COSHOTT v WOOLLAHRA MUNICIPAL COUNCIL

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40419/01 DC 3889/99

MEAGHER JA HANDLEY JA POWELL JA

ROBERT GILBERT COSHOTT & ANOR v WOOLLAHRA MUNICIPAL COUNCIL RES JUDICATA The plaintiffs brought proceedings in the Federal Court against adjoining property owners, their architects and builders, and the Council. The cause of action against the Council was negligence based on a duty of care said to be owed to the plaintiffs when the Council dealt with the neighbours' development and building applications. The Federal Court found that no damage had occurred and dismissed the proceedings.

The plaintiffs then commenced proceedings in the District Court against the adjoining owners, their builders and the Council. The cause of action pleaded against the Council was negligence in failing to enforce the legislation governing construction work on the adjoining property which caused or materially contributed to vibration damage to the plaintiffs' house. The action was summarily dismissed on the ground of an Anshun estoppel or a cause of action estoppel. The plaintiffs appealed.

HELD : The claims against the Council in the District Court and in the Federal Court were not part of the same matter because there was no common substratum of facts. The causes of action arose at different times and related to different damage. The claim in the Federal Court was for pure economic loss. The claim in the District Court was for physical damage to property. The Federal Court had no jurisdiction over the matter that was the subject of the action in the District Court. Accordingly there was no cause of action estoppel and the proceedings were not barred by an Anshun estoppel. ORDERS (1) Appeal allowed with costs;

(2) Set aside the orders of the District Court made on 18 May and 31 July 2001;

(3) In lieu thereof order that para 6 and the first two lines of para 7 of the statement of claim be struck out and that the notice of motion of 11 March 2001 be otherwise dismissed;

(4) The Council, the fourth defendant in the action, is to pay the plaintiffs' costs of the notice of motion of 11 March 2001;

(5) The respondent is to have a certificate under the Suitors Fund Act in respect of the costs in this Court. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40419/01 DC 3889/99

MEAGHER JA HANDLEY JA POWELL JA

ROBERT GILBERT COSHOTT & ANOR v WOOLLAHRA MUNICIPAL COUNCIL

Judgment 1 MEAGHER JA: I agree with Handley JA. 2 HANDLEY JA: This appeal is the latest round in the litigation generated by the construction of a four storey dwelling on 7 Gilliver Avenue, Vaucluse. On 14 November 1994 the respondent Council granted development consent for the erection of the building and construction began on 20 August 1995. On 5 July 1996 the appellants, who own 5 Gilliver Avenue, commenced proceedings in the Land and Environment Court against the owners of No 7 and the Council, attacking the validity of the development consent and seeking an order for the demolition of the building. 3 On 19 November Bannon J dismissed the proceedings. He held that the development consent was invalid, but because of the applicant's delay he refused to order the building to be demolished. 4 On 24 September 1997 the appellant commenced proceedings in the Federal Court against the owners of 7 Gilliver Avenue, their architects, the Council, and the builders. An amended statement of claim, filed on 21 November, pleaded many causes of action, but the only cause of action pleaded against the Council was in negligence, based on an alleged duty of care owed to the plaintiffs when the Council dealt with the development and building applications by the owners of 7 Gilliver Avenue. The applicants pleaded causes of action against the architects based on the Trade Practices Act and the Fair Trading Act. 5 On 3 March 1998 Wilcox J struck out the amended statement of claim but gave leave to the applicants to re-plead the causes of action against the architects and the Council. He considered that the claims against the architects made it appropriate to allow the applicants to join with those claims any negligence claim against the Council. However in the context his Honour should be understood as referring to claims based on a duty of care alleged to be owed by the Council in relation to its consideration of the development and building applications. 6 Pursuant to that leave, the then applicants filed a further amended statement of claim pleading a cause of action against the Council in relation to its consideration of the development and building application. The damage alleged against the Council, as particularised, was that the building constructed pursuant to the development consent overshadowed the applicants' property, interfered with its use and enjoyment, and reduced its value. 7 The trial proceeded before Wilcox J, who gave judgment on 23 March. He found that the applicants had sustained no damage from the breaches of duty they had alleged against the architects and the Council, and he dismissed the proceedings. 8 On 27 May the first appellant commenced further proceedings in the District Court against the builders, the owners of 7 Gilliver Avenue and the Council. The proceedings against the defendants, other than the Council, have been settled on undisclosed terms, but the action has proceeded against the Council. At some stage the second appellant was added as a plaintiff in the proceedings. 9 Paragraph 6 of the statement of claim pleaded that the development on 7 Gilliver Avenue was contrary to s 76(2)(a) of the Environmental Planning and Assessment Act (the Act), and illegal because the development consent was not valid. It also pleaded that the development was illegal under s 76(2)(b) because it was not carried out in accordance with the conditions of the development consent. Paragraph 7 alleged that the development constituted a nuisance which caused special damage to the plaintiff. The remaining particular of damage against the Council, which was particularised in para (a) under para 7, was as follows: "Damage to the plaintiffs' house caused by vibrations caused during/by the said rock excavation". 10 Paragraph 10 alleged that the likelihood of damage being caused to the plaintiff was well known to the defendants before and during the development. Paragraph 11, which pleaded the cause of action alleged against the Council, stated that it was the authority "charged with the [responsibility] of ensuring compliance with the statutory provisions relating to development" in the municipality, and it "failed to carry out its duty [to] ensure compliance with those statutory provisions". The particulars of damage to this paragraph incorporated by reference the particulars to para 7. 11 The Council applied, by notice of motion dated 11 April 2001, for the action to be summarily dismissed pursuant to DCR Pt 11A r 3, or for the statement of claim to be struck out, pursuant to DCR Pt 9 r 17. The application was based on res judicata, issue estoppel, or an Anshun estoppel derived from the proceedings in the Federal Court. On 18 May Karpin DCJ gave judgment and ordered that the action be stayed. Later on 31 July she ordered that the action be dismissed pursuant to DCR Pt 11A r 3. She said: "I am satisfied that all matters which are now sought to be litigated against the Council in this Court either were, or should have been before Wilcox J. If it be the case that the plaintiffs failed adequately to prosecute their case in negligence in those proceedings, they cannot now be permitted to split their action and relitigate the same factual material on the same issues, merely because one aspect of alleged negligence may have been overlooked. The parties are bound by the findings made by Wilcox J, and no issue remains to be litigated". 12 Mr Cashion SC, who appeared for the appellants, made three principal submissions:

(1) The Judge erred in finding that the judgment of the Federal Court gave rise to a cause of action estoppel because the cause of action pleaded in the District Court was different to that pleaded and litigated in the Federal Court;

(2) There was no Anshun estoppel because the Federal Court had no jurisdiction to deal with the claim in negligence against the Council in respect of damage caused to the plaintiffs' house as a result of the excavation work on 7 Gilliver Avenue;

(3) For the same reason it was not unreasonable for the plaintiffs not to plead the present cause of action in the Federal Court. 13 The negligence claim against the Council in the District Court was limited to excavation damage once the particulars in para 7(b) of the statement of claim was struck out by Patten DCJ. This was a different cause of action from that litigated in the Federal Court. The former arose as a result of the grant of the development consent. The latter only arose later during the course of construction. A development consent remains in force for 5 years (s 99) and will remain in force indefinitely if building, engineering or construction work relating to the building is physically commenced on the land within that period. A substantial period may therefore elapse between the accrual of a cause of action based on the grant of a consent, and the accrual of a cause of action based on the Council's failure to enforce compliance with it and with other legislation relating to development. In the present case, 10 months elapsed before construction commenced. 14 The cause of action litigated in the Federal Court was a claim for pure economic loss, whereas the claim propounded in the District Court appears to be one for physical damage to the plaintiffs' house. 15 Mr Cashion submitted that the claim pleaded in the District Court was not the same matter, or part of the same matter, that had been litigated in the Federal Court. The claim in the District Court arises under State law with no Federal element. The claim against the Council in the Federal Court also arose under State law but was linked with the Federal claim for misleading and deceptive conduct against the architects in their dealings with the Council in connection with the development application. As such it was within, or arguably within, the jurisdiction of the Federal Court over the whole matter. 16 There was no dispute as to the legal principles which must be applied in determining whether the Federal Court has jurisdiction over questions of State law. In Re Wakim ex parte McNally (1999) 198 CLR 511, McHugh said, at 563-4: "Whether an issue, whose resolution depends upon State law or the common law, is within the accrued jurisdiction of the Federal Court depends upon whether it is part of a 'matter' arising under section 75 or 76 of the Constitution. To be part of that 'matter' it must be part of a single controversy. And as the Court said in Fencott v Muller (1983) 152 CLR 570, 608 that 'depends on what the parties have done, the relationships between or among them and the laws which attach rights or liability to their conduct and relationships' … there will ordinarily be a single controversy and, therefore, a matter for the purpose of Chapter III if all the claims arise out of a common substratum of facts. Moreover in Fencott v Muller (above) at 607 Mason, Murphy, Brennan and Deane JJ said that there may be a single controversy even though the facts from which the various claims arise 'do not wholly coincide'." 17 See also at 584-5, 586 per Gummow and Hayne JJ. 18 In my judgment the claim against the Council in the District Court was not part of the same matter that was litigated before Wilcox J in the Federal Court. There was no common substratum of fact. The claims in the Federal Court concerned the Council's acts and omissions in the course of dealing with the development application. That negligence (if any) occurred on or before 14 November 1994. The damage, if any had been proved, would have been pure economic loss, and it would have occurred even if the later excavation work had caused no damage to the plaintiffs' house. The acts or omission of the architects relied on as misleading or deceptive conduct had nothing to do with the later excavation work. The claim in the District Court was not within the jurisdiction of the Federal Court and could not have been litigated in that Court as part of the earlier proceedings. The Council's claim that the present proceedings are barred by an Anshun estoppel (Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589) must therefore fail. 19 This analysis leads inevitably to the conclusion that there is also no cause of action estoppel in this case. The question is whether the plaintiffs are seeking to vex the Council upon a cause of action they lost in the Federal Court. Cause of action estoppel operates where the causes of action are the same, and this must be determined as a matter of substance and not form. See Trawl Industries of Australia Pty Ltd v Effem Foods Pty Limited (1992) 36 FCR 406, 418. In that case Gummow J held (422) that a cause of action for negligent misrepresentation as pleaded in the Federal Court was the same cause of action in substance as a cause of action for misleading and deceptive conduct which had been litigated to judgment in the Supreme Court. The loss sought to be recovered was the same, the misrepresentations relied upon substantially overlapped, all preceded the entry into the same heads of agreement, and the same evidence would be led in the new action. 20 This analysis applied to the present case demonstrates that the causes of action against the Council are not in substance the same. The appeal must therefore be allowed. 21 The notice of motion of 11 March 2001 sought in the alternative that the statement of claim be struck out. The Council did not file a notice of cross-appeal, but this Court has a duty to make any order which should have been made (Supreme Court Act s 75A(10)) and it may grant relief in a proper case although neither party has sought it (SCR Pt 51 r 22). 22 Since the statement of claim is to remain, it should be excised of irrelevant and objectionable material without further cost or delay. Paragraph 6 alleges that the development was illegal because there was no valid development consent, or because it was not carried out in accordance with the conditions of the consent. The Council was not the developer and is not sued for the consequences of the illegal acts of the developer. The first two lines of para 7 repeat the allegation of illegality and allege that the development constituted a nuisance. The Council has not been sued in nuisance, and could not be sued in that cause of action, because the work was not done by it or on its behalf. Mr Cashion did not seek to support these paragraphs of the statement of claim, and they should be struck out. 23 The following orders should be made:

(2) Set aside the orders of the District Court made on 18 May and 31 July 2001;

(3) In lieu thereof order that para 6 and the first two lines of para 7 of the statement of claim be struck out and that the notice of motion of 11 March 2001 be otherwise dismissed;

(4) The Council, the fourth defendant in the action, is to pay the plaintiffs' costs of the notice of motion of 11 March 2001;

(5) The respondent is to have a certificate under the Suitors Fund Act in respect of the costs in this Court. 24 POWELL JA: I agree with Handley JA.

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