Probuild Constructions (Aust) Pty Limited v Shade Systems Limited

Judgment (ex tempore - revised 24 april 2018)

1. HIS HONOUR: The plaintiff (Probuild) as contractor and the defendant (Shade Systems) as subcontractor made a subcontract on 14 October 2014. Under that subcontract, Shade Systems was to manufacture or supply and install external louvres for an apartment complex being constructed by Probuild for a developer.
2. In the usual way, the parties fell into dispute. There was an adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW). The adjudicator awarded a little under $280,000 to Shade Systems. That determination has been challenged in this Court, in the Court of Appeal and in the High Court. The primary judge decided the challenge in Probuild's favour, but the Court of Appeal and the High Court took a different view.
3. While all that was happening, Probuild commenced separate proceedings in this Court claiming liquidated damages for delay. The amount claimed is either $2.35 million or $11.625 million. It is a little unclear how a claim for liquidated damages could have alternatives varying so wildly, but no doubt some unfortunate trial judge will have to grapple with that and many other problems.
4. Shade Systems wishes to amend its Technology and Construction List Response, in what I will call the liquidated damages proceedings, to assert that the relevant conduct of Probuild in commencing and maintaining the liquidated damages proceedings is unconscionable and in breach of ss 20 and 21 of the Australian Consumer Law [1] .
5. It is an integral part of that case that Shade Systems should both allege and prove that the relevant conduct was engaged in in trade or commerce.
6. Shade Systems also wishes to allege, in its amended list response, that the proceedings, even if they involve a claim that is "genuine", have been commenced and are being prosecuted for an ulterior purpose, namely to shut Shade Systems out of its rights under the adjudication determination and under various costs orders, and undertakings for costs, that have been made or given in Shade Systems' favour in the course of the earlier litigation.
7. Probuild opposes the making of the amendments. Probuild says, in essence, that the amendments are either bound to fail or alternatively so weak that they should not be allowed to be propounded, because it is likely that the hearing date will be threatened.
8. A hearing date has been allocated. The liquidated damages proceedings have been set down for hearing for three days commencing 26 June 2018. That relatively expedited date was fixed after a substantial degree of dispute between the parties as to whether Shade Systems should be entitled to receive the benefit of the determination in its favour (only two years after the determination was given) and of the costs orders and undertakings to which I have referred.
9. When the notice of motion was heard before me yesterday, it appeared that the draft amendment might have a significant defect, because it did not show how it was that the relevant conduct could be said to have been conduct engaged in in trade or commerce. The parties accept, and rightly so, that it is essential that the conduct be conduct engaged in in, and not merely in connection with or in relation to, trade or commerce. That proposition flows inexorably from a number of decisions, of which it is necessary to cite only Concrete Constructions (NSW) Pty Limited v Nelson [2] .
10. Having said that, it is correct to observe, as Mr Hume of Counsel for Shade Systems submitted, that the definition of trade or commerce contained in s 2 of the Australian Consumer Law is somewhat wider than the definition of the equivalent phrase, in the Trade Practices Act 1974 (Cth), that was the subject of the High Court's consideration in Concrete Constructions. The expansion comes because, as s 2 makes clear, conduct may be engaged in in trade or commerce even if it is not carried on for profit.
11. Mr Robertson of Counsel, for Probuild, referred among other things to a notice to produce that Shade Systems' solicitors had served on Probuild's solicitors. He submitted that if the amendments were permitted, the inevitable result would be that Shade Systems would seek a direction that Probuild comply with the notice to produce. The notice to produce would require the production of some 25 categories of documents, some of them of quite extraordinary width, and several of them referring to "Probuild's motivation/s" for doing certain things. I have to say that I have some difficulty in seeing how such a notice could be fully enforceable (or, to put it the other way, how a party in Probuild's position could be required to comply with all of it).
12. However, what I am required to decide is not whether the notice to produce should be set aside in whole or in part. It is whether Shade Systems should be given the leave that it seeks.
13. Because there was the defect that I perceived in the drafting of the proposed amendments, I adjourned the motion for further hearing until today. I did that to give Shade Systems an opportunity to state, in effect by way of particulars, the material facts upon which it would rely to support its contention that the relevant conduct was conduct engaged in in trade or commerce. Shade Systems has provided some 14 paragraphs of particulars accordingly. Mr Robertson's submission was that these do not rectify the essential defect, which is that the conduct alleged is conduct undertaken in litigation, and not in trade or commerce.
14. The parties referred to a number of authorities on the point. I have referred already to Concrete Constructions. An authority on which Mr Robertson relied was the decision of the Court of Appeal of Queensland in Pertzel v Qld Paulownia Forests Ltd [3] .
15. In that case, Keane JA (with whom Mackenzie AJA and Lyon J agreed) said as follows at [49]: In my respectful opinion, the appellant's argument on this point must be accepted. The conduct of the appellant on which the respondent's case depends was the making of a response to a claim in accordance with obligations imposed by statute as conditions precedent to litigation. This conduct occurred within statutorily ordained processes intimately associated with the administration of justice. These processes were themselves concerned to facilitate the determination of the rights and obligations of the parties where those matters were in dispute. One would not recognise these dispute resolution processes as part of trade or commerce for the same reason that one would recoil from the suggestion that the courts are engaged in trade or commerce. In each case, one is concerned with activities which take their character from the function of the State in providing for the peaceful resolution of disputes. That these particular dispute resolution processes stem, in part, from the appellant's activities in the business of providing insurance does not mean that the conduct of the process in conformity with the requirements of the statutory regime is an activity that "of its nature bears a trading or commercial activity".
16. The conduct the subject of the complaint in that case was conduct as between an insurer and a person claiming against the policy for tortious conduct of the insured. It was, if I may say so with respect, conduct a long way removed from the conduct upon which Shade Systems relies in this case.
17. Mr Robertson referred also to the decision of McKerracher J in Bride v The Shire of Katanning [4] . His Honour was there dealing with an unrepresented litigant who asserted that in certain conduct of the Shire Council and its solicitors, apparently involving steps taken to enforce payment of rates or other legal obligations, offended the relevant provisions or their equivalent. McKerracher J held that the conduct was not demonstrated to be conduct in trade or commerce and that that this was a fundamental defect in the claim. His Honour said at [31]: Moreover, carrying on litigation is certainly not conduct 'in trade or commerce', regardless of whether the asserted participant in trade and commerce is the protagonist or the recipient of the protagonist's activities in litigation. Steps taken and conduct engaged in litigation, again, are governed by statutes and rules prescribing the nature of the conduct which may or must be engaged in, in the course of litigious activity. There are ample statutory and discretionary avenues by which the conduct of parties in litigation is addressed. None of these avenues operates on the premise that the conduct is commercial in character.
18. It must be accepted that those decisions, and I stress that they are merely representative of many to the same effect, do suggest that the Courts are reluctant to agree with the proposition that conduct in litigation can be conduct engaged in in trade or commerce. However, the decision of the Full Court of the Supreme Court of South Australia in Macks v Viscariello [5] appears to indicate that there is no absolute brightline rule of exclusion; or that there is no principle of law to the effect that litigious conduct cannot be conduct engaged in in trade or commerce. Their Honours said at [234] of that decision that the primary judge had been correct in saying: Of course the voluntary administrator may in the course of exercising his or her statutory duties dispose of the assets of the company in the course of trade or commerce. The prosecution, and compromise, of a chose in action of the company under administration may also involve conduct in trade or commerce. However, the conduct of an administrator in exercising his or her statutory functions, powers and duties relating to the creditors, contributories and directors of the company under Part 5.3A does not constitute conduct in trade or commerce.
19. I accept, as Mr Robertson submitted, that this observation was made along the way to concluding that the relevant conduct in that case was not conduct in trade or commerce. However, as I read their Honours' reasons, that was not simply because it was conduct in litigation. Had that been all there was, their Honours may have come to a different view. It was the characterisation of the conduct overall that led their Honours to conclude that the element of "in trade or commerce" was lacking.
20. Mr Hume at one stage described the question, whether conduct was engaged in in trade or commercial, as being "fact rich." It is undoubtedly correct to say that the resolution of that question requires an examination of all the relevant facts, and the application to those facts of the proper understanding of the term "in trade or commerce" as that is defined (expansively) in s 2 of the Australian Consumer Law and explained authoritatively in numerous decisions.
21. In the present case, what Shade Systems wishes to argue is, to adapt the maxim of Clausewitz [6] , that Probuild's conduct is trading or commercial activity continued by other means.
22. I see no reason why, in principle, such an argument could not succeed. Just as a liquidator or receiver may act in trade or commerce by going to court to seek to recover the fruits of, or to compromise, a chose in action of the company of which he or she is in control, so too, it seems to me, it is at least arguable that a company in the building and construction industry may use litigation as an instrument in its pursuit of commercial gain. I wish to make it perfectly clear that I am not suggesting that there is anything wrong or inappropriate in someone's so acting. I say no more than that my years on this Court have demonstrated, as a truism beyond argument, the proposition that those in the building and construction industries routinely use litigation as a means of carrying on their commercial aims.
23. It may be correct to say, as Mr Robertson in effect submitted, that some of the particulars given are a little "skinny" (my word, not his). However, to focus, as this submission did, on one paragraph out of 14 seems to me rather to miss the point. The question is whether, if the whole of the facts, matters and circumstances particularised can be proved, it would be open to a court to find that Probuild's conduct, in taking measures (including litigation) to assert that Shade Systems is liable for liquidated damages, is conduct engaged in in trade or commerce. In my view that argument cannot be said to be bad as a matter of law.
24. Is it then so weak as to justify rejection at this stage? I think not. It does not seem to me to be possible to say, at the outset, and before any evidence has been heard, that a particular argument, whilst it may be legally sustainable, is nonetheless so defective factually that it must fail. I do not suggest that the proposed defence will succeed. I suggest no more than that its strength cannot be assessed, and certainly cannot be assessed to be weak to the point that justifies peremptory rejection at this time.
25. The defence sought to be advanced of abuse of process does seem to me to be extraordinarily weak. If there were no more than that in the amendment, I would be inclined to refuse leave. But if leave is to be granted to advance what I might regard as the principal argument - unconscionable conduct under ss 20 or 21 of the Australian Consumer Law - it does not seem to me that the trial will be lengthened because it is sought, in the alternative, to characterise the relevant facts as demonstrating abuse of process.
26. It may very well be that if leave to amend is granted, the hearing date cannot be kept. That does not seem to me to mean that the leave should be refused. Although had there was some suggestion of delay in the submissions that Mr Robertson put, the reality is that the conduct upon which Shade Systems relies, in relation to all the proposed amendments, involves events right up until the very recent past. To put it another way, Shade Systems' case that is a consideration of the whole of that conduct should be undertaken with a view to characterising it in the way that Shade Systems would contend is correct. Thus, if the hearing date is to be lost (and I express no view as to this), that does not seem to me to be something from which the court should shy.
27. I raised, in the course of submissions, the question of why it was necessary, for unconscionability under the general law to be relied upon, that the relevant conduct should be said to have been engaged in in trade or commerce. Mr Robertson responded, correctly, that this was so if the Australian Consumer Law were to be relied upon. However, it does not follow that even if the conduct were not conduct in trade or commerce, the general law conceptions of unconscionability would have nothing to say. Mr Robertson submitted that he was here to answer the amendment that was propounded and not one that might be made. I accept that this is so. Nonetheless, it seems to me, I must take account of the reality, which is that sooner or later it may occur to someone to plead reliance on unconscionability, in the general law sense, without the necessity to prove conduct in trade or commerce.
28. For those reasons, I have come to the conclusion that leave to amend should be granted. In reaching that conclusion, I wish to say no more than I have said already about the Notice to Produce. The extent to which that is to be agitated is a matter that the parties will have to deal with as best they can.
29. That leaves the question of costs and the question of directions. If the parties are now prepared to put submissions as to the appropriate directions, I will deal with it. Otherwise, I will stand the matter into the list on Friday.
30. As to costs, the usual order - that the defendant pay the plaintiff's costs of and incidental to and thrown away by reason of the amendment - should be made. The costs of the Notice of Motion in the ordinary way would be costs that I would order to be costs in the cause, because the merits of the competing contentions will not be something that can be assessed properly until there is a final decision. However, the hearing has taken longer than expected. In my view the order that I have indicated should apply, with the exception of the costs of today, which should be paid by the defendant in any event.