Arrow International Australia Pty Ltd v Indevelco Pty Ltd

Arrow International Australia Pty Ltd v Indevelco Pty Ltd - [2005] VCAT 306 - VCAT 2005 case summary — Zoe

[7]

2 The following factual matters are set out solely in order to provide the context in which this application was made. No evidence as to the merits of the matter was adduced and I make no findings in relation to same. This factual background is set out so as to assist in the understanding of the arguments and of the ultimate decision.

3 This claim is centred upon a building dispute. It is a claim by a builder (Arrow) against an owner, (Indevelco), and the owner's financier (Perpetual). On 30 July 2000, Arrow and Indevelco entered into a building contract ("the Building Contract") in respect of an apartment building in Francis Street, Yarraville. A special condition in the Building Contract made it conditional upon the execution of a Building Contract Tie in Deed ("the Tripartite Deed"); an executed Addendum to the Building Contract Tie in Deed ("the Addendum") or similar deed acceptable to Arrow; approval of Arrow by Perpetual; and approval of finance for the project. On 13 December 2002, all parties entered into the Tripartite Deed. Clause 2.11 of that Deed sets out how payment shall be made, which, in essence, is that, at the end of each month, Arrow shall invoice Indevelco for work done; Indevelco shall arrange for a Quantity Surveyor acceptable to Perpetual to certify the invoice; and, upon agreement being reached between Arrow and the Quantity Surveyor as to any discrepancies, Perpetual shall transfer to Arrow's bank account the funds required to pay the invoice.

4 Such procedures are specifically said to be subject to Clause 2.9 of the Tripartite Deed, which states that nothing in the Deed or anything Perpetual does imposes any obligation on it under or in respect to the Building Contract, unless Perpetual expressly assumes Indevelco's obligations under the Building Contract.

5 A dispute has arisen between Arrow and Indevelco. Leaving aside a claim based on quantum meruit, Arrow is claiming against Indevelco the sum of $440,501.00 being, in essence, monies owing to it as a result of Indevelco's alleged failure to observe the terms of the Building Contract. Alternatively, Arrow is claiming that sum against Perpetual pursuant to Clause 2.11 of the Tripartite Deed or by way of damages pursuant to S.82 of the Trade Practices Act 1974 (CTH) ("TPA") and S.159 of the Fair Trading Act 1999 (Vic) ("FTA"). Declarations are also sought in relation to these matters, both in relation to a requirement to transfer funds pursuant to Clause 2.11 of the Tripartite Deed, and in relation to alleged contraventions of the legislation referred to above.

6 In accordance with Clause 2.11, Perpetual made thirteen payments into Arrow's bank accounts, these totalling in excess of $4 million dollars. By a letter dated 3 November 2003 from Perpetual to Arrow, Perpetual acknowledged that it had paid into Arrow's account an amount less than a payment certified by the Quantity Surveyor. In addition to that acknowledgement, the letter stated that Perpetual would endeavour to pay the shortfall as soon as possible and, in the interim, requested that Arrow's default letter be issued to it (Perpetual).

7 The Addendum sets out the payment arrangements referred to above and ultimately incorporated in the Tripartite Deed. It was agreed that the Addendum would not be executed as a deed at the time of the signing of the Building Contract, but would be incorporated into the Tripartite Deed. The Addendum was initialled by representatives of Arrow and Indevelco in July 2002, and, as stated, the Tripartite Deed was ultimately executed by Arrow, Indevelco and Perpetual in December 2002.

[12]

11 I shall not set out the submissions advanced on behalf of the parties in detail, but shall summarise them. The case advanced by Mr Frenkel on behalf of Perpetual could be so summarised as follows.

12 Reliance is placed upon S.75(a). The complaint should be dismissed because it is doomed to fail and is not curable by amendment.

13 The obligations of Perpetual as set out in paragraph 2.11 of the Tripartite Deed are purely procedural. They are expressly subject to the provisions of Clause 2.9. Perpetual has no obligations pursuant to the Building Contract unless it expressly assumes Indevelco's obligations, which it has not done. Arrow's right to be paid is a right pursuant to the Building Contract, and Perpetual is not a party to that contract. It is not a matter of evidence. It is a matter of contract law.

14 Further, it is not reasonably arguable that Perpetual is effectively the guarantor of Indevelco, as is alleged in paragraph 21 of the amended points of claim. The express assumption of Indevelco's obligations by Perpetual, as required by Clause 2.9, simply has not happened. Clause 2.9 of the Tripartite Deed is thus a complete answer to Arrow's claim for breach of contract. Further, the provisions relating to default contained in Clause 2.5(b)(i)(B) of the Tripartite Deed, which also refer to Perpetual's assumption of obligations under the Building Contract, fit in with Clause 2.9.

15 The letter of 3 November 2003 is not an express assumption by Perpetual of Indevelco's obligations. It is noted that the word "endeavour" is used in relation to the payment of any shortfall. There is not even an implied assumption of obligations, much less an express assumption. The letter does no more than point to the procedural clauses. Similarly, the making of payments by Perpetual into Arrow's bank account does not mean that there has been any assumption by Perpetual of Indevelco's liabilities and responsibilities. It is the procedure required pursuant to the Tripartite Deed. These are not matters for trial and they do not depend upon further evidence or the credit of witnesses. The issue depends purely upon contractual interpretation, and the claim is simply not open on the pleaded basis. In relation to both points of claim and amended points of claim, the claim is misconceived, lacking in substance, obviously hopeless, bound to fail, and cannot be cured by amendment.

16 In relation to the claim pursuant to the FTA, it is to be remembered that, if a pleading or part of a pleading before the Tribunal is plainly defective, the proceeding or part of it may be dismissed or struck out pursuant to S.75, and reference is made to Barbon v West Homes Australia Pty Ltd (2002) VSC 405.

17 Reference is also made to cases such as Arms v WSA Online Limited (2003) FCA 835 and Pioneer Electronics Australia Pty Ltd v Edge Technology Pty Ltd (1999) FAC 142. A claim based on S.9 of the FTA must adequately demonstrate the falsity of representations and must identify how it is said that the representations were false at the time that they were made. As was said in Pioneer at paragraph 7:-

[15]

20 The submissions of Mr Miller on behalf of Arrow could be summarised as follows.

21 A claim should not be struck out if a deficiency can be cured by amendment. The original points of claim, insofar as reliance was placed upon the FTA, may not have contained sufficient information, but the amended points of claim cure that defect.

22 Arrow puts its case against Perpetual in two fundamental ways. Firstly, the claim is based in contract, and various paragraphs of the amended points of claim, as listed in the written submissions on behalf of Arrow, identify how the claim is put.

23 The Tripartite Deed as executed by the parties is more than procedural in relation to payment, and imposes contractual obligations.

24 It is apparent from the affidavit of Mr Perera and the exhibits thereto that Perpetual was involved in the negotiations at the time of the execution of the Building Contract; that Indevelco was obtaining Perpetual's approval at that time; and that the Addendum was in fact referred to Perpetual's solicitors at that time. Further, the fact that Perpetual made substantial progress payments to Arrow demonstrates that Perpetual considered that it had an obligation to make such payments.

25 In addition, Perpetual has expressly assumed the obligations of Indevelco. It has done this by making the payments. It was of benefit to Arrow to have Perpetual agreeing to make the payments and was the reason why Arrow entered into the Tripartite Deed. Clause 2.11 gave Arrow the security of knowing payments would be made once they were certified. By its conduct in so paying, Perpetual expressly assumed Indevelco's obligations.

26 That Perpetual considered that it had such an obligation is made clear by the letter of 3 November 2003, in which it acknowledged that it was discharging the obligation of Indevelco and asked that any default letter be sent to it.

27 The word "expressly" receives some attention in "Words and Phrases Legally Defined", third edition, at page 206. Reference is there made to two authorities, namely Chorlton v Lings (1868) LR 4 CP 374 and Whitehouse v Pickett (1908) AC 357. These could be summarised as saying that the word "expressly" means "plainly, clearly or the like". No form of words is needed, but something should be said or done that conveys an intention. Bearing these authorities in mind, the clearest evidence that there has been an express assumption of the obligations of Indevelco by Perpetual, or, alternatively, the assumption of a primary obligation under the Tripartite Deed by Perpetual, is the fact that it made payments to Arrow over a twelve month period.

28 Secondly, the claim is based upon misleading and deceptive conduct pursuant to the FTA. Again, the written submissions refer to the relevant paragraphs of the amended points of claim. The claim has been repleaded in that document.

29 The representations relied upon were made prior to the signing of the Building Contract and not at the time of the signing of the Tripartite Deed. The affidavit of Mr Perera makes this clear. It is apparent that Perpetual was involved prior to the execution of the Building Contract, as were its solicitors.

30 There are a considerable number of authorities in relation to the striking out or dismissing of a claim without it having been heard on its merits, and in circumstances of the kind envisaged in S.75. The onus is on the person making the application to show that the pleading discloses no reasonable cause of action - see Winterton Constructions Pty Ltd v Hambros Australia Ltd [1991] FCA 171; (1991) 101 ALR 363. As was stated in Whim Creek Consolidated NL v Colgan [1989] FCA 261; (1989) 88 ALR 83, the court should not strike out a pleading unless it is shown that the case put forward in the pleading is so clearly untenable it cannot possibly succeed, and it is a jurisdiction that should only be used sparingly and in a very clear case - see Ngo v State of New South Wales [1996] HCA 17; (1996) 137 ALR 40.

31 Arrow has a sound case against Perpetual in both contract and in misleading and deceptive conduct, and it should be permitted to proceed against Perpetual.

At a glance

Court

Decision date

Source

Judgment (26 paragraphs)

Arrow International Australia Pty Ltd v Indevelco Pty Ltd (Domestic Building) [2005] VCAT 306 (24 February 2005)

Parties

Cases Cited (4)