it relates to the first defendant
The writ is dated 4 December 2015 and was filed in the court on the same date. The writ was served on the first defendant in December 2016. Superline's first iteration of its statement of claim was dated 7 February 2017. The further re-amended substituted statement of claim dated 11 June 2021 is Superline's twelfth iteration of its statement of claim (including iterations that were provided for the purpose of conferral and not filed).
This is the second application to strike out Superline's pleaded case against the first defendant. The first defendant filed the first application on 3 April 2019 seeking to strike out a number of paragraphs of Superline's substituted statement of claim dated 22 February 2019 (being its seventh iteration of its statement of claim). When that application was heard and determined, at no time did the first defendant raise an issue that went to the identity of the party sued by Superline as the first defendant.
The second defendant, BCA Consultants Pty Ltd, also made an application in 2019 to strike out Superline's claim pleaded in the substituted statement of claim dated 22 February 2019, insofar as Superline's claim related to the second defendant. That application was heard and determined at the same time as the first defendant's application, and dealt with different issues than those raised in the first strike out application made by the first defendant.
The first defendant was in part successful in its strike out application, and the second defendant was entirely successful.[2] Following delivery of the reasons for decision on 15 November 2019, leave was granted to the plaintiff to replead its claims against the first defendant and the second defendant.
[2] Superline Enterprises Pty Ltd v Palassis Architects [2019] WASC 414.
Following the delivery of reasons for decision in the strike out application, on 11 December 2019 the plaintiff filed an amended substituted statement of claim, and a further amended substituted statement of claim on 7 February 2020.
On 29 June 2020, the first defendant's solicitors wrote to the plaintiff's solicitors advising the plaintiff had sued a partnership, which does not exist. This was the first occasion on which the first defendant gave notice to Superline of this issue.
On 18 November 2020, the first defendant filed a defence to the further amended substituted statement of claim. This was the first defence it filed in the proceedings. In its defence the first defendant pleaded that at no material time had there been a partnership in the name and style of 'Palassis Architects (a firm)'.[3]
[3] First Defendant's Defence to the Plaintiff's Further Amended Substituted Statement of Claim dated 6 February 2020.
At subsequent directions hearings on 19 November 2020 and 24 December 2020 the issue going to the entity of the first defendant was raised and a discussion ensued as to whether the plaintiff should apply to amend its pleading against the first defendant and the writ of summons.
The plaintiff filed an application dated 14 January 2021 seeking orders that the writ of summons, and the further amended substituted statement of claim be amended, which application sought orders to change the name of the first defendant.
On 6 April 2021, the plaintiff filed a notice of change of representation, and appointed new counsel. On 14 June 2021, the plaintiff by its new solicitors filed the further re-amended substituted statement of claim, and at a directions hearing on 24 June 2021 the plaintiff's application dated 14 January 2021 was withdrawn, and orders were made for the first defendant to file an application for summary judgment and to strike out the further re-amended substituted statement of claim, and programming the applications for hearing.
3.0 Principles
3.1 Applications for summary judgment by a defendant
Pursuant to O 16 r 1, a defendant who brings an application for summary judgment must do so within 21 days after appearance or at any later time by leave of the court. Where an application is made out of time the court must consider whether it should in its discretion grant leave to the defendant to apply out of time. In considering whether to grant leave, the court must consider whether there is on the plaintiff's case, no issue to be tried against the defendant.
As to the question of leave, Acting Master Strk in Diedler v Borowiec recently summarised the principles that guide the court in exercising its discretion to grant leave to a defendant to apply for summary judgment out of time as follows:[4]
The time limit clearly reflects a policy view that such applications should be brought at an early stage in a proceeding, and before too much expense has been incurred.
It is also well established that there are no set guidelines as to when leave to apply for summary judgment out of time will be granted. The court has a broad discretion to grant leave out of time, and the burden is on the applicant to show the delay is justifiable in all of the circumstances.
In deciding whether or not to extend time, it is necessary to have regard to the history of the proceeding, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant and refusal of the application for the extension of time.
The prospects of the application will be relevant. To proceed to trial, with the expense that that may incur, when there is no defence to an action, or where an action pursued by counterclaim has no prospect of succeeding, would of itself be contrary to modern principles of case management. Thus, where an application has some merit, the requirements for leave will not ordinarily be demanding.
Prejudice to the other party occasioned by the delay in bringing the application, will also be relevant.
[4] Diedler v Borowiec [2021] WASC 394 [59] - [63] (footnotes omitted).
As to whether there is a serious question raised in the plaintiff's pleaded case to be tried, the Court of Appeal in Zaghloul v Bayly recently summarised the relevant principles as follows:[5]
The principles to be applied on an application for summary judgment are well established. The critical issue is whether it is clear that there is no real question to be tried. The issue is framed in this manner as it is only in the clearest of cases, where there is a high degree of certainty about the outcome if the proceedings were allowed to go trial, that summary judgment ought properly to be granted. The exercise of powers to summarily terminate proceedings must always be attended with caution.
There are cases where the court has considered it appropriate to determine questions of law on a summary judgment application. There should be summary judgment if the facts are undisputed and the law is clear. In general, however, an application for summary judgment is not the occasion to dispose of difficult or substantial questions of law which cannot be determined without full argument. It will usually be appropriate to leave the determination of such questions for trial.
[5] Zaghloul v Bayly [2021] WASCA 125 [116] - [117] (footnotes omitted).
Where there is a conflict of affidavit evidence, the court should approach the summary judgment application on the basis that the facts set out on the affidavits of the party resisting the application for summary judgment will ultimately be accepted at trial.[6]
3.2 Strike out applications
[6] Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598, 608.
In Vantage Holdings Group Pty Ltd v Donnelly [No 4], the principles relevant to a strike out application were outlined as follows:[7]
[7] Vantage Holdings Group Pty Ltd v Donnelly [No 4] [2019] WASC 398 [60] (footnotes omitted); this summary was approved by the Court of Appeal in English v Vantage Holdings Group Pty Ltd [2021] WASCA 47 [55] - [56].
(a)the essential functions of a pleading are to define and limit the issues for decision, to provide the basis for determining discovery and the admissibility of evidence for trial, and to ensure a fair trial by putting the other side on notice of the case it must meet;
(b)a statement of claim must not plead allegations at too high a level of generality. A pleading must be sufficiently particular to conform with one of the primary objects of pleadings, to inform the opposing party of the case that it must meet;
(c)a statement of claim must state specifically the relief or remedy claimed;
(d)the court should proceed with caution before striking out a pleading on the ground that it does not disclose a reasonable cause of action. While the court may determine a difficult question of law on such an application, it would usually be appropriate to leave the determination of such questions for trial;
(e)in alleging no reasonable cause of action:
(i)the question to be decided is not whether the facts pleaded are in themselves sufficient to give rise to a cause of action. Rather, the question is whether it would be open to the party (on its pleadings) to prove facts at the trial which would constitute a cause of action; and
(ii)'reasonable' means reasonable according to law. If the facts pleaded conceivably give rise to relief, then the cause of action should be held to be reasonable;
(f)the mere fact that a case appears weak is not of itself sufficient to strike out the action;
(g)in considering a strike out application, it is now necessary to consider the role of pleadings in the context of case management techniques. Case management considerations are not, however, necessarily antithetical to the observance of pleading rules. The objects of O 1 r 4A and 4B of the Rules of the Supreme Court 1971 (WA)are often promoted by a clear and precise statement of the issues for decision;
(h)provided a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action (or defence), and apprising the parties of the case that has to be met, the court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent extensively debating the application of technical pleading rules that evolved in, and derive from, a very different case management environment;
(i)pleadings may be struck out on the ground that they may prejudice, embarrass or delay the fair trial of the action because they are evasive, they conceal or obscure the real questions in controversy, they are ambiguous or not reasonably intelligible, they raise immaterial or irrelevant issues, they fail to confine the issues or state the case of the party in question with reasonable particularity, or they raise a case in terms which are simply too general; and
(j)irrelevant or unnecessary pleas in a statement of claim will be struck out on the grounds that they will prejudice, embarrass or delay the fair trial of the action where the defendant must traverse the allegations and, thereby, raise false issues.
4.0 The plaintiff's pleaded case against the first defendant
4.1 The plaintiff's pleaded case that the first defendant is a partnership, has held itself out as a partnership or should be estopped from denying that it is a partnership
Two important background facts to Superline's pleaded case are that from the registration of the business name Palassis Architects in January 2002 until April 2008, Mr Palassis traded as Palassis Architects, and the ASIC Current Business Name Extract recorded that the business name, Palassis Architects, was a partnership whose names were Magenta (WA) Pty Ltd (from 1 April 2008) and Mr Palassis (from 16 January 2002).[8]
[8] Affidavit of Panagioths Nikos Eustratios Manios sworn 1 November 2021, Annexure PM-4, 174.
Superline puts a case that the first defendant is liable to it in damages on the basis that Mr Palassis and Magenta carried out a business in partnership as Palassis Architects.
In the alternative, Superline pleads that the first defendant is liable to it as it has held itself out as a partnership. In respect of this plea, Superline relies upon the effect of s 21(1) of the Partnership Act 1895 (WA).
Further, and also in the alternative, if s 21(1) does not apply, Superline pleads that the doctrine of equitable estoppel (by conduct) would prevent the first defendant from resiling from its position where a representation has been made (that the first defendant was a partnership) which induced Superline to adopt or accept that representation to their detriment.
In par 2A it is pleaded that at all relevant times Mr Palassis traded as Palassis Architects; carried on a business, for reward, in providing architectural services for the design, construction, specification and supervision of the construction of commercial premises; and prior to 10 April 2008 operated with ABN 90944155054.
In par 2 it is pleaded that at all relevant times from 10 April 2008, the first defendant was a firm trading under the name of Palassis Architects; the registered partners of the firm were Mr Palassis and Magenta; and Mr Palassis continued to undertake the obligations pursuant to the 'architect agreement' (the oral contract entered into between Superline and Mr Palassis in or about May or June 2007) pleaded in par 11.
The pleaded obligations in par 11.1 and 11.2 of the architect agreement are that Mr Palassis would prepare the design and construction specifications and drawings to complete the works; and that the design and construction specifications would be such so as to achieve the outcome that the buildings would be classified as 4.5 Star/A Rating. It is also pleaded in par 11.3 that it was a term that Mr Palassis would accept the appointment as the nominated or designated architect to administer the construction contracts to be entered into between Superline and the builder, and in compliance with the terms of those contracts, to act as assessor, valuer or certifier having regard for the interests of both Superline and the contracted builder. In par 11.4 it is pleaded that in respect of fulfilling the terms pleaded in par 11.1 and 11.2 Mr Palassis would exercise reasonable skill and care.
In par 11.5(a) Superline pleads the agreement was oral and when this plea is read together with par 11 is that the oral contract was entered into in May or June 2007. In par 11.5(b) Superline pleads in the alternative that the contract arose by conduct and is that conduct specified as a request by Mr Manios to Mr Palassis and arose prior to 10 April 2008 by the provision of services by Mr Palassis, and after 10 April 2008 by the first defendant seeking to provide those services.
In par 11A, when read with par 2E, Superline raises a plea in the alternative to the terms pleaded in par 11.1, 11.2 and 11.4 that Mr Palassis and Magenta held themselves out as a partnership carrying on business in common with a view to profit. In par 11A(ii) it is pleaded that by reason of the matters pleaded in pars 2, 2C, 2D and 11A(i) (that Mr Palassis owed a duty at common law to exercise reasonable skill and care in providing the services pleaded in par 11.1 and 11.2), the first defendant owed a duty at common law to exercise reasonable skill and care in providing the services pleaded in par 11.1 and 11.2.
Superline's plea of 'holding out' is relevantly set out in par 2.6 and 2.7. In par 2.6 and 2.7 it is pleaded that Mr Palassis and the first defendant undertook the obligations of the building contracts (entered into with the builder on 28 May 2008), and in par 2.9 the first defendant was engaged for reward, in providing architectural services for the design, construction, specification and supervision of the construction of commercial premises. In par 2C it is pleaded by reason of the matters pleaded in par 2.2 to 2.9 that Mr Palassis represented he was a partner of the first defendant and Magenta represented that it was a partner of the first defendant. In par 2D it is pleaded that in reliance of the representation pleaded in par 2C Superline continued to engage Palassis Architects and pay the invoices issued by the first defendant. It is then pleaded in par 2E that by reason of the matters pleaded in pars 2.2 to 2.5, 2C and 2D, it is to be inferred as a matter of fact and law that Mr Palassis and Magenta was a partnership carrying on a business in common with a view to profit.
In par 2F Superline pleads the basis upon which it says that the first defendant should be estopped from maintaining in these proceedings that it is not a partnership. In par 2F.1, 2F.2, 2F.3 and 2F.4 it is pleaded that:
(a)by reason of the matters pleaded in par 2C (that the first defendant was a partnership and Mr Palassis and Magenta represented that they were partners of the first defendant), Superline commenced these proceedings against the first defendant;
(b)on 6 December 2016 the first defendant purported to enter an appearance on behalf of the first defendant; and
(c)between 6 December 2016 to 29 June 2020 Mr Palassis and Magenta did not inform Superline that they had never been part of a firm or partnership called Palassis Architects.
In support of the plea of estoppel in oral submissions counsel for Superline pointed out that O 71 r 7(1) of the Rules provides that when a person served as a partner under r 3 (where parties are sued in the name of a firm) denies that he was a partner or liable as such at any material time, he may enter an appearance which states that he does so as a person served as a partner in the defendant firm, but who denies that he was a partner at any material time. Further, pursuant to O 71 r 7(4), where a defendant has entered an appearance in accordance with subrule (1), the court may order on the application of the plaintiff or that defendant, and at any stage of the proceedings, that any question as to the liability of that defendant or as to the liability of the defendant firm, be tried in such manner and at such time as the court thinks fit. Superline makes the point that neither Mr Palassis nor Magenta entered a conditional appearance in accordance with O 71 r 7.
In par 2F.5 Superline pleads that it conducted these proceedings to date on the basis that the first defendant was a partnership between Mr Palassis and Magenta, and did not amend the writ in these proceedings prior to the expiry of the limitation period of any of its claims.
4.2 The plaintiff's claims against the first defendant of breach of contract, negligence, and misleading and deceptive conduct
4.2.1 Breaches of contract
There is no claim of breach of contract made against Mr Palassis personally, other than as a partner of the first defendant.
In par 11.5(a), when read with par 11, Superline pleads that the architect agreement was oral and entered into in May or June 2007. In par 11.5(b) Superline pleads that the architect agreement arose by conduct by Mr Palassis providing architectural services prior to and after 10 April 2008, and by the first defendant rendering invoices for the provision of services.
In par 11.3 it is pleaded that it was a term of the architect agreement entered into in 2007 that Mr Palassis would accept appointment as the nominated or designated architect to administer the building contracts, and in par 12 the first defendant by its principal, Mr Palassis, in or about 28 May 2008, accepted the appointment as the architect, and in doing so, the first defendant agreed with Superline that it would carry out the work specified in par 12.1 to 12.5. Further in par 13.1 it is pleaded that each of the terms pleaded in par 12.2 to 12.5 were subject to the implied term that in complying with those terms the first defendant would exercise reasonable skill and care. It is pleaded in pars 19.3.1, 20.3.1 and 21.3.1 that the first defendant breached the duty in par 13.1.1, 13.1.2 and 13.1.4, in respect of which loss and damage is pleaded in pars 22, 23 and 24 against the first defendant. Each of these pleaded breaches relate to the identification of defects in the buildings and the costs of rectifying the defects.
It is pleaded in par 11.1 and 11.2 that in or about May or June 2007, Mr Palassis entered into a contract to provide architectural services whereby it was a term to the effect that Mr Palassis would prepare the design and construction specifications and drawings to complete the works, and the design and construction specification of the works would be such so as to achieve the outcome that the buildings would be classified 4.5 Star/A Rating. In par 25.1 and 25.2 it is pleaded that the design and construction specifications prepared by Mr Palassis, alternatively, the first defendant, did not achieve the outcome that the buildings were classified with a 4.5 Star/A Rating, and as a result Superline has suffered loss and damage.
The liability for the damage, however, is not claimed against Mr Palassis personally but only against the first defendant by the plea in par 25A. Superline pleads against the first defendant that it is liable for loss and damage for the alleged failure to achieve the outcome that the buildings would be classified 4.5 Star/A Rating in par 25A by reason of the matters pleaded in pars 2E and 2F (being a plea that Mr Palassis and Magenta held themselves out as partners in a partnership, or should be estopped from denying that they were a partnership).
4.2.2 Negligence
Superline raises two claims in negligence against the first defendant.
In par 11A it is pleaded that Mr Palassis and the first defendant owed a duty at common law to exercise reasonable skill and care in providing the services in par 11.1 and 11.2. In par 26, Superline pleads that Mr Palassis and the first defendant owed it a duty of care at common law so as to achieve the outcome that the buildings would be classified 4.5 Star/A Rating, which was not achieved, resulting in a breach of duty by the first defendant causing loss and damage.
The second claim in negligence is pleaded against the first defendant in par 14. This plea is that the first defendant, having agreed to accept in or about 28 May 2008 the appointment as the architect under the building contracts and in doing so it agreed to comply with the terms of the building contracts, owed Superline a duty of care at common law in providing the services to be provided under the building contracts, and in fulfilling that duty it was to identify any defects in the works:
(a)in assessing progress payment claims;
(b)any final claim; and
(c)in assessing whether practical completion had been reached.
In pars 15 to 21 Superline pleads the matters going to a breach of the duty of care and in pars 22 to 24 it pleads that it has suffered loss and damage as a result of the first defendant's breaches.
4.2.3 Misleading and deceptive conduct - s 18 of the Second Schedule of the Competition and Consumer Act 2010 (Cth)
The only claim of misleading and deceptive conduct pleaded by Superline is a plea against Mr Palassis arising out of representations claimed to have been made prior to 10 April 2008.
In par 27 it is pleaded that in or about May/June 2007, and at a meeting on 8 June 2007, and by an email on 25 June 2007, Mr Palassis represented that he had the necessary skill and competency to design and nominate the construction specifications to achieve the outcome that the buildings would be classified as having a 4.5 Star/A Rating. It is pleaded in par 27.4 that the representations were misleading or deceptive in that Mr Palassis did not have the necessary skill or competence to design and nominate the construction specifications to achieve the 4.5 Star/A Rating. In pars 27 and 28 Superline pleads that Mr Palassis engaged in contravention of s 18 of the Second Schedule of the Competition and Consumer Act 2010 (Cth) and because of the conduct of Mr Palassis, Superline has suffered loss and damage.
In par 28(a) and (b) Superline pleads particulars of loss and damage as being a lower level of occupancy and rents, alternatively the capital or resale value of the buildings is less as a result of the building on Lot 828 being classified (in January 2018) as only having a 3 star NABERS water rating and a 2 star NABERS energy rating and the building on Lot 829 as only having a 3.5 star NABERS water rating and a 4.5 star NABERS energy rating, and the buildings have never reached the necessary classification qualifications to be assessed for a Greenstar rating (in March 2018) as opposed to the rents and occupancy levels that would be achieved if the buildings were classified as 4.5 Star/A Rating.
There is no plea that the first defendant is liable for the acts of Mr Palassis, on the basis that Mr Palassis represented that he was a partner of the first defendant, so as to raise the pleas of holding out or estoppel in pars 2E or 2F.
5.0 Principles - Liability of partners and O 71 r 1 and the plaintiff's claim against Mr Palassis
5.1 Order 71 r 1 and when a cause of action accrues
Section 10 of the Partnership Act provides that persons who have entered into partnership with one another are, for the purposes of the Partnership Act, collectively a firm, and the name under which their business is carried on is called the firm name. Section 16 of the Partnership Act provides that every partner in a firm is liable, jointly with the other partners, for all debts and obligations of the firm incurred while he is a partner.
As the first defendant points out in their submissions a partnership has no legal personality distinct from the individual partners, and it is not the partnership which carries on business, but the individual members who carry on the business in a partnership.[9]
[9] Central Exploration Pty Ltd v Zuks [2020] WASC 46 [85].
Order 71 r 1 of the Rules provides:
Subject to the provisions of any enactment, partners may sue or be sued in the name of the firm (if any) of which they were partners when the cause of action accrued, and an action by or against a firm in the firm name shall be sufficient to include all partners constituting the firm.
The effect of this rule is that it enables a party to use the firm's name as a form of shorthand for denoting those persons who compose the firm at the time when that name is used, and a plaintiff who sues partners in the name of their firm in truth sues them individually, just as much as if he or she had set out all of their names.[10]
[10] Babcock & Brown Pty Ltd v Anderson [2010] QSC 287 [30] (Margaret Wilson J); applying WesternNational Bank of City of New York v Pérez, Triana & Co [1891] 1 QB 304, 314.
Order 71 r 1 enables a party to bring proceedings against partners in the firm in the name of the firm where the partnership existed when the cause of action accrued. No partnership liability can exist for a cause of action which accrues prior to the establishment of the firm.
A cause of action accrues when all the facts have occurred which the plaintiff must prove in order to succeed.[11] Where loss and damage is the gist of the action, the cause of action does not accrue until actual loss or damage is sustained.[12]
6.0 When did each of the causes of action accrue, and is it pleaded that the partnership was in existence at the time of accrual
[11] Cigna Insurance Asia Pacific Ltd vPacker [2000] WASCA 415 [31] (Malcolm CJ); applying Do Carmo v Ford Excavations Pty Ltd [1984] HCA 17; (1984) 154 CLR 234, 245 (Wilson J); Cooke v Gill [1873] LR 8 CP 107, 116 (Brett J); Read v Brown (1888) 22 QBD 128, 129; Coburn v Colledge [1897] 1 QB 702, 706 (Lord Esher MR); Trower & Sons Ltd v Ripstein [1944] AC 254, 263; Williams v Milotin [1957] HCA 83; (1957) 97 CLR 465, 474; and Central Electricity Board v Halifax Corporation [1962] 3 WLR 1313 , 1323 (Lord Guest).
[12] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514, 525 (Mason CJ, Dawson, Gaudron & McHugh JJ); applied in Superline Enterprises Pty Ltd v Palassis Architects [2019] WASC 414 [41].
Although it is not entirely clear from the statement of claim precisely when Superline suffered loss and damage in respect of each of the pleaded causes of action (breach of contract, negligence, and misleading and deceptive conduct), it is nevertheless apparent that none of the loss and damage claimed could have been suffered on the pleaded case until after the construction of the buildings had commenced including work undertaken under the building contracts, which must have been work carried out after 10 April 2008 because the building contracts were not entered into until 28 May 2008.
Consequently, it is arguable that each of Superline's causes of action against the first defendant did not accrue until a date after 28 May 2008, being a date after Superline pleads in par 2 that the first defendant at all relevant times from 10 April 2008 was a firm trading under the name of Palassis Architects.
7.0 The consequence of pleading the misleading and deceptive conduct claim only against Mr Palassis personally
The writ of summons filed on 4 December 2015 commenced proceedings only against the first defendant, and only against Mr Palassis in his capacity as a partner of a partnership, and not Mr Palassis as an individual.
The first defendant argues that the effect of naming of a firm as the first defendant is that Mr Palassis is not sued in his individual capacity in pars 26, 27 and 28 (as distinct from his capacity as a partner in a firm). However, in par 26 although Superline pleads that Mr Palassis owed Superline a duty of care at common law to exercise reasonable skill and care, a plea is only made against the first defendant of breach of that duty and a claim for damages in par 26. A similar plea is made in respect of the breach of contract claim in par 25.1 and 25.2, although the conduct of Mr Palassis in preparing the design and construction is pleaded, liability for the breach of the term of contract is only claimed against the first defendant in par 25A.
In pars 27 and 28 contravention of s 18 of the Second Schedule of the Competition and Consumer Act is only made against Mr Palassis and there is no plea of contravention, or loss or damage claim because of the conduct of the first defendant, or that when the loss and damage was suffered Mr Palassis was carrying out the obligations pursuant to the terms of the architect agreement, in the ordinary course of carrying out the business of the first defendant.
8.0 Should the breach of contract claims and the negligence claims be struck out against the first defendant?
8.1 Principles - Holding out and estoppel
8.1.1 Holding out
Section 21(1) of the Partnership Act provides:
21.Persons liable by "holding out"
(1)Everyone who by words spoken or written, or by conduct, represents himself, or who knowingly suffers himself to be represented as a partner in a particular firm, is liable as a partner to any one who has on the faith of any such representation given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made.
Section 21 creates a statutory cause of action based upon misrepresentation by a person or persons that he or she is a partner. The preconditions for the cause of action to be made out are that there must be representation made by a person, or by another person with that first person's knowledge that he or she is a partner. Second, credit must have been given to that firm. Third, the credit must have been given in the belief that the representation was true.[13]
8.1.2 Estoppel by conduct
[13] Lynch v Stiff [1943] HCA 38; (1943) 68 CLR 428, 434.
Estoppel by conduct, also known as estoppel by representation, is the encouragement by a representation, which constitutes a promise, that has been relied on by the promisee, and which promise results in a detrimental change of position (by the promisee).
The elements to create an estoppel by conduct are:[14]
(1)a statement or other conduct that constitutes a representation of fact;
(2)its communication to the representee;
(3)the representee's justifiable belief in its truth and their alteration of position in that belief;
(4)an attempt by the representor to contradict their representation; and
(5)prejudice to the representee as a result of their alteration of position if contradiction of the representation were permitted.
[14] Handley K R, Estoppel by Conduct and Election (2nd ed), [1-006].
To establish estoppel by conduct it is not necessary for the representee (the person who claims that the other party, the representor, should be estopped) to prove that the conduct of the representor was the sole inducement operating on the representee's mind.[15]
[15] Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505 [72] (French CJ, Kiefel, Bell & Keane JJ), applying Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] QB 84, 104 ‑ 105 (Robert Goff J).
The question is whether the conduct of the representee was so influenced by the encouragement or representation made by the representor that it would be unconscionable for the representor thereafter to enforce their strict legal rights. Similarly, it is sufficient to show that the representation was a significant factor which the representee took into account when deciding whether to act as they did.[16]
[16] Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505 [72] ‑ [73] (French CJ, Kiefel, Bell & Keane JJ); applying the observations of Robert Goff J in Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] QB 84, 104 ‑ 105 and Neuberger LJ in Steria Ltd v Hutchison [2007] ICR 445 at 465 [117].
9.0 Disposition of the summary judgment and strike out application
Superline makes a submission that it is clear on its pleaded case against the first defendant that there is a real question to be tried in respect of each of the causes of action. It contends the evidence before the court in this application (being the affidavit sworn by Mr Manios on 1 November 2021 and the affidavit sworn by Mr Palassis on 8 October 2021) is evidence that Magenta was in partnership with Mr Palassis. In particular, it relies upon the evidence that invoices were issued in June 2008 for work to Superline which were payable to Mr Palassis' personal bank account and subsequently invoices were issued in the name of Magenta trading as Palassis Architects and payable to a bank account in the name of Magenta.[17]
[17] Affidavit sworn by Kevin Michael Palassis on 8 October 2021 [49] – [54]. However, Mr Palassis in his affidavit in [55] describes the issuing of invoices payable to his personal bank account as a sole trader after 10 April 2008 was a mistake.
Superline also relies upon the fact that it is pleaded in the first defendant's defence in par 2.3 that on and from 10 April 2008 Mr Palassis and Magenta jointly owned the business name Palassis Architects. However, the first defendant also pleads in par 2.3 of the defence that upon the incorporation of Magenta, Mr Palassis caused to be transferred to Magenta Mr Palassis' business which included any work in progress that had been previously undertaken by him as a sole trader.
Having considered the matters pleaded by both parties, and the affidavit evidence of Mr Palassis, together with the ASIC Business Name Extract which states that Mr Palassis and Magenta traded as a partnership on and from 10 April 2008, Superline's case that there was a partnership in the name and style of Palassis Architects from that date appears to be weak. However, given that the matters pleaded in respect of this issue and the evidence relevant to whether a partnership in fact existed is relevant to the holding out and estoppel by conduct pleas, and the argument on this issue should not add to the issues to be determined at the trial of the action, the pleas should be allowed to stand. In any event, the first defendant has not provided an adequate explanation for a four and half year delay in raising the issue that there was not at any material time a partnership in existence in the name and style of Palassis Architects (being the period of time from when it was served with a copy of the writ and first raising this issue). They simply say that until they turned their mind to pleading a defence, they had not considered the issue.
The first defendant contends that the estoppel plea is an entirely new cause of action which is not contained within the rubric of the writ filed in these proceedings. This contention is not correct. Superline's plea of estoppel by conduct is not a plea that seeks to give rise to a cause of action in itself. The plea of estoppel by conduct and the plea of holding out pursuant to the statutory rule created by s 21 of the Partnership Act are pleas which go to the application of an evidentiary principle which in effect are both pleas that seek to prohibit the first defendant in succeeding in its plea in its defence to each of the causes of action that at no material time has there ever been a partnership in the name and style of Palassis Architects.
Although the pleas of holding out and estoppel by conduct should have been raised by Superline in reply, neither the plea of estoppel by conduct nor holding out can be claimed to be outside the scope of the indorsement of the claims made against the first defendant in the writ filed in these proceedings.
On the evidence presently before the court, it appears that it may be difficult for Superline to make out a plea of holding out. In his affidavit sworn on 1 November 2021, Mr Manios states in par 4 that he has known Mr Palassis professionally for over 19 years, and has known that he was an architect by profession and carried on business under the name of Palassis Architects, but was not aware of the legal structure under which Palassis Architects traded under. The first defendant in these proceedings seeks to rely upon an unsworn affidavit signed by Mr Manios sometime prior to the date of 14 January 2021, which document was filed by Superline's previous solicitor, in support of an application to amend the writ of summons, by amending the name of the first defendant from a firm to a business. Superline objected to the tender of this document in the hearing of the first defendant's applications for summary judgment and strike out. However, I do not find it necessary to determine whether this document should be admitted into the evidence in the determination of these applications. This is because the statements made in that document largely go to what was known by Mr Manios at the time when he on behalf of Superline entered into the architect agreement and preparations were entered into for the building contracts, which contracts were not executed until approximately about six weeks after 10 April 2008.
Given that the first defendant did not raise the issue that there was no partnership in existence for four and a half years, and did not enter a conditional appearance in the proceedings, it appears on the material presently before the court that Superline's case of estoppel by conduct when considered at its highest is reasonably arguable, which if ultimately accepted by the court would prevent the first defendant from succeeding in its defence that it was not a partnership.
However, despite the fact there is no adequate explanation for the first defendant's delay in raising the partnership issue, it is clear that the pleas in pars 27 and 28 are not pleas against the first defendant, but Mr Palassis in his personal capacity only and not as a partner. These pleas should be struck out because Mr Palassis in his personal capacity is not a party to these proceedings. These pleas were made against Mr Palassis personally for the first time when the statement of claim was filed on 14 June 2021. Prior to the filing of this pleading pars 27 and 28 pleaded a misleading and deceptive claim against the first defendant.
For these reasons, the summary judgment application should be dismissed, and the only paragraphs of the statement of claim that should be struck out are pars 27 and 28.
I will hear the parties as to the orders that should be made to reflect these reasons and as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
VV
Associate to the Honourable Justice Smith
6 DECEMBER 2021
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