Body Corporate Strata Plan No. 405967 & Ors v Brady Constructions Pty Ltd (Domestic Building) [2006] VCAT 2678

1. Application under Section 75 of Victorian Civil and Administrative Tribunal Act 1998 dismissed.
2. Claims on behalf of all save first-named applicant struck out and such applicants removed as parties to the proceeding.
3. Title to proceeding and name of sole applicant amended so as to read 'Body Corporate Strata Plan No. 405967 No. 1'.
4. Costs reserved.
5. Adjourned to further directions hearing 9.30 am, 7 April 2006 at 55 King Street, Melbourne

1. On 8 July 2005 a firm of solicitors filed an application under Section 16 of the Water Act 1989 in the name of 'Body Corporate Strata Plan No. 405967' seeking damages, interest and costs and declaratory relief against both of the present respondents. The statement of claim attached said that the body corporate was a body corporate under Section 29 of the Subdivision Act and that it was the body corporate for a residential development known as 'Fairfield Mews' at 337 Station Street, Fairfield. The City of Darebin was said to be responsible for certain drainage matters and Brady Constructions Pty Ltd was alleged to be the builder of the Fairfield Mews development under Building Permit No. 908554/0.
2. As against the City of Darebin, the statement of claim alleged that there was an unreasonable flow of water into the development on 3 December 2003 because of lack of capacity in an easement drainage system which drained the development together with a park, a velodrome and Station Street. This easement drainage system was said to be under the control of the City. The City, therefore, it said was liable for damages for the consequences of the unreasonable flow. As against Brady it was alleged that Brady constructed the easement drainage system and also an internal drainage system for the development. The statement of claim then alleged that Brady was responsible for the damage caused by the unreasonable flow of water. The flow of water allegedly caused by the Council was referred to as the first flow of water and the one allegedly caused by Brady was referred to as the second flow of water though since the flows allegedly occurred on the same day in December 2003 and are described similarly, they are presumably one and the same. The basis upon which it was said that Brady was responsible for the damage caused by the flow of water was the allegation that it had breached the warranties implied in the building contract by the Domestic Building Contracts Act 1995. The statement of claim also alleged that Brady was liable to the applicant for negligence. The loss and damage alleged was set out in Schedule 2. It is clear from the terms of this schedule that the loss and damage sought to be recovered which totalled $225,982.59 extended not only to damage to the common property but also to damage inflicted upon units owned by individual unit holders at the development. To the extent that there were a number of claims for loss of rent, the damage claim went beyond the purely physical to economic loss as well.
3. The proceeding came before me for directions on 12 August 2005. I referred it to a compulsory conference before an engineer member on 16 December and gave directions fixing the matter for final hearing on 20 February 2005 if it did not resolve at the compulsory conference. The solicitors for the parties agreed that the compulsory conference should not take place and it was adjourned without any parties appearing.
4. Meanwhile on 26 October 2005 the same solicitors commenced the present proceeding in the Domestic Building List. The applicant was as in W38/05 - Body Corporate Strata Plan 405967 but there were some 95 other applicants who were said to be unit owners in the development. The application sought the following relief:

(a) Rectification of building and drainage defects.

(b) Alternatively the cost of rectification of defects.

(c) Cost of repairs to damaged property of the applicant.

1. Once again the respondents were Brady and the City Council.
2. The solicitors for Brady raised a number of issues as to the authority of the solicitors to act for those for whom they commenced proceedings and the basis upon which certain claims were made by certain persons; for instance, they observed that there was no authority for the body corporate to recover damages for losses, physical or economic suffered by unit holders to their own units as distinct from loss and damage inflicted on the common property of the development. There were issues as to which of the several bodies corporate established for the purposes of Strata Plan 405967 was the applicant in the one, the other or both proceedings. There were questions raised as to the identity of particular unit holders, for instance, the 46th applicant in this proceeding was shown as 'Pullen Family Trust'. The same family trust was shown as the 48th applicant. The necessity for the same name to appear twice as if a separate person raised an obvious problem as did the fact that a family trust as distinct from the trustee thereof is neither a natural nor a legal person.
3. Brady alleged that in the circumstances the proceedings constituted an abuse of process. They were both set down for a half day hearing in the afternoon of 10 March 2006 to determine the propriety of the manner in which the proceedings had been brought and continued. The applications did not conclude on 10 March but were resumed on 17 March.
4. There have been so many twists and turns in the life of these two proceedings that it is unnecessary for the purposes of this determination to seek to narrate them all. It may be necessary to refer hereafter to certain specific events but to provide a general background it is sufficient to summarise the situation which had been reached by 10 March. First, as to W38/2005 the solicitors proposed filing a further amended statement of claim which will be brought in the name of Body Corporate Strata Plan 405967 No. 1 (and not in the name of any of the other bodies corporate established under this strata plan) and also on behalf of some 48 unit owner applicants. This pleading therefore resolved the issue as to which body corporate is making the claim and also removed the objection as to the proceeding in its original form whereby the body corporate sought to recover damage suffered individually by unit holders. The solicitors claim their authority to bring W38/05 derives from rights of subrogation held by certain insurers who have paid out insurance moneys for the losses said to have been suffered in December 2003. As a result there is now no challenge to the solicitors' authority in Proceeding No. W38/05 and despite foreshadowed applications for its summary dismissal none has been made.
5. Once again the loss and damage as particularised totals $225,982.59 in Proceeding W38/05 consisting of alleged property damage in the sum of $179,481.85 and costs of consultants $46,500.74.
6. The present proceeding is now proposed to be continued by the Body Corporate No. 1 solely with respect to damage said to have been sustained by the development's common property. No claim is now to be made in the name of or on behalf of any unit owner for any separate and individual loss.
7. The proposed further amended points of claim in this proceeding delete claims on behalf of any unit owner. The claim is said to relate solely to rectification work required to be done to the common property.

1. Mr Schlicht of Counsel on behalf of Brady sought summary dismissal of this proceeding pursuant to Section 75 of the Victorian Civil and Administrative Tribunal Act 1998 as an abuse of process. He submitted that his clients were entitled to call into question the authority of the solicitors to act in the building proceeding. In light of the information as to the reliance on rights of subrogation in the Water Act proceeding he did not challenge the solicitor's authority to continue that proceeding. He referred to the judgment of Ormiston JA in Victorian Teachers Credit Union Limited v KPMG [2000] VSCA 23; (2000) 1 VR 654; Australian Workers Union v Bowen [1946] HCA 24; (1946) 72 CLR 575, 592; Daimler Co v Continental Tyre and Rubber Co Limited [1916] 2 AC 307 and John Shaw and Sons Limited v Shaw [1935] 2 KB 113. He submitted that those decisions showed that once a solicitor's authority to bring proceedings was called into question the onus of proof lay upon the solicitor and that if the proceedings were found to have been brought without authority, the proper order was to dismiss the proceedings as an abuse of process. He submitted further that a proceeding commenced by a solicitor without authority from his alleged client was a nullity, hence, even if there were an attempt retrospectively to ratify the commencement of this proceeding, such ratification would now be ineffective.
2. Next, Mr Schlicht alleged that the solicitors in prosecuting this proceeding had used information obtained by them in the course of discovery in W38/05 in this proceeding, to use in one proceeding documents obtained by compulsory processes in another could constitute contempt of court. He referred to an unreported decision of the Supreme Court of New South Wales, United States Surgical Court v Hospital Products International Pty Ltd and the well known decision of the House of Lords in Home Office v Harman [1983] AC 280. He submitted that where it is demonstrated that improper use had been used in one proceeding and documents discovered in another, the appropriate relief was to dismiss the second proceeding. He referred to Riddick v Thames Board Mills [1977] 3 All ER 677.
3. Mr Schlicht referred to paragraph 3 of the points of claim in the Domestic Building List matter, observing 'the allegations made, certainly in respect of paragraph 3 of the points of claim, could not be responsibly pleaded without the use of Brady's discovery in the Building List proceeding.' I note that paragraph 3 of the latest version of the points of claim proposed pleading only states:

By an agreement (the 'contract') between the respondent and Fairfield Mews Pty Ltd ('Fairfield') the respondent agreed to carry out and complete a multi-unit residential development (the 'works') at 337 Station Street, Fairfield Victoria.

1. Under the heading 'particulars' the following appears:

Particulars are unable to be provided until after discovery by the respondent.

1. Finally, Mr Schlicht complained that there had been a duplication of claims in the two proceedings. He said:

(a) The Building List proceeding seeks to prosecute a claim on the same basis for precisely the same loss as claimed in Water Act proceeding.

(b) The Water Act proceeding sought to maintain a claim for a mandatory injunction in respect of alleged defective building work which is sought to be rectified in the Building List proceeding.

1. He submitted that where there is a duplication of proceedings, then one should be struck out, presumably the latter one, if the plaintiff or applicant seeks to continue then one of the proceedings, presumably the second one, should be dismissed. Australian Commercial Research and Development Limited v ANZ McCaughan Merchant Bank Limited [1989] 3 All ER 65.
2. In light of the changed basis for the Water Act proceedings, Mr Schlicht did not in oral argument pursue the application for summary dismissal of the Water Act proceedings.
3. As to the issue of authority to bring the proceedings, Mr Schlicht referred me to an affidavit by Mr Pethica, the General Manager of his client who said that he wrote in identical terms of 17 February 2006 to the persons listed in the schedule of applicants with the exception of the body corporate. He said that 23 of those persons responded to his letter and each informed him that they had authorised the proceeding in the Domestic Building List. With respect to authorities from the body corporate for the prosecution of this proceeding, Mr Schlicht referred me to a number of body corporate certificates provided by the relevant body corporate to interested persons, for instance, one dated 31 January 2006 provided to legal counsel for a bank stated at paragraph 9:

The body corporate is not a party to any proceedings or aware of any circumstances which may give right to proceedings, except that legal action has been taken against owners in arrears.

The body corporate is not a party to any proceedings or aware of any circumstances which may give rise to proceedings, except the following: none to our knowledge.

1. Another certificate dated 2 March 2006 denied the body corporate being party to any proceedings 'except that legal action is being taken against owners in arrears'. Another certificate dated 2 March said:

The body corporate is a party to legal proceedings with THU against the developer for the compliant completion of the roof and drainage system of the building.

1. Mr Schlicht said documents produced by the solicitors by way of minutes from the body corporate did not give authority to commence this proceeding. The minutes of the meeting of 6 December recorded that the solicitors had been engaged to act on behalf of 'all the body corporate members' not the body corporate. A revised version of the minutes provided rectified that problem but appeared to have been signed by Darren Brown who was recorded in the original minutes as an apology. Mr Schlicht invited me to draw the inference authorised by the decision of the High Court of Australia in Jones v Dunkel (1959) 101 CLR 298. By reason of the failure of the solicitors to provide any affidavit evidence from any member of the body corporate committee. When the matter resumed a week after its first listing, viz on 17 March, Mr Kincaid who was briefed by the solicitors, produced an affidavit from Kon Bochrinis proposing that he was a member of the committee of Body Corporate No. 1 (I note he is recorded as being such and present at the meeting of the committee on 6 December in the minutes previously produced). Mr Bochrinis stated:

I confirm that [the solicitors] have been instructed by the committee to act on behalf of the body corporate and issue proceedings in VCAT against Brady Constructions Pty Ltd, the builder of the development to rectify defects to the property or pay damages for the cost of having such defects rectified by a third party.

1. Mr Schlicht submitted as previously noted that if I found that the proceeding had been commenced without authority it was a nullity, hence, a subsequent ratification or purported ratification could not cure the problem.

1. Mr Kincaid was briefed on behalf of the solicitors to contend that the present application to dismiss should be rejected.
2. He took me through the evolution of the two proceedings. He submitted that the Water Act proceeding was aimed at recovering damages for the losses suffered by the unit owners and the body corporate. The domestic building proceeding, this proceeding, was brought with the separate purpose of obtaining either rectification of the common property or damages to enable rectification to be carried out. He submitted there was no duplication of proceedings because they sought redress for separate loss and damage. The proceedings were commenced separately, he said, because proceeding W38/05 was commenced by insurers using their right of subrogation whilst this proceeding was commenced directly for the benefit of the body corporate.
3. Mr Kincaid said that a perusal of the pleadings would demonstrate that no date for the relevant building contract had been pleaded in this proceeding, hence, the factual basis for the allegation that improper use had been made of information obtained on discovery in W38/05 was lacking.
4. He relied on the affidavit of Mr Bochrinis to establish the solicitor's authority to commence the proceeding on behalf of the body corporate.
5. Despite assertions to the contrary in some earlier affidavit material filed by the solicitors in the proceedings he did not distinctly assert, as I understood his submission, that the solicitors had authority from the unit holders to commence this proceeding. Mr Kincaid's submission was that this proceeding should continue with the No. 1 body corporate as the sole applicant. He agreed that if I entertain doubts as to the solicitor's authority in this proceeding from the unit owners, it would be inappropriate for me simply to give leave for the unit holders to withdraw. He submitted a more appropriate form of order to make would be one of strike out. This would remove the unit owners from the proceeding but would not appear to adjudicate upon their rights in any way.

1. I turn first to the issue of the solicitor's authority to commence this proceeding on behalf of the body corporate. In light of the evidence of Mr Pethica and the somewhat ambiguous terms of the committee minutes and ultimately the affidavit of Mr Bochrinis I am not satisfied that the solicitors had authority to commence this proceeding on behalf of the body corporate when it was commenced. In light of the affidavit of Mr Bochrinis, a committee member, I am however satisfied that such authority was ultimately forthcoming and that the issue of the proceedings was ratified. The decision of the Court of Appeal in Victoria Teachers Credit Union Limited v KPMG [2000] VSCA 23; (2000) 1 VR 654 demonstrates that a proceeding initially commenced without authority is not a nullity but can subsequently be adopted and ratified by the plaintiff or other moving party. See especially for instance [2000] VSCA 23; (2000) 1 VR 654, 664 [28] per Ormiston JA. His Honour there said that the issue of ratification is dealt with according to the same rules as apply in the law of principal and agent.
2. Next, I am not satisfied that there has been any inappropriate use by the solicitors or Counsel whom they briefed of information and documents discovered in W38/05 for the purposes of the present proceeding. The only paragraph in the pleadings which was relied upon was paragraph 3. This paragraph does not nominate a date for the relevant building contract and so it is not obvious to me how the form of that paragraph can be indicative of a misuse of information. The existence of a building agreement of unknown date was alleged in the original statement of claim in W8/05. Even if I were convinced that there had been some use made of the building contract discovered in W38/05 in the present proceeding such as to ascertain its date, I would regard this as a trivial matter which would not justify any sanction at all, certainly not a sanction as serious as summarily dismissing the present proceeding. K & S Corporation Limited v No. 1 Betting Shop Limited [2005] SASC 228 (Debelle J) [83].
3. This leads me to the final and most difficult of the questions raised by the present application, namely whether this proceeding and W38/05 entail a wrongful duplication of proceedings such that this proceeding is the second should be dismissed, stayed or struck out. I accept that it would be unjust and would amount to an abuse of process to vex Brady with separate claims in separate proceedings based on the same cause of action.
4. I am unable to accept the contention advanced by Mr Kincaid on behalf of the body corporate that the fact that the two proceedings seek relief with respect to different loss and damage necessarily leads to the conclusion that they are not based on the same cause of action. In D'Amico v Wells [1961] VicRp 103; [1961] VR 672 Mr D'Amico by reason of negligent driving crashed into a shop occupied by Mr Wells. The crash damaged both the buildings and stock in the shop. The solicitors acting for Wells issued a complaint in a Court of Petty Sessions but by mistake only sued for the loss and damage to the stock, failing to make any claim for the damage to the building. The defendant admitted liability and the proceeding was struck out. The complainant refused however to execute a deed of release and brought a subsequent proceeding seeking the costs of repair to the building. The Magistrate gave him an award for this latter amount. His Worship's determination was set aside on order to review by Gavan Duffy J. His Honour said:

What I have to determine, therefore, is whether the claim for damage done to the complainant's stock is in substance the same cause of action as the claim for damages done to his shop. I think on the whole that it is. The evidence would be substantially the same, namely, proof of negligence and of the amount of damage suffered in consequence of it.

[1961] VicRp 103; [1961] VR 672, 676

1. The question as to whether the same cause of action is being invoked or not customarily arises where a proceeding has already been prosecuted to judgment or otherwise settled and disposed of and there is an attempt to bring a further claim relative to some related matter if the claim is based on the same cause of action it is barred by the doctrine of res judicata [as D'Amico v Wells]. Spencer, Bower, Turner and Handley Res Judicata (3rd Ed 1996) 232-3. That it is frequently difficult to determine whether the same cause of action is being sued upon is demonstrated by the fact that the simple question whether a claim for damages for personal injury depends on the same cause of action as a claim for damages for property damage arising out of the same traffic collision has set the English, Victorian and New South Wales Courts of Appeal at sixes and sevens for over 100 years. Brunsden v Humphrey (1884) 14 QBD 141; Linsley v Petrie [1998] 1 VR 427; Tiufino v Warland [2000] NSWCA 110; (2000) 50 NSWLR 104.
2. The gravamen of Mr Schlicht's claim that both this proceeding and W38/05 invoke the same cause of action is that the pleadings in both make the same allegation of breach of duty against his client. These allegations of course arise in different contexts in the different proceedings. Section 16(1) of the Water Act 1989 renders a person who caused an unreasonable flow of water from the land of one person onto the land of another, liable for the consequences of the unreasonable flow. Where, as frequently occurs, the allegation is that the relevant respondent has 'caused' the unreasonable flow by omitting to do something, it is only if it can be shown that the respondent was under a duty to do what he omitted to do that he can be said to have 'caused' the relevant unreasonable flow of water and hence the loss and damage which results from it. A mere bystander owing no duty to anyone to intervene would not be regarded as having 'caused' an unreasonable flow of water merely because there were actions which he could have taken to avert it. Turner v Bayside City Council [2000] VCAT 399; (1999) 16 VAR 130, 135-6. In R108/05 the duty which was said to have obliged Brady to construct the development in a manner which would have avoided the flood in December 2003 was said to flow from its implied obligations as builder under a domestic building contract as imposed by the Domestic Building Contracts Act 1995. Similarly in so far as Brady is sued in this proceeding for orders rectifying the common property in the development or damages in the alternative, its liability to rectify is said to flow from the selfsame statutory implied obligations under the Domestic Building Contracts Act. These obligations are therefore being required to do 'double duty' in two separate proceedings, for related but distinct purposes .
3. Neither Counsel referred me to any authorities as to the principles to be applied in determining whether two proceedings invoke the same cause of action or not. In Macquarie Bank Limited v National Mutual Life Association of Australia Limited (1996) 40 NSWLR 543 in the context of an application to amend pleadings the New South Wales Court of Appeal had to consider whether two proceedings against the bank's former solicitors relied on the same cause of action. The Court by majority held that the two proceedings did not invoke the same cause of action. Clarke JA summed the situation up thus:

To reiterate, in the first action, a substantive claim was that Westgarth had failed to register assignments of the life policies and to warn Macquarie that registration was necessary in order that the assignments be effective. In the second proceeding Macquarie contended that Westgarth had failed to exercise the requisite care in relation to the real estate mortgage security and in failing to warn of defects of which they were aware.

(1996) 40 NSWLR 543, 561

In Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd [1992] FCA 272; (1992) 108 ALR 335 Gummow J (as a Judge of the Federal Court of Australia) held that proceedings brought in the Federal Court were brought on the same cause of action as were previously concluded proceedings in the Supreme Court of New South Wales where both sought to recover the same damage and were based upon the same factual matrix.

1. The present issue is difficult to determine. Unlike the situation in the Trawl Industries' case the two proceedings seek to recover separate loss and damage. D'Amico v Wells shows that this is not conclusive against the same cause of action being invoked in both proceedings. The two proceedings that I have to consider arise from the same factual matrix in the manner that I have described. This resembles Trawl Industries; but they rely on separate basies for liability and so differ from the situation considered by Gummow J in Trawl Industries. With some hesitation I conclude that these two proceedings do not invoke the same cause of action. As the authorities invariably, and with respect, somewhat unhelpfully remind us, this is a question of substance and not form (one wonders whether any Court or judge would ever say the opposite). So for instance it might be thought that a claim alleging the same breach of duty against a solicitor based on the contract of retainer would rely on the same cause of action where the same facts are alleged to contend that the solicitor is liable in the tort of negligence. On one view these two hypothetical proceedings are merely a repackaging of the same basic claim. Here, whilst the two claims arise out of the same factual matrix, they seek to recover separate loss and damage and are based upon two quite separate statutory causes of action, one being based upon statutorily implied terms in a contract, the other being based upon a statutory codification of part of the law of nuisance. Since the two proceedings do not in my view invoke the same cause of action it is not an abuse of process to separate these proceedings in the way that they have been.
2. It follows that the application for a summary dismissal under Section 75 of the Victorian Civil and Administrative Tribunal Act 1998 must fail.

1. I have heard no submissions as to costs and so I will reserve that question.

1. Mr Kincaid's united submission was that the claim by the unit owners in this proceeding should be withdrawn. Because in light of the affidavit of Mr Pethica I am not satisfied of the solicitor's authority to bring this proceeding on behalf of the unit owners. I am not satisfied of the solicitors' authority to withdraw the claim. The proper order in these circumstances is one of strike out.