Metal Roofing & Cladding Pty Ltd v Eire Pty Ltd [1999] NTCA 104; 9 NTLR 82

respondent company, Eire Pty Ltd (Eire). In March 1990, Stamen purchased

the land and buildings occupied by the Wayside Inn at Timber Creek in the

Northern Territory. The Wayside Inn had a twenty-four hour liquor licence

and also sold fuel. The business was acquired and run by Eire. At about the

same time, Mr and Mrs McElwee decided to build a supermarket on the

land. It was intended that the supermarket would be built by Mannin as

soon as possible. Apart from fuel and alcohol, the Wayside Inn sold only

meals, cigarettes and soft drinks. There is a substantial Aboriginal presence

in and around Timber Creek. Mr and Mrs McElwee considered that a

supermarket would be profitable. Their plan was to build the supermarket in

about three months, and to have it open for business by 1 November 1990,

Plans were prepared and in June 1990 quotes were obtained for the various

sections of the proposed works. A significant component of the work was

the metal roof and cladding for the building. The appellant is a well -known

national supplier of this type of material. In June 1990, the appellant was

supplied with the plans and Mr McElwee spoke to the manger of the

appellants premises at Palmerston, one John Michel. Mr McElwee told Mr

Michel that the material was for the building of a supermarket at Timber

Creek, that he wanted the material as soon as possible, and that the

appellants ability to deliver the materials promptly would be an important

factor in deciding whether to give the appellant the contract. Mr Michel

On 25 June 1990, the appellant provided a written quote addressed to

Mannin for the supply of the required materials which was subsequently

superseded by an amended quote provided on 29 June 1990. Mr McElwee

told Mr Michel that the quote was acceptable and that he required delivery

by the end of July. He told Mr Michel that Mrs McElwee would be coming

in to pre-pay the amount of the quote, which she subsequently did, and at

which time an invoice was raised, addressed to Mannin. The learned trial

judge found that the understanding between Mr McElwee and Mr Michel

was that the materials would be ready for transporting to Timber Creek by

the end of July 1990, or within a reasonable time from the order, which his

Honour fixed at five weeks. His Honour also found that time was of the

The materials were not delivered on time, and on a number of occasions in

late July and during August, Mr McElwee telephoned Mr Michel who

promised delivery shortly. Some of the materials were delivered during the

third week of September. Mr McElwee then telephoned the appellants new

manager, Mr Muir, who said that the balance would be ready for delivery in

a week. This was followed by a number of telephone calls and visits to the

appellants premises by Mr or Mrs McElwee or by a Mr Riches, a

subcontractor to Mannin, engaged to carry out most of the actual building

work. They were fobbed off by assurances that the materials would be

coming soon. Some small items were delivered, but not enough to allow the

work to proceed further. On 15 November, the solicitor for Mannin, Mr

Winter, faxed a letter to the appellant making time the essence of the

contract and demanding delivery of the balance of the materials by 5pm on

24 November. This resulted in a visit to Timber Creek by Mr Muir and the

dispatch of further materials on the same day. However the delivery was

still incomplete, and the appellant wrote to Mr Riches, on 19 November,

explaining that further deliveries would be made, some by first available

transport, and the rest within fourteen days. After some further items had

been delivered on 29 November, Mannins solicitor sent a fax on 4

December to the appellant advising that unless the balance of the materials

was delivered by 6 December, Mannin would arrange for other suppliers and

On 5 December, Mr Muir advised Mr McElwee that the appellant could not

deliver the remaining materials by 5 December, and that Mannin should get

them elsewhere. On 7 December Mannins solicitor faxed a letter to the

appellant advising that the balance of the materials had been ordered from

another source and that Mannin will be instructing him to sue for damages.

The learned trial judge found that the appellant had breached the contract

when it had failed to deliver the materials by mid-August, that Mannin did

not "repudiate" the contract at that stage, but "treated the contract as being

on foot and sought to bring about the belated performance by the appellant

of its obligations, but that the contract was "clearly repudiated by Mr

Winters letter dated 7 December", and that this enabled Mannin to recover

"such part of the loss actually resulting as was at the time of the contract

reasonably foreseeable as liable to result from the breach". It is clear that,

despite his Honours finding that the contract was "repudiated" by Mr

Winters letter dated 7 December, the appellant, through Mr Muir, had

indicated on 5 December that the appellant could not perform the contract

by the time stipulated in Mr Winters fax of 4 December, that it was the

appellant which had repudiated the contract and that Mannin elected to

accept the appellants repudiation as bringing the contract to an end: so

much seems clear from the finding made by his Honour, particularly the

finding that Mannin was entitled to sue for damages, and the award to

Mannin in a separate action which was heard at the same time as Eires

action, of the sum of $8,607.63, made up of the cost of procuring the

missing items from another source, additional payments due to the delays

which Mannin was required to make to Mr Riches, the cost of replacing

some sheets of ply which became damaged by rain and additional freight

The action begun by Eire was for damages for negligence, or for false and

misleading conduct. Eire pleaded, in its amended statement of claim, that

the contract was made between Mannin and the appellant (which it alleged

was made by Mannin on behalf of Stamen, the trustee of the "McElwee

Family Trust No 2"), that the materials were for the purpose of being used in

the construction of a supermarket, that upon completion of the supermarket

it was the intention of Stamen and Eire that Eire would lease the

supermarket from Stamen and operate the business of a supermarket thereon,

and that by entering into the contract and undertaking to supply the

materials to Mannin, the appellant owed a duty of care to Eire and to Stamen

to procure the delivery of all of the materials by not later than 27 July or

alternatively within a reasonable time, so as not to delay the construction of

the supermarket; that in breach of its duty of care, the appellant negligently

failed to deliver the materials by 27 July 1990 or within a reasonable time,

as a result of which Eire sustained damages in the form of lost profits from 1

November 1990 when the supermarket would have opened had the materials

been supplied on time, until 1 October 1991 when the supermarket opened

for trading. An alternative claim was based on "false and misleading

conduct", under s.82 of the Trade Practices Act or s.91 of the Consumer

Affairs and Fair Trading Act "by contracting with Mannin, to the knowledge

of the Plaintiffs to delivery (sic) the kit (materials) on or before 27 July

1990". The action was commenced after it was statute barred, and it was

necessary for Eire to obtain an extension of time under the Limitation Act,

which, in the course of his reasons for judgement, his Honour granted.

His Honour considered that a duty of care existed because, had the loss been

suffered by Mannin, it would have been reasonable and it would not increase

the appellants burden to allow the claim; the builder Mannin and the

operator Eire were "in reality the same person"; the appellant knew that the

materials were required to build a supermarket, and therefore economic loss

to the proprietor could readily be foreseen to be the consequence of delayed

delivery; that the appellant knew that the supermarket, when built, would be

conducted by "a particular person in the McElwee interest, as distinct from a

mere member of a class"; and that therefore there was a sufficient degree o f

His Honour found that the appellants "purported performance of the

contract was negligent"; "the deliveries were delayed and piecemeal, and

there was a failure to inform Mr McElwee of the true position when

complaints were made"; and that there was a causal connection between the

"non-compliance with the contract" and the late opening of the supermarket.

His Honour accepted that the period of delay caused by the appellants

negligence was from mid-December 1990 to mid April 1991 � namely four

months. His Honour awarded damages for loss of profits for this period in

the sum of $32,000 plus interest thereon until judgement.

Counsel for the appellant, Mr Southwood , argued that there was no evidence

upon which the learned trial judge could have found that the appellant knew

that the respondent intended to operate the supermarket business itself, or

for that matter, that anyone in the McElwee interest intended to so operate

it. He submitted that the evidence went no further than that an inference

could be drawn that the servants of the appellant at some much later stage

knew that the supermarket was being built for Mr and Mrs McElwee,

although not at the time the contract was being entered into. Mr Maurice

Q.C. for the respondent conceded that there was no evidence that the

appellants servants knew who was going to run the supermarket business,

but submitted that his Honour was justified in drawing the inference that the

appellant, through its servants, knew that the McElwees themselves were to

be the owners of the supermarket property at the time of the contract. I

consider that Mr Maurice Q.C. is correct; the knowledge (or the means of

knowledge) of the appellant sprang from what was disclosed on the plans of

the supermarket supplied to Mr Michel in order for the appellant to submit

its quote, viz., the words "Proposed Store on Lot 53, Town of Timber Creek,

for Mr and Mrs McElwee." The finding by the learned trial judge that

"Metclad knew that the supermarket, when built, would be conducted by a

particular person in the McElwee interest, as distinct from a mere member of

a class" cannot, therefore, be supported. Mr Southwood submits that this is

fatal to the respondents case; Mr Maurice Q.C. submitted that it was a

matter of no consequence because the appellant must have foreseen that, if

there was to be delay in the construction of the supermarket, it was

inevitable that the McElwee interests would suffer economic loss, if for no

other reason than that the building materials had been paid for and were

earning nothing � not even rent. Mr Maurice Q.C. conceded that if the

building were to have been let to someone other than in the McElwee

interest, there could be no recovery by that entity for pure economic loss;

but, he submitted, it was precisely because the loss was suffered by a

company owned and managed by the McElwees, that the loss was

recoverable. It was not entirely clear to me whether the submissions of the

parties were directed to the question of reasonable foreseeability, or of

proximity, or to questions of causation, or to questions of remoteness of

damage or to all these questions. Neither side was able to point to any

authority directly on point. It will therefore be necessary to consider the

leading authorities on pure economic loss with some care.

Another point raised by the appellant is the consideration that, as Mr

Maurice Q.C. conceded in argument, the only parties to the contract were

Mannin and the appellant. The learned trial judge found that the contract

had been performed negligently; "the deliveries had been piecemeal, and

there was a failure to inform Mr McElwee of the true position when

complaints were made." Mr Southwood submitted that this was not a true

case of negligent performance of a contract such as might give rise to an

action for damages in tort, but rather, as I understood his submission, one

where the facts showed only that the appellant had breached its contract in

that the appellant had failed to comply with the contractual terms as to the

time for delivery. In those circumstances, so the argument went, there could

be no breach of any duty of care owed to a person not a party to the

contract. In support of this contention, Mr Southwood relied upon the

decision of Byrne J in John Holland Construction & Engineering Pty Ltd v

Kvaerner R.J. Brown Pty Ltd & Another (Supreme Court of Victoria,

The law of negligence resulting in pure economic loss has been the subject

of some recent developments in the High Court and elsewhere. The usual

starting point are the following propositions which are taken from the

judgement of Gibbs J (as he then was) in Caltex Oil (Australia) Pty Ltd v

The Dredge "Willemstad" [1976] HCA 65; (1976) 136 CLR 529 at 555:

As a general rule damages are not recoverable for economic

loss which is not consequential upon injury to the plaintiffs

The fact that the loss was foreseeable is not enough to make it

There are exceptional cases in which the defendant has

knowledge or the means of knowledge that the plaintiff

individually, and not merely as a member of an unascertained

class, will be likely to suffer economic loss as a consequence

of the defendants negligence which gives rise to a duty of

The question of whether or not the case is "exceptional" depends upon there

being "a relationship of proximity" between the parties which is "special":

see Bryan v Maloney (1995) 182 CLR 609 at 619 per Mason CJ, Dean and

Gaudron JJ; Esanda Finance Corporation Ltd v Peat Marwick Hungerfords

[1997] HCA 8; (1997) 188 CLR 241. In Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330

at 414, Kirby J expressed the view that "proximitys reign....as a universal

identifier of the existence of a duty of care at common law, has come to an

end"; but as was said in Hill v Van Erp (1997) 188 CLR 159 by Gummow J,

the notion of proximity in these cases is "a broad conceptual umbrella

beneath which the concerns particular to discrete categories of case can be

discussed" (at 237). Similar observations are made by Dawson J (at 177-

178). Toohey J said, at 189, that "it is the category of cases with which

proximity is concerned, rather than whether a relationship of proximity

exists on the facts of a particular case": see also Burnie Port Authority v

General Jones Pty Ltd [1994] HCA 13; (1994) 179 CLR 520 at 543 per Mason CJ, Deane,

The initial question is still whether or not the kind of loss suffered by the

plaintiff was reasonably foreseeable by the defendant: see Bryan v Maloney,

supra, at 617. This question seems to have been assumed as having been

answered in the affirmative by the leading authorities, which concentrate on

the question of proximity. In this case, the kind of loss suffered by the

respondent was loss of profits caused by delay in completion of the contract

to supply the materials needed to erect the supermarket. Mr Southwoods

argument that the failure to establish that the appellant knew who was to run

the supermarket business is fatal to the respondents case, amounts to a

submission that in those circumstances the kind of loss suffered by the

respondent viz., loss of profits was not reasonably foreseeable. This may be

contrasted with the kind of loss suffered by whomever may have been in

contemplation as the owner of the building, viz., loss of rent, which clearly

must have been reasonably foreseeable, given the respondents knowledge

that the building was to be erected for "the McElwee interest". Along the

same or similar lines, Mr Southwoods submission amounts to what

Professor Fleming describes as "the unforeseeable plaintiff" (The Law of

th Edn., p.142). Professor Fleming observes (pp 144-145):

"We shall later have occasion to see that this limitation of l iability to

"foreseeable plaintiffs" is nowadays matched by a similar limitation

to "foreseeable damage". That the first is expressed in terms of

"duty", but the second in terms of "remoteness of damage", reflects

only an inconsequential and largely accid ental choice. Moreover,

there has been a parallel tendency to take an expansive view of what

is foreseeable. Thus in the present context, it is not required that the

plaintiff be "foreseeable" as an identified individual; he need only

belong to the class of persons within the foreseeable range of risk.

This may well include among the potential victims of negligent

driving: the real owner of a borrowed car mistakenly believed to

belong to the borrower; a doctor who comes to the aid of a person

injured; a pregnant woman and her baby who is subsequently born

deformed; perhaps, even a father donating a kidney to the victim.

Should the doctrine of the "unforeseeable plaintiff" be extended to

different interests of the same plaintiff? There used to be some

support for the contrary "threshold tort" doctrine, whereby a

plaintiff, once having established violation of a legally protected

interest, could recover "parasitic damages" for other injury without

having to establish its own credentials for protection. Indeed, the

more limited principle has survived that one who has suffered

foreseeable physical injury can recover also for unforeseeable

On the other hand, without going so far as to fragment a plaintiffs

interests into infinitely separable components, the more recent trend

has been to demand that a plaintiff establish that each head of

damage, had it stood alone, would have qualified under the "duty"

rules, in particular the restrictive rules relating to nervous shock and

economic loss. Thus, a passenger injured in a collision cannot

recover for mental distress suffered as a result, not of

contemporaneous perception, but of hearing afterwards about her

husbands death. Nor could she recover for losing her job as his

The ,,foreseeable plaintiff argument as a limitation or liability is already a

recognised limiting factor in economic loss claims. In Seas Sapfor v

Electricity Trust of South Australia (1996) 187 LSJS 369, Doyle CJ

...the defendants knowledge or means of knowledge of the plaintiff

as a specific individual as opposed to a member of an unascertained

class as one factor to be considered in deciding whether or not there

In Perre v Apand Pty Ltd (1997) 80 FCR 19, OLoughlin, Branson and

Mansfield JJ, after reviewing Hill v Van Erp, supra, said at p.40:

What is common to the reasoning of the majority in determining that

there was a duty of care owed by a solicitor to the frustrated

liability was neither to an indeterminate number but only to

one identified person, nor for an indeterminate amount but for

(See also, the Willemstad, supra, at p.555 per Gibbs J).

Part of Mr Southwoods argument rested on the fact that in the Willemstad

case, the economic loss which the plaintiff claimed did not include loss of

profits, but was limited to the direct expenses incurred in employing

alternative modes of transporting the oil to the refinery from the terminal as

a result of the fracture to the oil pipeline. Stephen J, in particular,

emphasised this as a relevant factor, at p.577, when he described the nature

...which reflect that loss of use, representing not some loss of profits

arising because collateral commercial arrangements are adversely

affected but the quite direct consequence of the detriment suffered,

namely the expense directly incurred in employing alternative modes

In the Willemstad, the difficulty of distinguishing between problems of

remoteness of damage, reasonable foreseeability of loss and the need for

some other limiting factor was referred to by Gibbs J at pp 554 -555, echoing

the words of Lord Denning MR in Spartan Steel & Alloys Ltd v Martin & Co

(Contractors) Ltd [1972] EWCA Civ 3; (1973) 1 QB 27 at 37, and whilst his Lordships solution

of applying policy considerations on a case by case basis as the criterion of

duty was not accepted, there is no doubt that the modern approach as

outlined by the High Court in Bryan v Maloney and cases following it is to

eschew any separate analysis based on considerations such as whether the

loss was too remote, for example. The threshold test of reasonable

foreseeability of loss is that expressed by Gibbs J in the Willemstad in the

third proposition referred to in para [11], supra, ie. that the defendant must

have the knowledge or the means of knowledge that the plaintiff

individually, or as a member of an ascertained class will be likely to suffer

economic loss, as a consequence of the defendants negligence. If this be

so, it matters not that the foreseeable loss was loss of rents or loss of

profits; nor does it matter that the defendant did not know who was to run

the supermarket business, if he had the means of knowledge, and the

operator was a member of a defined class. The facts in this case do not,

however, support a finding that the appellant ought to have known that the

supermarket was going to be run by the McElwees or someone in their

interest. There were no facts led at the trial which touched upon that

question. The facts are intractably neutral as to whether the inference could

be drawn that the appellants ought to have known that the McElwees

themselves (or someone on their behalf) or some unknown third party would

operate the business. If this is the correct approach, the loss was not

reasonably foreseeable, no duty of care arose, and this appeal must be

Alternatively, it may be that the question of reasonable foreseeability is not

to be determined in accordance with Gibbs Js third principle, but in

accordance with a wider view of the facts: ie. it is sufficient if it was not

far-fetched that someone would suffer economic loss. There are

observations in the authorities which suggest that this may be the test.

Indeed, one of the reasons why reasonable foreseeability was abandoned as

an adequate limitation on liability in economic loss cases and that some

further control was thought to be necessary, was because it was relatively

easy to foresee economic loss leading to huge claims by multi ple claimants

in situations where, for example, an electricity supply was negligently

disrupted (see the cases referred to in the Willemstad, supra, at 551) or

where a virus escaped (Weller & Co v Foot and Mouth Disease Research

Institute [1966] 1 QB 569 esp. at 585 per Widgery J). As Stephen J put it in

But if economic loss is to be compensated its inherent capacity to

manifest itself at several removes from the direct detriment inflicted

by the defendants carelessness makes reasonable foreseeability an

If this be so, Gibbs Js third principle is but one of the factors to be

considered in determining whether or not the appellant owed a duty of care

to the respondent, and is not in itself decisive. In Bryan v Maloney, supra,

at 618, the majority appear to have treated it as but one of the policy

considerations which may militate against recognition of a relationship of

proximity in a category of case involving mere economic loss. Some other

factors which are expressly referred to in the authorities as being of

relevance, and which are of relevance to this case, are:

1. the type of economic loss suffered: ie. its proximity to the

tortious act: see for example, Stephen J in the Willemstad, at

2. whether or not there has been an identified element of known

reliance or dependence, or the assumption of responsibility, or the

combination of the two (Bryan v Maloney, at 619), or, as McHugh

J put it in Perre v Apand Pty Ltd [1999] HCA 36 at paragraphs

124-126 whether the plaintiff was vulnerable to harm from the

3. if there are consistent contractual liabilities, the nature and scope

of the duty must not depend on the specific obligations or duties

created by the express terms of the contract; but it is otherwise if

the duty of care is co-extensive with an implied term (Bryan v

4. whether there is any inconsistency between the existence of the

relationship of proximity with respect to the particular kind of

economic loss and the legitimate pursuit by the appellant of its

own financial interests (Bryan v Maloney, at 623-4).

An analysis of these factors is only necessary because the answer to this

case is not to be found in any existing recognised category. In these

circumstances, it is important to bear in mind when considering cases said to

be analogous, the particular features relied upon by the courts as

establishing the relevant degree of proximity: see for example the statement

of the majority in Bryan & Maloney at 630 relating to their decision not

being decisive in other categories of case. In truth, there are no analogous

cases to the present one. In TOD Group Holdings Pty Ltd v Fangrove Pty

Ltd (Queensland Court of Appeal; unreported 1/12/98) the Court refused to

award damages for economic loss where the loss arose from the negligent

design of a parapet for a commercial building, the plaintiff being a successor

in title to the original building owner. The court distinguished Bryan v

Maloney on the basis, inter alia, that the building was commercial and not

residential, and said that any further extension of the category of case in

which a builder will be under a duty of care towards subsequent purchasers

of his construction involves policy considerat ions which can only be

resolved by the High Court itself. Mr Southwood pointed out, that to allow

the plaintiff to succeed in this case would extend liability for pure economic

loss well beyond what has so far ever been recognised, and, in particular,

would be contrary to existing principle which treats corporate entities as

separate entities from their shareholders and directors: Salomon v Salomon

& Co. (1897) AC 22. Nevertheless, as was recognised by the Full Federal

Court in Perre v Apard Pty Ltd, supra, at 37, even if there is no existing

category to which the facts of a particular case fit, new categories can be

deduced by the normal processes of legal reasoning of analogy, deductive

A consideration of the various factors leads me to conclude that there was

no duty of care owed by the appellant to the respondent in this case. The

appellant did not know, nor ought the appellant to have known, who was

going to operate the supermarket. The nature of the damages claimed, loss

of profits, arise not as the direct consequence of any negligently late

delivery of the components, but because collateral commercial arrangements

were adversely affected. The loss is pure economic loss, unliquidated in

amount, and not additional to loss of property or injury to persons. There is

evidence which may have enabled a finding that Mr and Mrs McElwee, as

the directors of the respondent, relied upon the appellant for the timely

performance of the contract, but there is no evidence that the appellan t

knew, or ought to have known, that the respondent was relying on the

appellant. The contract was between the appellant and Mannin only. It was

not suggested that Mr and Mrs McElwee contracted on the respondents

behalf as agents for an undisclosed prin cipal. The real cause of the loss to

the respondent was the failure of the appellant to perform the contract on

time. As Byrne J put it in John Holland Construction & Engineering Pty

Ltd v Kvaerner R J Brown Pty Ltd and Another, at p.274

What the law of negligence in this context imposes is, not that the

defendant owes a duty of care to perform a contract, but that it owes

a duty to perform the contract with due care : MacPherson & Kelly v

Prunty [1983] VicRp 53; (1983) 1 VR 573.

The most recent authority on this subject is the High Court's decision in

Perre v Apand Pty Ltd [1999] HCA 36. In that case, some members of the

court recognised the importance of "clear rules" to guide practitioners and

busy courts of first instance: see, for example, Kirby J at para 230, and th e

remarks of McHugh J at para 88-91. Unfortunately, that clear guidance is

not to be found, in my respectful opinion, in their Honour's judgments. If

the rules upon which liability is cast cannot be stated with clarity, that

implies that there is something very wrong with the theoretical basis upon

which this branch of the law of tort is developing. The lack of sound theory

has resulted in piecemeal, incremental development. I have read each of the

judgments in that case in the hope that there was some agreement, at least in

approach, which would assist me to arrive at some conclusions in this case.

In the end, I have not found anything of use which persuades me to change

There is nothing to show that the respondent was vulnerable to harm by any

conduct of the appellant, in the sense discussed in Perre v Apand Pty Ltd,

supra. The respondent was not required to outlay its capital for the stock in

trade upon which the lost profit would have been earned, until the building

was near completion. This did not occur until many months after the period

of delay for which the appellant was found liable. To allow the claim would

be, as Mr Southwood submits, to disregard established principles of law

which distinguish between corporations and their shareholders and directors.

Those who seek the protection of incorporation to protect their business

interests and to gain tax advantages, cannot complain if the quid pro quo is

that they and their corporate identities are kept separate for other purposes

as well. If there is to be a change in policy in this connection this should

come from the High Court and not this Court. There are no other competing

policy considerations which I have been able to identify which are relevant

to this case, except that the implication of allowing this claim is the

potential for liability by any manufacturer of component parts to any third

party who suffers loss as a result of late delivery. Mr Maurice Q.C. urged

upon us that as there was a unity of interest between the respondent, Mannin

Stamen and Mr & Mrs McElwee who were in reality the same interest, and

that seen in this light, no such potential indeterminate liability was exposed.

However, this contention cannot be accepted, for the reasons already given.

The learned trial judge did not consider the alternative statutory claims

referred to in paragraph [6], supra. As there is no notice of contention by

the respondent, there is no need to consider those possible claims in this

Court. In the light of the conclusions I have reached, it is not necessary to

consider the other grounds of appeal. I would therefore to allow the appeal,

set aside the verdict for the plaintiff and enter judgment for the defendant,

the respondent to pay the appellants costs of the appeal and of the whole of

I agree with Riley J that the appeal should be dismissed for the reasons

referred to in his judgment. The only comment which I wish to add is to

emphasize the present disgraceful uncertainity in the law dealing with

claims for pure economic loss in negligence. Both Mildren J and Riley J

refer to having found nothing to change their opposing views in the present

matter by reference to the High Court's recent decision in Perre v Apand Pty

Ltd (1999) HCA 36, unreported, 12 August 1999. Similarly, I have laboured

through the 437 paragraphs (and a good deal of the material referred to in

the 539 footnotes) of the seven judgments upholding that appeal. With the

greatest of respect, there is nothing there in terms of agreement on basic

guiding principles to assist with resolution of claims such as the present. I

appreciate that these observations will be of no comfort to either the

appellant in the present matter or countless future litigants until such time as

there is consensus as to the fundamental principles in this branch of the law

Janet and Michael McElwee are the sole directors and shareholders of three

companies namely Mannin Pty Ltd (,,Mannin), Stamen Investmen ts Pty Ltd

(,,Stamen) and Eire Pty Ltd (,,Eire). At all material times Mannin was a

building company, Stamen was the owner of land at the township of Timber

Creek and Eire was the operator of the Wayside Inn at Timber Creek. Eire

was also the vehicle proposed by the McElwees to be the operator of a

supermarket business, the premises for which were to be built by Mannin on

The appellant, Metclad Roofing & Cladding Pty Ltd (,,Metclad), was a

national manufacturer and supplier of building materials including cladding

approached Metclad through its Palmerston manager, John Michel, regarding

the supply of materials for the construction of the supermarket at Timber

Creek. In the course of those discussions Mr McElwee informed Mr Michel

that he wished to have the materials provided as soon as possible and that

Metclads ability to deliver the materials promptly would be an important

provided a written quote for the supply of the required materials and then,

shortly thereafter, on 29 June 1990 an amended quote was provided.

Mr McElwee spoke with Mr Michel on that day indicating that the amended

quote was accepted, and that he required delivery of the materials by the end

of July 1990. Mr Michel did not demur in relation to the delivery date.

The learned trial Judge found that it was a term of the contract that the

materials for the construction of t he supermarket would be supplied within a

reasonable time and held that a reasonable time was a period of five weeks

from 29 June 1990. There is no challenge to this finding.

Following the acceptance of the Metclad quote Mrs McElwee attended at

prepared and produced to Mrs McElwee and she paid the amount indicated

thereon, namely $20,604 less a two and a half percent discount. There is no

dispute that the appellant knew that the materials were for the construction

of a supermarket and there was a finding by his Honour that "Metclad knew

that the supermarket, when built, would be conducted by a particular person

The appellant did not supply the materials for the construction of the

supermarket by the agreed time and his Honour held that Metclad was

negligent in the "performance of this contract" as "deliveries were delayed

and piecemeal, and there was a failure to inform Mr McElwee of the true

His Honour found that the supermarket opened for business on 1 October

1991 and further that the "lateness of deliveries of material caused

substantial delay in the opening of the supermarket".

responsibility for the delay for the period from mid-December 1990 to mid-

April 1991 to the negligence of the appellant. He went on to find that the

loss of profits occasioned by the negligence of the appellant was $8,000 per

month for the period of four months and he awarded da mages of $32,000

plus interest in favour of the operator of the supermarket, Eire.

The appellant appeals against part of that judgment being a decision by

his Honour not to permit an amendment to the defence and, against the order

of his Honour granting the plaintiff/respondent an extension of time in

which to bring proceedings. Further the appellant appeals against the whole

The appellant appeals against the refusal by the learned trial Jud ge to grant

to the appellant leave to amend its defence. The appellant wished to plead

that the relationship between the appellant and Mannin was modified by

written terms which were contained on the reverse side of the standard

invoice issued by the appellant. The appellant sought to plead that Michael

McElwee and the respondent were aware of the standard terms and

conditions which, it was to be argued, effectively limited any right of claim

for damages in relation to delays in delivery and to the neglige nce of the

appellant. The application to amend was made on the first day of the trial.

In rejecting the application his Honour referred to Queensland & Anor v

J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 and in particular to the

"almost all of the considerations which Kirby J identified tell against the

exercise of the Courts discretion in favour of the defendant in the present

His Honour noted that the failure of the defendan t to raise the matter at an

earlier time had been explained and "the explanation is one which involves a

negligent omission on the part of the defendants advisers which has

His Honour took into account that the c ase before him was not "a huge

case", the difficulties in getting the case to trial and the view of his Honour

that a successful application would necessitate an adjournment, and the

provision of a costs order would not adequately deal with the prejudice

which flowed from the granting of the late application.

It is clear that a court on appeal will be slow to interfere with the exercise of

a discretion by the primary judge and will only do so where it appears that

some error has been made in the exercise of discretion: House v The King

[1936] HCA 40; (1936) 55 CLR 499 at 504-505. However, as was pointed out by Winneke P

in Howarth v Adey [1996] VICSC 4; (1996) 2 VR 535 at 542:

"There is a material difference between the exercise of a judicial

discretion which affects a mere matter of practice and procedure and

the exercise of a discretion which prevents a party from making a

case which he or she desires to make on the merits."

It is, as Winneke P observed, the duty of the court on appeal to interfere if

the court is of the opinion that the discretion has miscarried and an injustice

In Queensland v J L Holdings Pty Ltd (supra) it was held that "the ultimate

aim of a court is the attainment of justice and no principle of case

Dawson, Gaudron and McHugh JJ (at 152), the following well known

passage from Bowen LJ in Cropper v Smith (1884) 26 Ch D 701 was

"Now, I think it is well established principle that the object of courts

is to decide the rights of the parties, and not to punish them for

mistakes they make in the conduct of their cases by deciding

otherwise than in accordance with their rights. Speaking for myself,

and in conformity with what I have heard laid down by the other

division of the Court of Appeal and by myself as a member of it, I

know of no kind of error or mistake which, if not fraudulent or

intended to overreach, the Court ought not to correct, if it can be

done without injustice to the other party. Courts do not exist for the

sake of discipline but for the sake of deciding matters in controversy,

and I do not regard such amendment as a matter of favour or of

"Justice is the paramount consideration in determining an application

such as the one in question. Save insofar as costs may be awarded

against the party seeking the amendment, such an application is not

the occasion for the punishment of a party for its mistake or for its

delay in making the application. Case management, i nvolving as it

does the efficiency of the procedures of the court, was in this case a

relevant consideration. But it should not have been allowed to

prevail over the injustice of shutting the applicants out from raising

an arguable defence, thus precluding the determination of an issue

between the parties. In taking an opposite view, the primary judge

was, in our view, in error in the exercise of her discretion."

Kirby J agreed with the conclusions of the majority but expressed his own

He set out in some detail factors which courts had taken into

account in deciding for and against applications to amend pleadings. These

observations are to be found at pp167-172 of the judgment.

The two contractual terms upon which the appellant sought to rely were

contained on the standard invoice of the appellant and were as follows:

No claim by the purchaser for failure to deliver, short supply,

supply of incorrect goods or pricing or calculation errors shall

be accepted unless made within 7 days of the date of delivery.

Any claim for damages arising from the sale of goods by

Metclad to the purchaser (including any claim arising through

the negligence of Metclad) shall be limited to the invoice price

of the goods or at Metclads option the replacement thereof."

It is clear that if these terms applied to the relationship between Metclad and

Mannin they gave rise to a potential defence available to the appellant to a

claim made by Mannin. There is no appeal in relation to the proceedings

raised only in respect of the appeal by Metclad against the judgment in

There was no dispute that the terms were not drawn to the attention of

Mr McElwee at the time the agreement was entered into and it seems most

likely that they were not included on the copy of the invoice which was

provided to Mrs McElwee when she attended to pre-pay the purchase price.

The only way in which the terms and conditions could have been

incorporated into the agreement was in reliance by the appellant upon the

course of trading between the appellant and Mannin over a period of time

which necessarily involved an understanding by Mannin of the standard

The appellant indicated to his Honour a willingness to "obtain an affidavit

from (the solicitor) which explains fully the circumstances in which this

matter was overlooked". That issue was not raised again before his Honour

ruled against the application and no opportunity t o provide such an affidavit

was afforded to the appellant at that time. Such an affidavit would in any

event only have addressed the reason for the failure to plead the defence. It

was not suggested that it would address the merits of the defence.

appellant acknowledged that success in its application may require an

adjournment and an order for costs. The nature of any order for costs was

not discussed because that situation was not reached.

Despite the fact that the information provided to his Honour was not

supported by any affidavit material there was no dispute as between the

parties that there had been a course of dealings between Mannin and

Metclad. Mr Wyvill, who then appeared for Mannin and Eire, referred to "a

significant period of trading" between Mannin and Metclad and that there

was a course of dealing over a nine month period in respect of "hundreds of

Whilst it is true that most of the matters referred to by Kirby J in

Queensland v J L Holdings (supra at 170-171) tend to support the position

adopted by his Honour, some matters of significance do not. There was an

explanation for the delay that was accepted by his Honour. The error rested

with the legal advisers and there was nothing to sugg est fraud or improper

concealment of the defence on the part of those advisers or their client. It

seems the oversight was at least accidental or, as his Honour described it,

involved "a negligent omission on the part of the defendants advisers".

Although it must be acknowledged that a costs order in a case such as this is

not the ultimate panacea it was once thought to be, an appropriate costs order

could have been made in order to limit the prejudice suffered by the

respondent. There is no suggestion in this case, as there is in some others,

that an order for costs could not be enforced because of the impecuniosity of

The real problem for the appellant in relation to the application to amend

was that no basis was demonstrated for the su ggestion that the exclusion

clauses would have application to the circumstances of this matter. Whilst it

may be that there had been a history of dealings between Mannin and

Metclad and, further, whilst it may be that Mannin could be shown to have

been aware of the standard terms and conditions, there was nothing to show

or suggest that those terms and conditions in fact governed the relationship

The case for Eire and for Mannin was that this was a special arra ngement

with Metclad in which the building of the supermarket was "an urgent

matter", where the ability of Metclad to deliver the materials on time was a

matter which was "an important factor" in it obtaining the contract and

where, as his Honour found, time was of the essence. Whatever may have

been the arrangement on earlier occasions the circumstances surrounding

this particular occasion strongly support a finding that the terms and

conditions which applied were peculiar to it rather than being the standard

terms and conditions which may (or may not) have applied on other

Other than counsel for the appellant asserting to his Honour that "the terms

were incorporated pursuant to an application for credit and ... were endorsed

on the back of the invoices" it was never made clear, whether by evidence or

assertion, when or in what circumstances the standard terms would apply.

No argument was presented to his Honour on the application for leave to

amend the defence, nor was there any argument presen ted before this Court,

identifying reasons why those standard terms and conditions would have

application. The proposed pleading referred only to there being "standard

terms and conditions" but did not identify why they should have application

on this occasion. The evidence is to the contrary. This was not a purchase

The terms were not raised at the time the contract was entered into with

Mr McElwee and there is no suggestion that they were ever provided to

Mannin or any other party in relation to this transaction. This was not the

usual transaction as between Metclad and Mannin but, as has been pointed

The intention of the parties, as found by his Honour, was to the contrary of

the importation of the exclusion clauses and, had the amendment been

allowed, they would have had no impact upon the outcome of these

The failure to permit the amendment did not lead to any

injustice to the appellant. In the circumstances, and for the reasons I have

expressed and subject to the observations I have made, the decision of

his Honour not to permit the making of the amendments sought by the

The learned trial Judge erred in finding that the appellant owed the

respondent the duty of care found by the trial Judge.

It is the complaint of the appellant that it did not assume any responsibility

for the respondent nor did it assume responsibility for the construction of

did not rely upon the appellant. It was submitted that, the mere fact that the

materials to be supplied by the appellant were required for the building of a

supermarket and that it could be readily foreseen that economic loss to the

owner of the supermarket would be the consequence of delayed delivery,

was not sufficient to establish the existence of a duty of care. It was said

those matters do not themselves establish the necessa ry relationship of

Further it was submitted that it could not be foreseen that

economic loss to the operator of the supermarket would be the consequence

The appellant submitted that the effect of the decision made by his Honour

was to establish that the appellant owed the respondent the following duty of

"A duty of care to perform the contract of sale and supply of the

materials for the construction of the supermarket on time so as to

avoid loss of profit by the respondent, the third party operator

The appellant submitted that no such duty is recognised by law and, where

the relationship said to ground a tortious duty is a contract, and where the

alleged breaches of any tortious duty are entirely concurrent with the

contractual obligations, there can be no basis for holding that there exists

concurrently with a contractual obligation a tortious duty in coincidental

terms. Reference was made to Bryan v Maloney (1994-95) 182 CLR 609.

On the other hand the respondent submitted that the trial Judge correctly

identified the facts of the case as falling within the category of exceptional

"Willemstad" [1976] HCA 65; (1976) 136 CLR 529, where Gibbs CJ said (555):

"In my opinion it is still right to say that as a general rule damages

are not recoverable for economic loss which is not consequential

upon injury to the plaintiffs person or property. The fact that the

loss was foreseeable is not enough to make it recoverable. However,

there are exceptional cases in which the defendant has knowledge or

means of knowledge that the plaintiff individually, and not merely as

a member of an unascertained class, will be likely to suffer economic

loss as a consequence of his negligence, and owes the plaintiff a duty

to take care not to cause him such damage by his negligent act."

"A defendant will then be liable for economic damage due to his

negligent conduct when he can reasonably foresee that a specific

individual, as distinct from a general class of persons, will suffer

financial loss as a consequence of his conduct. This approach

eliminates or diminishes the prospect that there will come into

existence liability to an indeterminate class of person; it ensures that

liability is confined to those individuals whose financial loss falls

In Bryan v Maloney (supra) Mason CJ, Deane and Gaudron JJ said (618):

"One policy consideration which may militate against recognition of

a relationship of proximity in a category of case involving mere

economic loss is the laws concern to avoid the imposition of

liability "in an indeterminate amount for an indeterminate time to an

indeterminate class". Another consideration is the perception that, in

a competitive world where one persons economic gain is commonly

anothers loss, a duty to take reasonable care to avoid causing mere

economic loss to another, as distinct from physical injury to

anothers person or property, may be inconsistent with community

standards in relation to what is ordinarily legitimate in the pursuit of

personal advantage. The combined effect of those two distinct policy

considerations is that the categories of case in which the requisite

relationship of proximity with respect to mere economic loss is to be

found are properly to be seen as special. Commonly, but not

necessarily, they will involve an identified element of known

reliance (or dependence) or the assumption of responsibility or a

In the present case the learned trial Judge found that the appellant knew that

"the supermarket, when built, would be conducted by a particular person in

the McElwee interest, as distinct from a mere member of a class."

It was pointed out by the respondent that the negotiations were conducted by

Mr McElwee, that the invoice was directed to Mannin but that the drawings

which were supplied to the appellant recorded that the construction was a

"proposed store on lot 53, Town of Timber Creek for M and J McElwee".

Those plans were originally provided to Mr Michel but he subsequently left

the company and, at the date of trial, had died. The evidence of Mr Muir,

his successor, was that an examination of the plans revealed that the

supermarket was being built for Mr and Mrs McElwee. There can be little

doubt from the evidence and the findings of his Honour that the appellant

was, at all material times, aware that the building company Mannin was

owned by Mr and Mrs McElwee and that the supermarket was being built by

Mannin for them or a corporate entity controlled by them. What was not

then known by the appellant was the precise identity of the legal entity

which was to own the building, and the precise identity of the legal entity

In fact, as was subsequently revealed, the supermarket was being

constructed by Mannin on land owned by Stamen and was to be operated by

Eire. Those were all companies wholly owned by Mr and Mrs McElwee.

When Mr McElwee discussed matters with the appellant he was representing

both Mannin and the proposed owner/operator of the business premises who

was identified in the plans as himself and his wife. The appellant was, as

the respondent submits, effectively dealing with the actual person who was

to be the "owner/builder/operator or someone who embodied them all in a

representative capacity". Hence the finding by the learned trial Judge that

the supermarket when built would be "conducted by someone in the

Just what was meant by "conducted" was not then known with precision by

the appellant. However, what was known was that the McElwees, either

themselves or through some related business entity, would suffer financial

loss, either in the form of loss of profits or alternatively loss of rents, if the

opening of the supermarket was delayed because of the negligence of the

Further, it was submitted on behalf of the respondent, there was here a

voluntary assumption of responsibility by the appellant to the

owner/operator, through the McElwees, to deliver the goods on time. This

was, effectively, the finding of his Honour. The respondent relied upon that

voluntary assumption of responsibility. The appellant may not then have

been aware of the precise identity of the respondent but it was aware of the

reliance by virtue of the conversation with Mr McElwee. This then created

a relationship of sufficient proximity to give rise to the imposition of a duty

of care. At all relevant times the appellant, through Mr Michel, knew that it

was not just dealing with the builder but was also dealing with the building

owner who may also be the operator of the supermarket.

The respondent submitted that this was really a case where a contract

between the appellant and Mannin was the occasion which gave rise to a

duty of care to a third person, namely Eire. The promise of early delivery of

materials was, to the knowledge of the appellant, a promise secured for the

benefit of the owner and operator of the supermarket.

In Hill v Van Erp (1995-1997) 188 CLR 159 at 166 Brennan CJ said:

"Although a solicitors contractual duty is owed solely to the client,

the existence of that duty does not necessarily negate a duty of care

owed to a third party in tort. To the contrary, the undertaking of a

specialist task pursuant to a contract between A and B may be the

occasion that gives rise to a duty of care owed to C who may be

Also in Hill v Van Erp (supra) Dawson J said (175), relying upon Caltex Oil

(Australia) Pty Ltd v The Dredge ,,Willemstad (supra), that "damages are

recoverable where the defendant has the knowledge or means of knowledge

that a particular person, not merely as a member of an unascertained class,

will be likely to suffer economic loss as a consequence of his negligence".

Later Dawson J referred to a passage from the judgment of Windeyer J in

Voli v Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74 (182) and went on to

"In different terms, the principle expressed in that passage is that a

duty of care is imposed on a person who places himself in a

relationship which the law will recognise as one of proximity with

other persons where damage to those others is reasonably foreseeable

as a consequence of careless behaviour on his part, and merely

because a person has placed himself in that relationship by reason of

a contract with another does not necessarily preclude a finding of

proximity (although in some cases it might do so: Bryan v Maloney

at 621). The contract may give rise to an obligation to perform a

task but the performance of the task may, in all the circumstances,

give rise to a duty of care to perform it so as not to cause damage,

whether of a physical or economic kind, to another. Even if one

party to a contract can exclude liability to the other party for

negligence in the performance of the contract but cannot do so with

respect to someone who is not a party to the contract, that is no

reason to deny the existence of a duty of care to that third party. A

party to a contract is able to negotiate with respect to the protection

of his interests whereas a third party is not in a position to do so."

"... a party to a contract may owe a third party an additional or

concurrent duty in tort ... that is not to say that contractual duties are

irrelevant to a consideration of proximity or the content of a duty of

Her Honour went on to refer with approval to the following passage in

"In some circumstances, the existence of a contract will provide the

occasion for, and constitute a fact favouring the recognition of, a

relationship of proximity either between the parties to the contract or

between one or both of those parties and a third person. In other

circumstances, the contents of a contract may militate against

recognition of a relationship of proximity under the ordinary law of

negligence or confine, or even exclude the existence of, a relevant

In the circumstances of this matter where: (a) to the knowledge of the

supplier the builder and the owner/operator (or the representative of each)

were present and participating in the discussions; (b) a representation was

made by the supplier that the essential materials could and would be

delivered within a time frame and the supplier thereby assumed a

responsibility in that regard; (c) by virtue of those discussions the supplier

knew that both the builder (with whom a contract is entered into) and the

owner/operator (who wishes the building constructed urgently) relied upon

that representation and assumption of responsibility; and (d) it was clear in

the circumstances that any delay in supply of the essential materials would

lead to delay in completion of the project with consequent losses to the

owner/operator of the building; then (e) a duty of care must be owed by the

supplier to the owner/operator. It follows from the above that in this case

there was a duty of care owed by the appellant to the respondent.

This is not a case where the duty of care owed to the respondent arises out

of a contractual relationship. There was no contract entered into between

the appellant and the respondent. The duty of care the appellant owed to the

respondent is one owed to a non-contracting party. The situation is

consistent with that referred to by Mason CJ, Deane and Gaudron JJ in

Bryan v Maloney (supra) (at 622) where their Honours quoted from the

dictum of Lord Macmillan in Donoghue v Stevenson where he said:

"And there is no reason why the same set of facts should not give one

person a right of action in contract and another person a right of

There can be no suggestion that the recognition of a duty of care in these

circumstances will give rise to liability of "an indeterminate amount, for an

indeterminate time to an indeterminate class". Each element is clearly

defined and limited. The relationship between the appellant and the

respondent was sufficiently proximate to make it a special relationship.

In the circumstances the learned trial Judge did not err in finding that the

Since this matter was argued the High Court has delivered its judgment in

the matter of Perre v Apand Pty Ltd (1999) HCA 36. A reconsideration of

my reasons in light of that decision does not cause me to alter my views.

The learned trial Judge erred in finding that the appellant was negligent

in its dealings with the respondent and with Mannin.

The learned trial Judge found that the conduct of the appellant was

negligent. In the course of his reasons for decision he said:

"I do not have any difficulty in characterising Metclads purported

performance of this contract as negligent. The deliveries were

delayed and piecemeal, and there was a failure to inform

Mr McElwee of the true position when complaints were made. Nor

do I feel any difficulty in finding a causal connection between the

non-compliance with the contract and the late opening of the

The complaint of the appellant is that it was not proven that the breach of

contract arose as a result of any lack of care on behalf of the appellant. It

says that there was no evidence to establish what the cause of the delay was

prior to the appointment of Mr Muir as manager of the appellant, and that

there is an explanation for the later delay which, as I understand the

submission, does not involve any breach of a duty of care owed to the

The finding of the learned trial Judge, based up on the evidence of the

appellants workshop foreman, was that delivery could have been achieved

in four to five weeks from the date of the order. The evidence was that the

first delivery was not made until the third week of September and then did

not include substantial amounts of the ordered and necessary materials.

After what his Honour described as "the incomplete delivery" Mr McElwee

contacted the appellant and was informed that the balance of the materials

would be ready within a week. Over the next two months small items were

delivered but nothing which would allow construction of the supermarket to

proceed. Legal advice was sought by the McElwees and a letter from their

solicitors was sent to the appellant referring to the loss and damage already

suffered, indicating that the appellant had adopted a "dont care" attitude

and demanding prompt delivery of the remaining materials. This resulted in

It was not until 29 November 1990 that sheeting for the main roof was

delivered but again, as his Honour noted, it was minus eight sheets.

On 4 December 1990 the solicitor for the respondent sent another letter of

demand and then Mr Muir, the manager of the appellant, contacted

Mr McElwee and indicated that the appellant could not deliver the materials

as promised and that "Mannin should get the materials elsewhere". Mannin

As was submitted by Mr Maurice QC on behalf of the respondent, the

explanation for the delay in delivering the materials was peculiarly within

the knowledge of the appellant. Numerous promises were made that the

materials would be provided within a short period of time. No satisfactory

explanation was provided for the failure to deliver or for the ongoing delay.

On one occasion there was reference to problems with a crimping machine

and, on another, the former manager, Mr Michel, resigned and the evidence

of the foreman was that three employees left with him causing some

disorganisation. The relevant finding of the learned trial Judge was in the

"As to the losses flowing from delayed delivery, it is clear that such

losses were foreseeable by Metclad. Nor did the evidence reveal any

reasonable explanation for the delay. So far as the crimp curving is

concerned, it was said that the crimping machine was defective and

that difficulties were experienced in fixing it. The evidence of

Mr Newman (the foreman) suggests that Metclad put up with the

vagaries of this machine throughout most of 1990. It cannot, in my

view, be called in aid to render an unreasonable delay reasonable.

Otherwise, the delays in delivery were quite unexplained. It remains

a mystery how the copies of the original invoice were handled in the

Metclad system. The difficulties experienced by Metclad in

performing this contract are probably explained by a dislocation of

Metclad procedures by reason of a changeover of staff at the relevant

In summary form the evidence accepted by his Honour was that the

appellant promised delivery of the materials within five weeks of the date of

order and the evidence of the foreman was that this could have been

achieved. In fact it was not achieved and, throughout the period from the

expected time of delivery through to the time when Mannin was forced to

look elsewhere for the materials, the information provided by the appellant

in response to numerous requests was that the materials would be delivered

shortly. It was not until much later that the appellant indicated that it could

not deliver the then outstanding materials. If there was an explanation for

the delay which put the matter beyond the control of the appellant, then that

explanation would be expected to have emerged in the course of these

exchanges or, if not then, in the evidence of the manager Mr Muir before

his Honour. The only explanation provided indicated negligence on the part

of the appellant in continuing to rely upon the defective machine and failing

to properly organise its affairs rather than any matter to the contrary.

The finding of his Honour as to negligence was clear and firm and supported

by an identified evidentiary basis. In my opinion it ought not be interfered

The learned trial Judge erred in exercising his discretion to grant the

respondent an extension of time in which to bring its proceedings

The learned trial Judge found that the cause of action, the subject of these

proceedings, accrued to the respondent in November 1990. The limitation

period therefore expired in November 1993. There was no challenge to

these findings. The proceeding was commenced in February 1995 and was

An extension of time was sought and granted pursuant to s 44 of the

Limitation Act.

This section allows the Court to extend time if a fact

material to the plaintiffs case was not ascertained by the plaintiff "until

some time within 12 months before the expiration of the limitation period or

occurring after the expiration of that period, and that the action was

instituted within 12 months after the ascertainment" of that fact by the

plaintiff. The material fact identified by the respondent in this case was the

furnishing of a report by the accountants, KPMG, to the respondents

solicitors in May 1998. That report provided a calculation of the loss of

profit suffered by the supermarket. The report was based on materials

provided by Mrs McElwee and it was submitted to his Honour that the

revelation of the extent of the loss provided a material fact.

The leading authority in this area is the High Court decision in Sola Optical

Australia Pty Ltd v Mills [1987] HCA 57; (1987) 163 CLR 628 where, as his Honour

there is no requirement that there should be some interaction

between the ascertainment of the material fact and the

that a fact is material to a plaintiffs case if it is relevant to the

In that case the material fact relied upon was a medical report in which a

surgeon expressed the view that the plaintiff had suffered an 80 percent loss

of function of the arm. This is not unlike the ascertainment of the extent of

the loss revealed by the report of KPMG. KPMG was expressing an expert

opinion as to the effect of the information provided by Mrs McElwee. As

"There is a close analogy between the medical report there discussed

His Honour then considered the exercise of his discretion and held that there

was no reason why this should not be exercised in favour of the respondent.

A major consideration in this regard was that prior to the expiration of the

limitation period the appellant had been aware of a claim for loss of profits

We are dealing here with the exercise of a discretion by a trial Judge. In my

opinion he applied the correct principles and no error has been demonstrated

as to the exercise of his discretion. A material fact was identified and

accepted by his Honour, his Honour considered the issue of prejudice to

each of the parties and determined, in the circumstances, that an extension

of time ought to be granted. I see no basis for interfering with the exercise

The learned trial Judge erred in failing to consider the oral evidence of

Mr Muir was the successor to Mr Michel as manager of the appellants

premises at Palmerston. Mr Michel was responsible for the entry into the

contract by the appellant and the indication that the materials could be and

would be supplied within the time period found by the learned trial Judge.

Mr Muir gave evidence that he had become the branch manager in

September 1990, replacing Mr Michel. It was the evidence of Mr Muir that

he was unaware of problems with the supply of materials until he received

the letter from the solicitor representing Mr and Mrs McElwee.

Although it is true that the learned trial Judge did not subject the evidence

of Mr Muir to separate consideration it is clear that he addressed the matters

raised with Mr Muir in evidence eg the difficulties with the crimping

machine and matters relating to management. It is also clear from a

consideration of the history of the matter recorded by his Honour that he

accepted the version of events provided by Mr and Mrs McElwee and

Mr Riches and, where they conflicted with the evidence of Mr Muir, he

A fair reading of the reasons for decision demonstrates that the evidence of

Mr Muir was considered and addressed. The appellant does not indicate

what, if anything, flows from the suggested failure.

The learned trial Judge erred in finding that Eire Pty Ltd, Mannin Pty

Ltd and Stamen Pty Ltd were in reality the same legal entity.

In fact his Honour did not make a finding in the form suggested. His

"In this case, had the builder, owner and operator been the same

person (as in reality they were), loss of profits would have been

Read in context his Honour was not saying that th ey were the same legal

entity. He was making the obvious point that the three companies shared the

same directors and shareholders and were established to carry out the affairs

of those directors and shareholders, being Mr and Mrs McElwee. In the

course of the reasons for decision his Honour distinguished between the

companies reflecting, as was patently obvious, that they were separate legal

----------------------------------------------------