The Builder's draft Points of Claim against the subcontractors

1. The builder has filed draft Points of Claim as against the proposed parties pleading a breach of the Warranty (set out below), a breach of a common law duty of care which the builder asserts the subcontractors owed to the OC as the successor in title to the developer, and a breach of a common law duty of care which the builder asserts the subcontractors owed to the builder. Further, that the OC's claims are apportionable claims, and that in the event the tribunal finds that the builder is liable to the OC that it should apportion the OC's loss and damage in accordance with Part IVAA.
2. Although not raised by any of the parties at the directions hearing, any pleading by a respondent (in this case the respondent by counterclaim) seeking apportionment under Part IVAA should properly be part of its defence to an applicant's (in this case the applicant by counterclaim) claim. Surprisingly, the builder has not pleaded any defence relying on the apportionment provisions of Part IVAA in its Points of Defence to Counterclaim dated 6 March 2012. However, as I propose to allow joinder of the waterproofer and the tiler for the purposes of apportionment I will give the builder leave to amend its Points of Defence to Counterclaim.
3. Further, I note that s24AI of the Wrongs Act contemplates the apportionment of responsibility as between concurrent wrongdoers, not liability. It will be a matter for the OC as to whether it wishes to amend its Points of Claim to, in effect, piggyback on the Builder's Part IVAA defence to ensure that in the event the tribunal apportions responsibility an award of damages consistent with the apportionment of responsibility will be made.

1. Under a subcontract dated 19 June 2002 the builder engaged the tiler to undertake all tiling, stonework and benchtops. It is alleged in paragraph 9(b) of the builder's draft Points of Claim against the tiler that the subcontract works comprised the design, supply, installation, commission, putting into operation and maintaining for (12) months the Subcontract Work.
2. Under a subcontract dated 21 June 2002 the builder engaged the waterproofer for the Tanking works as a whole.
3. The subcontracts entered into by each of the tiler and the waterproofer are in substantially the same terms. Under clause 3A(b) of the subcontracts, each of the subcontractors agreed to indemnify and hold harmless [the builder]from and against any breaches of the Subcontract. Each of the subcontractors was to provide a warranty to the builder and to the developer in the form set out in Schedule F to the respective subcontracts.
4. On 14 July 2003 each of the subcontractors executed a warranty in favour of the builder and the developer ('the Warranty') which relevantly contained the following express terms:

1. The Warrantor has agreed to give the warranty and indemnity herein contained to the Contractor [the Builder] and to Australand [the Developer] in consideration of the Contractor agreeing to employ the Warrantor and Australand accepting this Warranty Agreement.

1. The Warrantor warrants to the Contractor and also (as a separate warranty) to Australand that all work performed and all materials or parts supplied by the Warrantor in the course of the Subcontract Works shall be in accordance with the quality and/or a standard not lower than the quality and/or standard stipulated by the Agreement [the contract between the Builder and the Developer] and to the extent that the quality and/or standard is not so stipulated, shall be of good workmanship and materials and of merchantable quality and be fit for the purpose or purposes for which the same are required.

This warranty shall be in addition to and shall not derogate from any manufacturer's warranty or warranty implied by law, attaching to any materials or goods forming part of the Project.

1. The Warrantor covenants with the Contractor and also (as a separate covenant) with Australand to replace and/or make good to the reasonable satisfaction of Australand's Administration Manager by at the expense of the Warrantor, so much of the Subcontract Works as within the period specified in the Agreement, or if no period is specified. The period of 7 years from the Practical Completion of the Project...

1. ...and the Warrantor hereby agrees to indemnify and keep indemnified the Contractor and Australand against any director, indirect or consequential loss or damage of any nature whatsoever sustained by them, or either of them, directly or indirectly arising out of any breach of the warranties, covenants or other conditions hereby given by the Warrantor howsoever arising.

The application for joinder for the purposes of Part IVAA

1. Section 60 of the Victorian Civil and Administrative Tribunal Act 1998 provides:

(1) The Tribunal may order that a person be joined as a party to a proceeding if the Tribunal considers that-

(a) the person ought to be bound by, or have the benefit of, an order of the Tribunal in the proceeding; or

(b) the person's interests are affected by the proceeding; or

(c) for any other reason it is desirable that the person be joined as a party.

(2) The Tribunal may make an order under sub-section (1) on its own initiative or on the application of any person.

1. Section 24AF(1) of the Wrongs Act provides:

(a) a claim for economic loss or damage to property in an action for damages (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care;

1. Section 24AH provides:

(1) A concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions caused, independently of each other or jointly, the loss or damage that is the subject of the claim.

(2) For the purposes of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up, has ceased to exist or has died.

1. Section 24AI provides:

(1) In any proceeding involving an apportionable claim -

(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the loss or damage claimed that the court considers just having regard to the extent of the defendant's responsibility for the loss or damage; and

(b) judgment must not be given against the defendant for more than that amount in relation to that claim.

1. In considering an application for joinder I am not required to determine the issues, rather I am simply required to have regard to the various matters set out in s60 of the VCAT Act. The broad scope of the tribunal's powers under s60 were considered in Zervos v Perpetual Nominees Limited[1] where Cummins J said at [11]:

Whether it [the allegation] is sustained in the end is a matter for trial. The application for joinder is not an application for summary judgment and whilst I agree with Mr Herskope that the test is higher than that apposite to a mere pleading matter because it involves joinder of a party, on the other hand Mr Frenkel is entirely right that the bar is set lower than on an application for summary judgment.

1. Applications for joinder for the purposes of Part IVAA have their own peculiarities. The observations of Middleton J in Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd[2] are pertinent. Whilst finding that Part IVAA did not apply to the particular circumstances of that case, his Honour made the following observations about its operation:
   1. ... Where a claim brought by an applicant does not have as one of its necessary elements any allegation of failing to take reasonable care, an additional enquiry into the failure to take reasonable care may become relevant in the course of a trial to determine the application of Pt IVAA. Even though the claims in this proceeding themselves do not rely upon any plea of negligence or a "failure to take reasonable care" in a strict sense, a failure to take reasonable care may form part of the allegations or the evidence that is tendered in the proceedings. At the end of the trial, after hearing all the evidence, it may be found that Pt IVAA applies.
   2. In these circumstances, where a respondent desires to rely upon Pt IVAA of the Wrongs Act, it will need to plead and prove each of the statutory elements, including the failure to take reasonable care. In a proceeding where the applicant does not rely upon any such failure, then the need for a particularised plea by a respondent may be particularly important for the proper case management of the proceedings: see eg Ucak v Avante Developments Pty Ltd [2007] NSWSC 367 at [41]. It would be desirable at an early stage of proceedings for a respondent to put forward the facts upon which it relies in support of the allocation of responsibility it contends should be ordered. If a respondent calls in aid the benefit of the limitation on liability provided for in Pt IVAA of the Wrongs Act, then the respondent has the onus of pleading and proving the required elements. The court, after hearing all the evidence, will then need to determine, as a matter of fact, whether the relevant claim brought by the applicant is a claim arising from a failure to take reasonable care.

Is it arguable that a claim for a breach of the s8 warranties is an apportionable claim?

1. The OC's primary claims against the builder are founded on an alleged breach of the building contract which pursuant to s8 of the Domestic Building Contracts Act 1995 ('the DBCA') included the statutory warranties. Amongst other breaches of the s8 warranties, the OC alleges that the builder failed to carry out the work with reasonable care and skill.
2. Section 8(d) of the DBCA provides:

(d) the builder warrants that the work will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract; [underlining added]

1. Mr Laird referred me to previous decisions of the tribunal[3] in support of his submission that claims brought for a breach of the statutory warranties are not apportionable claims. As the statutory warranties are incorporated into every major domestic building contract, the claims for breach of those warranties are founded in contract. In Serong v Dependable Developments Pty Ltd[4] Macnamara DP (as he then was) said at [349]:

The contractual claim against Dependable does not arise from a claim for misleading and deceptive conduct contrary to Section 9 of the Fair Trading Act nor does it arise from an alleged failure to take reasonable care. Rather it arises out of allegations that Dependable has failed to meet certain absolute standards arising out of the contract including the due completion of the works within a specified time and the employment of proper workmanship in the construction of those works. Dependable's liability under the contract is to perform its terms not to use reasonable care to perform them. Mr Gurr submits that the effect of Section 24AI is that there should be no apportionment as between the contractual claim against Dependable and the claims for misleading and deceptive conduct. I agree with this submission.

1. In Spiteri & Ors v Stonehenge Homes & Associates Pty Ltd[5] Judge Lacava said at [136-138]
   1. Mr Laird submitted that the claims made against Homes in the primary proceedings are brought under the statutory warranties in the case of the Owners and in contract in the case of Wesfarmers. He correctly, in my view, submits that claims brought under the statutory warranties contained in the Act and the claim in contract are not apportionable claims within the meaning of the Wrongs Act 1958.[6]
   2. With respect, that submission must be correct. Part IVAA of the Wrongs Act 1958 requires a court or tribunal when apportioning a claim, to assess from the facts, the degree of responsibility or liability between concurrent wrongdoers. That can be done in the context of a negligence claim but not in a claim in contract or where the claim is based in breach of warranty.
   3. In my judgment, the claims that Wesfarmers and the owners bring against Homes are not apportionable claims within the meaning of the Wrongs Act 1958.
   4. I note that Homes made no submissions contrary to those advanced by the applicants on this question.
2. However, I am not persuaded that the question as to whether a breach of the implied warranty set out in s8(d) of the DBCA satisfies the definition of an apportionable claim as set out in s28AF of the Wrongs Act has been finally determined. In Gunston v Lawley[7] Byrne J said at [46]:

The Tribunal noted that one of the statutory warranties relied on by the owners was that "the builder would carry out the work with reasonable care and skill".[8] It nevertheless concluded that this was not an apportionable claim, that is, it was not "a claim... (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care."[9] This conclusion was not challenged before me and nothing turns upon this. I would not, however, like to think that my silence should be taken as an indication that I share this view. The point is of no significance in this appeal because, in the Tribunal's consideration of the responsibility of the other respondents for the loss or damage of the owners, the builder was in fact treated as a concurrent wrongdoer. [emphasis added]

1. Further, in Solak v Bank of Western Australia Ltd & Ors[10] ('Solak') Pagone J said:

... the apportionability of claims under the State legislation all depend fundamentally upon whether the claim is one "arising from a failure to take reasonable care". Bank West's claim against the third parties is not pleaded as such but the factual precondition to the operation of the relevant statutory regimes does not depend upon how a claim is pleaded but whether the statutory precondition exists, namely whether the claim arises from a failure to take reasonable care. In Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd Middleton J said that the words "arising from a failure to take reasonable care" should be interpreted broadly. In my view the State regimes providing for apportionment of liability between concurrent wrongdoers requires a broad interpretation of the condition upon which apportionment provision depends to enable courts to determine how the claim should be apportioned between those found responsible for the damage. The policy in the legislation is to ensure that those in fact who caused the actionable loss are required to bear the portion of the loss referable to their cause. That task ought not to be frustrated by arid disputes about pleadings. Support for that conclusion may be found by the circumstance that a "failure to take reasonable care" can arise as much from an obligation in tort as in contract. In this case Bank West's claim for indemnity based upon a failure to sight original documents (that is, a breach of contract) may aptly be described as a failure to take reasonable care for the purposes of the apportionment provisions. The views relied upon by Bank West from Commonwealth Bank of Australia v Witherow[11] and Gunston v Lawley[12] do not require a different conclusion. Bank West's action is in my view one "based on an alleged failure" by the third parties to take "reasonable care".[13]

The task in apportioning liability amongst concurrent wrongdoers is to be undertaken in a real and pragmatic sense to identify who is to blame for the loss and who should bear the liability [Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463 [94] (Palmer J), Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505, [591] (Young CJ in Eq).] The primary focus in that undertaking is to determine, as best as may be possible, the "causal potency" of the various factors which singularly or together went to bring about the loss caused. [underlining added]

1. In my view, the question as to whether the claim by the OC that the builder has breached the warranty set out in s8(d) is an apportionable claim, is arguable.

Is it arguable that the waterproofing and tiling subcontractors are concurrent wrongdoers?

1. Mr Laird and Mr Howden both submit that I should not allow joinder of the subcontractors for the purposes of Part IVAA as no duty of care is owed by either of the subcontractors to the OC as successor in title to the developer. They submit that the developer had taken steps to protect itself contractually by requiring the subcontractors to give the Warranty and Indemnity and thus the subcontractors did not owe a duty of care to the developer.
2. Both Mr Laird and Mr Howden referred me to Woolcock Street Investments Pty Ltd v CDG Pty Ltd[14] and Gunston v Lawley[15]
3. In Woolcock the High Court held that an engineer did not owe a duty of care to a subsequent purchaser in circumstances where it was satisfied that there was no anterior duty: the engineer did not owe a duty of care to the original developer. This was explained thus by Byrne J in Gunston v Lawley where his Honour said at [22]

Insofar as concerns the architectural draftsman, the Tribunal addressed this question by reference to the analysis of the High Court in Bryan v Maloney[16] and Woolcock Street Investments Pty Ltd v CDG Pty Ltd,[17] cases which, in some respects, resemble the present because they both arose from defects to buildings which were the consequence of neglectful design or construction. In each case, the plaintiff purchased the defective property but without being aware of its defect or that this defect might cause distress to the building as, in fact, happened. The suggested negligent party in Bryan's case was the builder engaged by the proprietor and, in Woolcock's case, the engineer who designed the footings. In their consideration of these cases, the High Court was concerned that such a claimant must first show that the defendant owed a duty of care to the original owner, that is the proprietor at the time of the negligent act.[18] This is an issue anterior to the principal issue in the present case because, if such a duty did not exist, the plaintiff as a subsequent owner must fail. If it did exist, then the plaintiff, as subsequent owner must then establish that this duty of care is owed to it as well as to the proprietor.

And further at paragraph 28, where his Honour said:

The feature which is of great importance in the cases, at least since 1999[19] in determining the existence of a duty of care in the architectural draftsman to the proprietor is vulnerability, that is, the ability of the plaintiff to protect itself from the loss in the event of negligence. In the normal case, where duty is said to be owed by a sub-contractor to a proprietor, this requirement may be difficult for the proprietor to satisfy. There will usually be a contract between the proprietor and the head contractor which will contain covenants protecting the proprietor from defective work. Even if it does not, it will be difficult in the typical case for the proprietor to persuade the court that it did not have the ability to protect itself in this way.[20]

1. Mr Howden referred me to a number of authorities including Owners Corporation Strata Plan 61288 v Brookfield Multiplex[21] and, in particular, the comments of McDougall J at [85]:

I start with what I said in Star of the Sea. A key feature of my reasoning in that case was that the owners corporation had the benefit of the statutory implied warranties, and what I have called above statutory privity of contract, against the developer and the builder. I said in substance that it was not appropropriate for the court to impose some further or more onerous duty of care.

1. I note that unlike the statutory warranties set out in s8 of the DBCA, the statutory warranties set out in the Home Building Act 1989 (NSW) do not include a warranty that the works will be carried out with reasonable care.
2. In my view, it would be premature to make any findings as to the merits of the builder's Part IVAA defence until all the evidence is before the tribunal, and has been tested. Although I have been provided with copies of the subcontracts and the warranties, and I accept that Byrne J noted it will usually be difficult for a developer to show the vulnerability necessary to establish any duty, I am not in a position to make any final determination as to whether the subcontractors are concurrent wrongoers, without hearing all of the evidence.
3. I am reinforced in this view by the comments made by Ashley JA in Godfrey Spowers (Victoria) Pty Ltd v Lincoln Scott Australia Pty Ltd.[22] In considering the proportionate liability regime set out under Part IVAA of the Wrongs Act he referred to the comments of Barrett J in Reinhold v NSW Lottery Corporation (No2)[23] when considering the proportionate liability regime in NSW where he relevantly said:
   1. I respectfully agree that a claim may properly be regarded as one 'arising from a failure to take reasonable care' if, 'at the end of the trial', the evidence warrants a finding to that effect and regardless of the absence of 'any plea of negligence or a "failure to take reasonable care"'. The nature of the claim, for the purposes of Part 4 is to be judged in the light of the findings made and is not determined by the words in which it is framed.

1. The provisions of Part 4 are compulsory. They change substantive rights, so that a plaintiff's ability to obtain an adjudication of joint and several liability is removed where the circumstances are of the type to which the alternative regime of proportionate liability is applied. A case no doubt needs to be pleaded and proved by one or more defendants so as to engage the statutory provisions. But it will be the findings ultimately made that determine whether the statutory conditions compelling the court to adopt the proportionate approach are satisfied.

Those observations emphasised the importance of trial to the determination of the application of the relevant legislation.

It was contended by counsel for the engineer that s 24AL(1) stood against a conclusion that a concurrent wrongdoer was only identifiable once a Court had made findings. But I am not persuaded that this is so. Use of the present tense of the verb 'to be' should be regarded, on a consideration of the tenor of Part IVAA, as being anticipatory; or, in a practical sense, as requiring only that a defendant

... put forward a pleading which raises an arguable case that the party is a concurrent wrongdoer... that the defendant need only plead a case which is 'not hopeless'.[24]

In other words, this is a procedural provision only, which does not determine that a person is a concurrent wrongdoer for the purposes of Part IVAA.

1. I also note the comments by Byrne J in Gunston v Lawley at [27] where he said:

There is no general principle of law that a sub-contractor cannot owe a duty of care to a proprietor with which it has no direct contractual relationship. Furthermore, it is not helpful to consider the existence of a duty of care in a vacuum: it will depend upon the relationship between the parties with respect to the negligent activity in question and with respect to the loss which the proprietor has suffered as a consequence. This may arise from the fact that the sub-contractor is nominated by the proprietor or that its work was otherwise the consequence of direct dealings between them.

And the comments of Croft J in Main Road Property Group Pty & Ors v Pelligra & Sons Pty Ltd & Ors[25] at [10]

As was emphasised by Middleton J in Dartberg the assessment of the application or otherwise of Part IVAA of the Wrongs Act at a preliminary stage of the proceedings does not pre-empt the further consideration and final determination of the issue in the course of the trial, in light of a full hearing of the evidence and submissions. This process at trial will involve the determination whether or not a claim is an "apportionable claim" under Part IVAA and, if so, the consequences in the particular circumstances with respect to the apportionment of liability among each of the defendants subject to such a claim. In my view the final determination of the issue at an earlier stage of proceedings carries a significant risk of injustice when the result is to preclude the reduction of proportionate liability of a defendant or defendants as a result. [underlining added]

1. Having found it is arguable that the OC's claim against the builder is an apportionable claim, and that it is arguable that the subcontractors are concurrent wrongdoers, it is appropriate that the subcontractors be joined to the proceeding as respondents. I will direct the principal registrar to amend the record accordingly, noting they have previously been joined as joined parties for the purposes of the builder's third party claims against them.
2. As this matter is listed for a directions hearing on 24 April 2013, I will hear from the parties at that time as to the appropriate interlocutory orders to be made. These will necessarily including the filing and service by the builder of properly particularised Points of Claim as against the subcontractors and Amended Points of Defence to Counterclaim, and Points of Defence by the subcontractors. It would also seem appropriate for the OC to have an opportunity to amend its Points of Claim if it wishes to piggyback on the builder's Part IVAA defence, and file and serve a Reply. I note this proceeding is listed for hearing commencing on 5 August 2013, and as discussed with the parties, including the subcontractors, at the last directions hearing, there would seem at this time no reason why that hearing date cannot be maintained.

[1] [2005] VSC 380

[2] [2007] FCA 1216 (10 August 2007)

[3] Serong v Dependable Developments Pty Ltd [2009] VCAT 760 at [66] and [399],

Spiteri & Ors v Stonehenge Homes & Associates Pty Ltd [2011] VCAT 2267 at [136-138]

[4] [2009] VCAT 760

[5] [2011] VCAT 2267

[6] Serong v Dependable Developments Pty Ltd (Domestic Building) [2009] VCAT 760 at [66 and 349] and

Lawley v Terrace Designs Pty Ltd (Domestic Building) [2006] VCAT 1363 at [318].

[7] [2008] VSC 97

[9] Wrongs Act s 24AF(1)(a).

[10] [2009] VSC 82 at [35]

[11] [2006] VSCA 45, [13] (Maxwell P, Buchanan JA and Redlich AJA agreeing).

[12] [2008] VSC 97, [20], [47] (Byrne J).

[13] [2006] VSCA 45, [13] (Maxwell P, Buchanan JA and Redlich AJA agreeing).

[14] [2004] HCA 16

[15] [2008] VSC 97

[17] [2004] HCA 16; (2004) 216 CLR 515.

[18] Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; (2004) 216 CLR 515 at 527 [14].

[19] See Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180.

[20] See, for example, Southern Water Authority v Carey [1985] 2 All ER 1077; Norwich City Council v Harvey [1989] 1 All ER 1180.

[21] [2012] NSWSC 1219

[22] [ 2008] VSCA 208 at [108]

[23] [2008] NSWSC 187.

[24] Woods v De Gabriele and ors [2007] VSC 177, [9] (Hollingworth J); Atkins v Interprac Financial Planning Pty Ltd and anor [2007] VSC 445, [10] (Hargrave J).

[25] [2010] VSC 5