Galovac Pty Limited v Australian Capital Territory [2010] ACTSC 132

3. Similarly, r 425 of the Court Procedure Rules provides that the court may order that a pleading be struck out if the pleading discloses no reasonable cause of action, tends to prejudice, embarrass or delay the fair trial of the proceeding, is frivolous, scandalous, unnecessary or vexatious, or is otherwise an abuse of the process of the court.

4. The ACT contends that Galovac's claims are frivolous or vexatious in that the further amended statement of claim fails to disclose any cause of action. Further, that the claims are statute barred in any event by s 11 of the Limitation Act 1985 (ACT).

5. There was no dispute about the principles that apply:

(1) The party seeking summary judgment faces a "very high threshold" (Financial Integrity Group Pty Limited v Farmer [2009] ACTSC 143 at 12).

(2) The lack of a cause of action must be "clearly demonstrated" (General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129).

(3) The procedure calls for "exceptional caution" (General Steel at 129).

(4) The necessity for argument, even extensive argument, is no bar. However, as soon as it appears that there is a "real question" to be determined on which relief depends, the summary judgment procedure is not available (General Steel at 130 citing Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91).

(5) Mere implausibility of the claim or improbability of success is insufficient; there must clearly be no real question to be tried in the sense that the claim is bound to fail (Seven Network Ltd v News Ltd (No 4) (2005) 214 ALR 686; [2005] FCA 244 at [14] citing Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (Ch D) at 5; [1991] 4 All ER 961 at 965).

(6) The application is to be assessed on the assumption that every fact pleaded by the plaintiff is true (West v State of New South Wales [2007] ACTSC 43 at [9]).

(7) The application must be determined on the substance, not the mere form or expression, of the claim (Financial Integrity Group at [15]).

6. Galovac's claim is for damages for economic loss as a result of the ACT's alleged negligence. Galovac pleads:

(1) An auction by the ACT of three blocks of land (blocks 77, 78 and 79) on 26 September 2002.

(2) The imposition by the ACT of conditions of sale in respect of block 79 requiring sewerage and stormwater services to be constructed over blocks 78 and 77 to the public road within 24 months and equivalent conditions of sale in respect of blocks 78 and 77.

(3) Sale by the ACT of block 79 to Galovac on 26 September 2002, and the sale also of blocks 77 and 78 to other purchasers on the same date.

(4) The issue by the ACT of a Crown lease for block 79 to Galovac on 26 November 2002, and also for block 77 on 21 November 2002 and block 78 on 27 June 2003.

(5) The imposition by the ACT of covenants on the Crown leases requiring the construction of sewerage and stormwater services to the public road to the same general effect as the conditions of sale.

(6) The existence of a duty of care owed by the ACT to Galovac to prevent Galovac from suffering economic loss due to negligent acts or omissions surrounding the issue of the Crown leases to purchasers of blocks 77, 78 and 79.

(7) Breach of this duty of care in issuing Crown leases for blocks 77 and 78 without imposing obligations on the owners of these blocks to enable Galovac, as the owner of block 79, to connect to the required sewerage and stormwater services and/or without imposing an easement for sewerage and stormwater services over these blocks and failing to issue Crown leases with such obligations and/or easements.

(8) Inability of Galovac to comply with the covenants of the Crown lease due to the failure by the owners of blocks 77 and 78 to undertake the works required on their land and the lack of any right in Galovac or others to undertake works on blocks 77 and 78.

(9) As a result, inability of Galovac to develop block 79 until the Land Development Agency on 30 May 2008 offered an alternative solution to the provision of sewerage and stormwater services to block 79.

(10) By reason of the breach of the duty of care, economic loss in Galovac not being able to carry out the development until the alternative solution of 30 May 2008 was accepted on 30 June 2008 and by the conditions attached to the acceptance of that offer.

7. According to the ACT, Galovac's pleading fails to disclose a cause of action in that: - (i) given the contract for sale of 26 September 2002, the ACT could not have owed Galovac any concurrent tortious duty of care, (ii) alternatively, any tortious duty of care cannot extend beyond the terms of the contract of sale, (iii) insofar as Galovac seeks to avoid the effect of the contract by identifying a duty in respect of the issue of the Crown leases, there can be no duty of care to do that which the contracts precluded or disabled the ACT from doing, and (iv) any duty is otherwise negated by the principles established in San Sebastian Proprietary Limited v Minister Administering the Environmental Planning & Assessment Act 1979 [1986] HCA 68; (1986) 162 CLR 340.

8. These arguments may well defeat Galovac at trial. They do not, however, establish that Galovac's claim is bound to fail.

9. First, the ACT is not a mere vendor of land. In granting leases it has land development functions (see s 238 of the Planning and Development Act 2007 (ACT) (previously s 161 of the Land (Planning and Environment) Act 1991 (ACT) (now repealed)) and s 37 of and Sch 4 to the Australian Capital Territory (Self-Government) Act 1988 (Cth)).

10. Second, the decisions said to support the ACT's position excluding concurrent tortious liability (Frederick W Nielsen (Canberra) Pty Ltd v PDC Constructions (ACT) Pty Ltd (1987) 71 ACTR 1 and RW Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1995) 11 BCL 74) are based on facts not necessarily analogous to those of the present case. In particular, none of those cases appear to involve a relationship (or potential relationship) similar to that between the ACT and Galovac. Relevant incidents of that relationship, which might affect the application of those decisions but the relevance of which can be determined only at trial, include the pleaded facts concerning the practical and temporal relationship between the sale and issue of Crown leases for blocks 77 and 78, along with block 79.

11. Third, at least one appellate decision has cast some doubt on the exclusion of concurrent liability in contract and tort other than in the context of a professional relationship (NRMA Insurance Ltd v A W Edwards Pty Ltd (1995) 11 BCL 200). In this case, Kirby P (with whom Mahoney and Powell JJA agreed) said "the law on this subject is not clear". His Honour also said that:

As many cases illustrate, the detailed facts of the precise relationship between the parties may well be important in discerning the extent of any duty of care...

12. Kirby P's observation has been applied to defeat summary dismissal of arguably novel claims in negligence in Preston v Star City Pty Limited (No 3) [2005] NSWSC 1223, Heptonstall v Gaskin (No 2) (2005) 138 IR 103; [2005] NSWSC 30 and Air Services Australia v Zarb [1998] NSWCA 7.

13. Fourth, whether a duty in tort can impose obligations on the ACT (other than those specified in the contract for sale) involves, or at the least may involve, considerations of the precise relationship between the ACT and Galovac in the precise context of the ACT's statutory functions.

14. Fifth, the question whether the contract for sale precluded or disabled the ACT from fulfilling the requirements of the alleged duty of care in the grant of the Crown leases is by no means a foregone conclusion. That cannot be assumed as a fact in the ACT's favour on this application. Resolution of this question may involve disputed questions of fact and law, which can be resolved only at the trial.

15. Sixth, there is at least an argument that San Sebastian does not necessarily defeat Galovac's claim. It is true that Galovac does not plead any representation or assurance (or, indeed, reliance on the ACT in any way). The alleged duty, instead, is said to arise in respect of the grant of the three Crown leases in circumstances where it was reasonably foreseeable that Galovac would suffer economic loss of the kind in fact suffered by reason of the grant of the leases with or without certain obligations as identified. These facts are different from those in San Sebastian. The nature of the statutory functions which the ACT was exercising are also different. So too is the extent, nature and physical proximity of the land involved. There is at least an argument available, in these circumstances, that San Sebastian is distinguishable. The strength or weakness of that argument is not a matter for consideration on this application for summary dismissal.

16. Similar considerations undermine the ACT's argument on the limitation point. The pleaded economic loss is not loss in the value of the land by reason of the grant of the Crown lease for block 79 or the other blocks. The pleaded economic loss is said to have resulted from Galovac's inability to undertake the development and the acceptance on 30 June 2008 of the offer for an alternative method of providing sewerage and stormwater services. The inability to undertake the development, according to Galovac, first crystallised as actual irretrievable loss on the expiry of the 24 month period for the owners of blocks 77 and 78 to undertake the works required on their land.

17. Whether or not this characterisation of the loss and the time at which it was first incurred to any extent is correct depends at least in part on the existence and content of any duty of care and breach of it as alleged (Wardley Australia Limited v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 527). The ACT's position - that the facts disclose only a contract for sale where loss was incurred on entry into the contract, being the difference between the value of the land without rights over blocks 77 and 78 - may prove to have the greater persuasive force. Galovac's characterisation of the duty, its breach and loss may prove untenable. But Galovac's characterisation is not manifestly hopeless. It is not doomed to fail. Accordingly, the question of the limitation period also must be determined with knowledge of all the relevant facts.

18. For these reasons, the ACT has not discharged the burden necessary to succeed in its summary judgment application or in its application to strike out the further amended statement of claim. Orders are made accordingly:

(1) The defendant's application filed 17 February 2010 be dismissed.

(2) The defendant pay the plaintiff's costs of the application, as agreed or taxed.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of her Honour, Justice Jagot.

Counsel for the defendant: Mr DJ Higgs SC and Mr RP Clynes

Solicitor for the defendant: ACT Government Solicitor