Dixonbuild Pty Ltd v Everhard Industries Pty Ltd

Background

1. By a Statement of Claim filed on 21 December 2021 Dixonbuild sued Everhard for $200,175.35 as damages for breach of contract, or in the alternative, for breach of the Home Building Act 1989 (NSW). Dixonbuild was a building contractor and Everhard was a company which carried out drainage work. Dixonbuild entered into contracts with the owners of a residential property at Swan Bay in New South Wales. Dixonbuild entered into a subcontract with Everhard, by which Everhard agreed to supply and install an on-site sewage management system (OSSMS) at the property.
2. Everhard entered into a sub-subcontract with "TWWS" for TWWS to perform the OSSMS work. Put shortly, the work done by TWWS was defective and non-compliant.
3. The Statement of Claim pleaded that Everhard had breached the terms of its contract with Dixonbuild. Paragraph 44 of the Statement of Claim pleaded that Everhard had accepted liability for the defective works and agreed to undertake rectification works to bring the OSSMS works up to standard.
4. On 7 June 2019 the owners commenced a Home Building Application against Dixonbuild in the NSW Civil and Administrative Tribunal (NCAT). NCAT ordered Dixonbuild to pay the owners the sum of $99,350. Dixonbuild appealed against that finding but the NCAT Appeal Panel dismissed the appeal and ordered Dixonbuild to pay the owner's costs of the appeal.
5. In par 58 of the Statement of Claim Dixonbuild sought damages under three heads: 1. $99,350 being the amount of the NCAT order in favour of the owners. 2. $29,750.76 being the costs that the owners have sought from Dixonbuild. 3. $71,074.59 being the total legal costs incurred by Dixonbuild in respect of the NCAT hearing and the NCAT appeal.
6. Everhard filed a Defence on 28 March 2022. It admitted a large number of matters and disputed certain fairly minor matters.
7. The crux of the Defence, and the focus of the strike out application brought by Dixonbuild, is to be found in par 63 of the Defence. This raises two issues.
8. The first allegation pleaded in par 63, is that the claim brought by Dixonbuild is an "apportionable claim" within the meaning of Part 4 of the Civil Liability Act 2002 (NSW) (CLA). It was alleged that TWWS was a "concurrent wrongdoer" within the meaning of Part 4 of the CLA for reasons set out in par 63(b)(i)-(v) of the Defence.
9. The second matter pleaded in par 63 of the Defence is an allegation in par 63(b)(vi) that Dixonbuild had failed to mitigate its loss and damage. The particulars provided made it plain that Everhard was alleging that Dixonbuild did not run the NCAT proceedings as it should have, thus resulting in the order made against it.
10. Dixonbuild filed a Reply on 20 April 2022. In relation to the "apportionable claim" defence, Dixonbuild pleaded that TWWS was not a concurrent wrongdoer as it did not owe Dixonbuild a duty of care. Reference was made to the decision of the High Court in Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 [2014] HCA 36; (2014) 254 CLR 185. Dixonbuild asserted that the parties could have protected their interest by contract and that no party was "vulnerable", which it submitted was a condition necessary for a duty of care to arise in the first place.
11. In the Reply the plaintiff also disputed the failure to mitigate defence raised by Everhard for reasons set out in par 4 of the Reply.

Evidence for the Plaintiff

1. Counsel for Dixonbuild tendered selected parts of the affidavit of Mr Bartholomaeus dated 4 May 2022 (PX 1). Mr Bartholomaeus is the Managing Director of Dixonbuild. This 824-page affidavit was the evidence-in-chief of the plaintiff in the proceedings. Counsel relied upon pars 70-89 which dealt with notice being received of the defective works and attempts being made to rectify such work. Counsel conceded that this evidence had not been placed before NCAT, where Dixonbuild was represented by different lawyers.
2. Counsel also relied upon pp 147 and 148 of the annexures, which constituted a "Period Trade Contract" between Dixonbuild and Everhard and also upon p 173, which was an Addendum to the Period Trade Contract.
3. In relation to the proceedings before NCAT, counsel for the plaintiff relied upon p 672 of the annexures where, as part of reasons for the award in favour of the owners, the NCAT Member said the following: "I note that the Respondent's solicitor made strenuous representations that I should adopt the preferred option of a Work order under s 48MA but I have decided against that course because the system installed is not correctly sited it has not been commissioned it has failed to operate and it has caused and continues to cause a health hazard to the Applicants and if left to continue longer will probably cause a health hazard to the community in general by causing raw sewage to enter the drainage system by flowing out of the site and into other properties. I have accepted the cost quoted by Alstonville as the reasonable damage for the Applicant, there being no alternative costing and order the Respondent to pay the sum of $99,350 on or before 1 October 2019."
4. The plaintiff also relied upon a second affidavit of Mr Bartholomaeus dated 13 June 2022 (PX 2). He referred to his first affidavit and provided a summary of the dealings between the parties to these proceedings and TWWS. In par 9 of the affidavit Mr Bartholomaeus said that Everhard had accepted liability for the defective OSSMS works and had agreed to undertake rectification works.
5. Mr Bartholomaeus disputed that Everhard could avoid liability on the basis that this was not an apportionable claim. That of course is a matter of law which would fall to be decided after background facts had been established by evidence.
6. In par 12 of the affidavit Mr Bartholomaeus said: "In circumstances where the Defendant has accepted liability for the defective OSSMS works undertaken by TWWS (the subcontractor it retained), in my belief this is not an acceptable defence to the Plaintiff's claim. On this basis, I verily believe the Defendant has no defence to the Plaintiff's claim."

Evidence for the Defendant

1. Everhard relied upon the affidavit of its solicitor Ms Glover dated 3 August 2022 (DX 1). Ms Glover set out a summary of the factual background to the claim and provided a response to the Notice of Motion in pars 26-29 of her affidavit. She relied upon a letter dated 4 July 2022 sent by her to the plaintiff's solicitors, setting out submissions as to why the defendant disputed the Notice of Motion and the basis upon which it would defend the Notice of Motion. That letter is reproduced at pp 113-116 of her affidavit. Inter alia, Ms Glover said in the letter: 1. The former solicitors for Dixonbuild, who represented it before NCAT, did not file any pleadings or serve any evidence in the matter. 2. This was so notwithstanding the fact that the plaintiff's former solicitors held a quote from "JAC" at the relevant time to do rectification work, for a price substantially below the figure put forward by Dixonbuild. 3. The NCAT finding was based on the evidence called by the owners and the order was made against Dixonbuild because of a failure to serve pleadings or evidence. If Dixonbuild had properly defended the application, an order for rectification works would have been the worst result. 4. Dixonbuild made no attempt to join Everhard to the NCAT proceedings, thus depriving it of the opportunity to be heard and defend the matter. 5. The District Court is not bound by any determination made by NCAT. Dixonbuild would need to properly prove each element of its cause of action. 6. Dixonbuild was subject to adverse costs orders largely due to the way in which the NCAT proceedings were conducted. Everhard did not cause or contribute to this loss. 7. Even if Everhard had some liability to Dixonbuild, at best it would be entitled to an award consistent with the JAC quote of $12,771. 8. It was premature of the plaintiff to file a Notice of Motion, particularly in relation to the strike out application, when there was nothing wrong with the form of the Defence filed.
2. The letter from Ms Glover gave notice that if Dixonbuild did not withdraw the Notice of Motion, costs on an indemnity basis would be sought.

Summary Judgment Principles

1. Rule 13.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides as follows: "13.1 Summary judgment (1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief-- (a) there is evidence of the facts on which the claim or part of the claim is based, and (b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed, the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires. (2) Without limiting subrule (1), the court may give judgment for the plaintiff for damages to be assessed. (3) In this rule, a reference to 'damages' includes a reference to the value of goods."
2. A defendant who opposes an application for summary judgment must demonstrate the existence of a triable issue: Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87.
3. The power to enter summary judgment should be exercised with great care, and an order under the rule should only be made where it is clear that there is no real question to be tried: Fancourt. If there is a real question to be tried, either of fact or law, and the rights of the parties depend on it, it is not open for the court to intervene summarily: Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62.
4. The test applied in considering an application for summary judgment is similar to that applying to an application for summary dismissal: see General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125. Exceptional caution is necessary where it is apparent that the ultimate outcome turns upon the resolution of some disputed issue or issues of fact: Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598.

Consideration of Application for Summary Judgment

1. It is correct to say that Everhard has admitted that it breached its contract with Dixonbuild in relation to the OSSMS work. However, that does not necessarily mean that Dixonbuild is entitled to summary judgment. There are a number of disputed matters of fact and law which would have to be established before Dixonbuild could succeed in its claim. Many of those are set out in the letter from Ms Glover referred to above. Others were identified by counsel for Everhard in written submissions (MFI 2, pars 14-15). I accept the submission that the triable issues of fact include: 1. What remediation steps were necessary. 2. The cost of those steps. 3. The circumstances in which Everhard was prevented from undertaking these steps and by whom.
2. I accept the submission that the triable issues of law include: 1. Whether the contract was breached in circumstances where remedial works were planned and were to be undertaken. 2. The question of loss where rectification works could have been undertaken but were not. 3. The status of the contract after Everhard was locked out of the site, when it stood ready, willing and able to remedy the defects. 4. Dixonbuild's responsibility at law for: preventing Everhard from completing its remediation steps; failing to take any steps to defend itself in NCAT; failing to mitigate its loss; and incurring unnecessary costs both for the owners and for itself. 5. Whether TWWS is a concurrent wrongdoer which would be proportionally liable for any loss.
3. I acknowledge the submission made by counsel for Dixonbuild that TWWS may not have been a current wrongdoer, if it owed no duty to Dixonbuild. However, the resolution of whether that is so would involve consideration of the contractual arrangements between Dixonbuild and Everhard, the contractual arrangements between Everhard and TWWS, and the events surrounding the performance of both contracts. Counsel for Dixonbuild submitted that the key issue as to whether there was a duty of care was "vulnerability". It is a mixed question of fact and law as to whether any party could have protected its own interests, resulting in TWWS not owing a duty of care to Dixonbuild. That is not something that can be decided on the material presently before the court. It is at least arguable and triable.
4. As to whether Dixonbuild mitigated its loss, the passage from the decision of the Member of NCAT relied upon by counsel for Dixonbuild, reproduced above, suggests that the conduct of the NCAT proceedings by Dixonbuild (through previous lawyers) was less than ideal and perhaps even dilatory.
5. I accept the submission made by counsel for Everhard that just because NCAT awarded a particular figure to the owners against Dixonbuild, that does not necessarily mean that the figure awarded by NCAT is the proper measure of damages, even if Everhard is liable in these proceedings. Everhard is not bound by the findings made in NCAT. Further, it has an argument arising from discussions concerning rectification work, and a quote for a substantially lower amount than that awarded by NCAT. These matters may lead to a result, when different considerations are taken into account, which is different to the result in NCAT.
6. The concession very properly made by counsel for Dixonbuild that certain evidence concerning rectification work was not put before NCAT, suggests that there could well be a different outcome on damages, even if Everhard were found to be liable.
7. As to the costs awarded by NCAT in favour of the owners and against Dixonbuild, these costs have been "sought" by the owners, but there has been no assessment of costs and no finalisation of a fair and reasonable amount.
8. The same issue arises in relation to the costs claimed by Dixonbuild for its own lawyers in running the case before NCAT and then running the case before the Appeal Panel.
9. Finally, there is a certain tension between Dixonbuild spending over $70,000 in costs to dispute that it was liable to the owners for $90,000, when the OSSMS was utterly defective, but asserting in these proceedings that Everhard could have no defence whatsoever to the claim for breach of contract in relation to that work.
10. For those reasons I decline to give summary judgment in favour of the plaintiff.

Strike Out Principles

1. Rule 14.28 of the UCPR is as follows: "14.28 Circumstances in which court may strike out pleadings (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading-- (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1)."
2. Counsel for the plaintiff relied upon r 14.28(1)(a). Similar principles apply to those relevant to a summary judgment application. A successful application relying upon "no reasonable defence" must pass the General Steel test that the defence is so obviously untenable that it cannot possibly succeed.

Consideration of Application to Strike Out Pleading

1. The Defence filed in these proceedings is a cut above most Defences filed in this court, in its specific response to the allegations in the Statement of Claim, and in the detail it gives. In my view it fairly and squarely raises, in par 63, the issues about an apportionable claim and failure to mitigate.
2. In my view the Defence advises the plaintiff of the case it has to meet and lays out the legal and factual issues to be decided by a trial judge.
3. I refuse the application to strike out the pleading or any part of it.

Conclusion and Orders

1. Dixonbuild has failed on this Motion to obtain any of the orders sought. In those circumstances costs must follow the event and there will be an order for the plaintiff to pay the defendant's costs.
2. The letter from Ms Glover, referred to above, raised the prospect of an application for indemnity costs, on the basis that the letter set out in detail the reasons why the Notice of Motion would be unsuccessful and invited the plaintiff to discontinue the Notice of Motion. At the hearing of the Notice of Motion it was indicated by counsel for Everhard that if it was successful in defending the Notice of Motion, it would wish to make an oral application for indemnity costs. That can occur by arrangement with my Associate.
3. The orders are: 1. Dismiss the plaintiff's Notice of Motion filed on 13 June 2022. 2. Order the plaintiff to pay the defendant's costs of the Notice of Motion. 3. Grant leave to the parties to approach my Associate to obtain a date for argument concerning the defendant's application for indemnity costs of the Notice of Motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 October 2022