The Trust Company Ltd v VISA Global Logistics Pty Ltd

[2017] NSWSC 197

Supreme Court

New South Wales

Medium Neutral Citation:	The Trust Company Ltd v VISA Global Logistics Pty Ltd [2017] NSWSC 197
Hearing dates:	1 March 2017
Decision date:	07 March 2017
Jurisdiction:	Equity - Commercial List
Before:	Stevenson J
Decision:	Leave to amend refused
Catchwords:	PRACTICE AND PROCEDURE – whether defendant should be given leave to amend defence to cross-claim to allege a duty of care owed by builder to cross-claimant; TORTS – duty of care to avoid economic loss – vulnerability – whether necessary to plead that relevant party unable to protect itself from economic loss – whether cross-defendant has no prospect of demonstrating such inability at trial
Legislation Cited:	Civil Liability Act 2002 (NSW)
Cases Cited:	Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185; HCA 36 Shaw v New South Wales [2012] NSWCA 102
Category:	Procedural and other rulings
Parties:	The Trust Company Limited (Plaintiff/Cross-Defendant/Applicant) GIL Holdings (Aust) Pty Limited (Second Cross-Defendant/Applicant) VISA Global Logistics Pty Limited (Defendant/Cross-Claimant/Respondent)
Representation:	Counsel: T W Marskell (Plaintiff/Cross-Defendants/Applicants) N J Kidd SC (Defendant/Cross-Claimant/Respondent)   Solicitors: Wotton + Kearney (Plaintiff/Cross-Defendants/Applicants) K & L Gates (Defendant/Cross-Claimant/Respondent)
File Number(s):	SC 2014/365944

Judgment

1. The Trust Company Limited is the owner of industrial premises at Banksmeadow. GIL Holdings (Aust) Pty Limited was formerly the owner of that property. Nothing turns of the transfer of ownership. Accordingly, to avoid factual complications not relevant to the issue at hand, I will refer simply to “the Owner”.

2. On 28 March 2013, the Owner entered into an Agreement for Lease with the defendant, VISA Global Logistics Pty Limited.

3. By the Agreement for Lease, the Owner agreed to carry out building works on the property for the ultimate use of VISA, as lessee, and VISA agreed to take a lease of the property.

4. An entity related to the Owner (in a manner not necessary to describe) engaged a builder, DZCG Pty Limited, to carry out the works.

5. The works achieved practical completion, and VISA took possession in July 2014.

6. By its cross-claim in these proceedings, VISA claims damages from the Owner for breach of a promise made in the Agreement for Lease that the works would be carried out in accordance with various approvals and in “a proper and workmanlike manner”.

7. The claim arises from the allegedly defective construction of the asphalt surface of a hardstand area on the property.

8. The Owner seeks leave to amend its defence to the cross-claim to allege that VISA’s claim is an apportionable claim for the purposes of s 34(1)(a) of the Civil Liability Act 2002 (NSW) and that the builder is a “concurrent wrongdoer” for the purposes of that section; that is, that the builder’s acts or omissions caused the damage of which VISA complains.

9. An essential element of that claim is that the builder owed VISA a duty of care (currently described as a duty to perform the works in accordance with the building contract and the Agreement for Lease).

10. The matter for consideration is whether that contention, as proposed to be pleaded, is “so obviously untenable or groundless that there is ‘a high degree of certainty’ that they will fail if allowed to go to trial; and whether this is one of the ‘clearest of cases’ in which the court may accordingly intervene to prevent the claims being litigated” (Shaw v New South Wales [2012] NSWCA 102 at [32] (Barrett JA, with whom Beazley, McColl and Macfarlan JJA and McClellan CJ at CL agreed). (Those remarks were directed to a case of summary dismissal; the same principles apply to disallowing a pleading amendment on the basis that it is bound to fail).

11. The duty contended for is said to arise because:

1. under the Agreement for Lease, the Owner was obliged to carry out the works in a proper and workmanlike manner;

2. under the building contract, the builder warranted to carry out the works in accordance with various specified requirements;

3. the builder knew, or ought to have known, that the works it was to perform under the building contract were to allow VISA to occupy and use the property and that VISA was reliant on its skill, experience and expertise;

4. the builder assumed responsibility for the design and construction of the works under the building contract in circumstances where VISA had input and gave direction concerning alterations to the plans and specifications in respect of, relevantly, the hardstand area that is said to have failed;

5. VISA knew, or ought to have known, that the Owner did not have the skill, experience or expertise to perform the works and that the works would be undertaken by the builder;

6. VISA was reliant on the skill and experience of the builder to carry out the works;

7. VISA did not have the opportunity itself to contract with the builder as the Owner required VISA to enter into the Agreement for Lease rather than a building contract as part of the structure of the transaction; and

8. by reason of these matters, VISA was vulnerable to the builder in respect of any economic loss it might suffer in the form of defective building works.

12. The question is whether those allegations, assuming that they can be proved, are capable of leading to the conclusion that VISA was “vulnerable” in the sense discussed by the High Court in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185; HCA 36.

13. Mr Kidd SC, who appeared for VISA, submitted that it was impossible that such matters could bespeak vulnerability in the relevant sense; that the Owner’s contention that, in these circumstances, the builder owed VISA a duty of care was “manifestly hopeless”; that matters relied upon could not “possibly” constitute a vulnerability in the relevant sense; and that leave to amend should be denied on that basis.

14. Mr Kidd drew attention to the following statements made by the Justices in Brookfield:

1. vulnerability refers to a “plaintiff’s incapacity or limited capacity to take steps to protect itself from economic loss arising out of the defendant’s conduct” at [22] (French CJ);

2. the inclusion in the contracts under consideration in Brookfield of “provisions regulating the quality of what was to be received in return for payment of the price” denied the vulnerability of the party with the benefit of those provisions and that “[t]he making of contracts which expressly provided for what quality of work was promised demonstrates the ability” of the person with the benefit of that promise to protect itself against, and deny their vulnerability to, any lack of care by the counterparty at [55] and [58] (Hayne J and Kiefel J (as her Honour then was)); and

3. vulnerability was concerned with the “inability of the plaintiff to take steps to protect itself from the risk of the loss” at [130] (Crennan, Bell and Keane JJ).

15. Mr Kidd submitted that the fatal omission from the proposed pleading was an allegation that VISA could not protect itself from economic loss arising from the performance of the works.

16. Mr Kidd pointed to the detailed provision made in the Agreement for Lease concerning the manner in which the Owner was to procure that the works be carried out. He further submitted that VISA and the Owner had made a contract which expressly provided for the “quality of what was to be received” by VISA and that this “denies vulnerability”.

17. In response, Mr Marskell, who appeared for the Owner, submitted that the relevant clauses in the Agreement for Lease are “limited in the redress they provide and do not necessarily protect” VISA from a want of reasonable care on the part of the builder.

18. In that regard, Mr Marskell referred to cl 3.8 of the Agreement for Lease (in which VISA acknowledged that it had provided directions to the Owner as to the design of the relevant works and accepted responsibility for those parts of the design to the extent that it had had such input) and the “Defects Liability Period” in cl 3.10 which, although imposing an obligation on the Owner to rectify, replace and make good defects, did not confer a right upon VISA itself, to rectify, replace and make good defects and then seek compensation for such work.

19. Thus, Mr Marskell submitted, the facts finally established at trial may show that the rights conferred by the Agreement for Lease on VISA as against the Owner were not sufficient to protect VISA from any economic loss it suffered by reason of the manner in which the builder carried out the works.

20. I understand this submission to mean that the basis on which the Owner wishes to contend that VISA was vulnerable to any want of care by the builder is that protection afforded it by the Agreement for Lease may not, as things turn out, be adequate.

21. If that is the case the Owner wishes to establish, I do not see it reflected in the proposed pleading.

22. In substance, the proposed pleading alleges that VISA’s vulnerability to the builder arises from the alleged:

1. reliance by VISA on the builder’s care and skill;

2. knowledge by the builder of that reliance; and

3. assumption by the builder of responsibility for the design of works in which VISA had input and direction.

23. In my opinion, a party asserting a duty of care by A in favour of B by reason of B’s vulnerability to A must plead more than that:

1. B was reliant on A to exercise care and skill;

2. A knew of such reliance; and

3. A assumed responsibility for matters which might affect B.

24. The judgments in Brookfield make clear that more is required; namely, B’s incapacity, limited capacity or lack of ability to protect itself from the possible consequences of A’s conduct.

25. For that reason, I am not prepared to give the Owner leave to file and serve a second further amended cross-claim list response as presently formulated.

26. If the Owner’s case is that VISA’s lack of ability is because of a shortcoming in the protection afforded by the Agreement for Lease, then that should be pleaded.

27. If the Owner goes further and alleges some inability on the part of VISA to negotiate better protection under the Agreement for Lease, then that should also be pleaded.

28. I am, however, prepared to reconsider the matter if the response is reformulated.

29. It may be that Mr Marskell is correct to submit that it does not necessarily follow from the terms of the Agreement for Lease that VISA was, beyond all argument, not vulnerable.

30. Mr Kidd’s argument to the contrary amounts to this: if a party, particularly an apparently sophisticated commercial party, negotiates the terms on which it is prepared to accept risk of economic loss, that, without more, shows that the party is not vulnerable. Or, as Mr Marskell put it more colloquially: “as long as you have had a chance to contract with someone about the consequences of what might go wrong, that is the end of vulnerability”.

31. Mr Kidd’s argument may prove to be correct. There is certainly some support for it in Brookfield.

32. But whether it is so clearly correct that I should foreclose the Owner from pursuing the point is a matter I will reconsider should the Owner reformulate the pleading.

33. I will hear submissions as to the course that should now be followed.

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Decision last updated: 07 March 2017