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[2024] QCA 218
General information, not legal advice.
Court of Appeal (Qld)
2024-11-12
Bond JA, Callaghan and Crowley JJ
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Source: Queensland Judgments (Supreme Court Library Queensland) (www.queenslandjudgments.com.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF QUEENSLAND
CITATION: Sedgwick Australia Pty Ltd v JLOC Super Pty Ltd [2024] QCA 218
PARTIES: SEDGWICK AUSTRALIA PTY LTD / ACN 003 437 161 / (appellant) / v / JLOC SUPER PTY LTD / ACN 605 330 786 / (respondent)
FILE NO/S: Appeal No 16103 of 2023 / SC No 12417 of 2021
DIVISION: Court of Appeal
PROCEEDING: General Civil Appeal
ORIGINATING COURT: Supreme Court at Brisbane – [2023] QSC 270 (Freeburn J)
DELIVERED ON: 12 November 2024
DELIVERED AT: Brisbane
HEARING DATE: 7 May 2024
JUDGES: Bond JA, Callaghan and Crowley JJ
ORDERS: Appeal allowed. Set aside paragraph 1 of the orders made by the primary judge on 29 November 2023 and on 15 December 2023. Strike out paragraphs [5A], [22AB] and [22B] of the respondent’s fourth amended statement of claim, with leave to replead. The parties are directed to file written submissions on the costs orders to be made in respect of the appeal and of the application before the primary judge within 7 days, such submissions not to exceed 4 pages in length.
CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL – GENERAL PRINCIPLES – INTERFERENCE WITH DISCRETION OF COURT BELOW – IN GENERAL – WRONG PRINCIPLE – PARTICULAR CASES – DECISION AFFECTING PLEADINGS – where the original trustees were trustees of a superannuation trust fund and held real property in that capacity on which a building was constructed – where, following damage to the building by a storm, the insurer appointed a loss adjuster to assess damage and determine what needed to be done, with a builder carrying out rectification works – where a new trustee was appointed and legal title to the property vested in it, and a subsequent storm occurred causing further damage, and the new trustee claimed the total costs of the repair of damage and ancillary works alleging that it was caused by the builder failing to carry out properly the original rectification works – where the new trustee commenced a proceeding against the builder and the loss adjuster seeking to recover for loss and damage suffered for breach of a duty of care allegedly owed in tort – where the primary judge dismissed an interlocutory application by the loss adjuster to strike out paragraphs of the new trustee’s statement of claim – whether the primary judge erred in the construction of s 12(6) of the Trusts Act, in holding the new trustee was entitled to sue in respect of the alleged conduct of the loss adjustor prior to appointment as trustee – whether the primary judge erred in the failing to strike out all or part of the pleadings – where the plaintiff advanced an inadequate pleading of the causal link between allegedly wrongful conduct and the loss allegedly suffered / Trusts Act 1973 (Qld), s 12(6) / Uniform Civil Procedure Rules 1999 (Qld), r 149, r 154 / Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd (2021) 9 QR 141; [2021] QCA 198, cited / Agar v Hyde (2000) 201 CLR 553; [2000] HCA 41, cited / Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11, cited / Berry v CCL Secure Pty Ltd (2020) 271 CLR 151; [2020] HCA 27, cited / Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215; [1987] FCA 122, cited / Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1, cited / English v Vantage Holdings Group Pty Ltd [2021] WASCA 47, cited / General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69, cited / Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, cited / Just GI Pty Ltd v Pig Improvement Co Aust Pty Ltd [2001] QCA 48, cited / New South Wales v Spearpoint [2009] NSWCA 233, cited / Richmond Valley Council v JLT Risk Solutions Pty Ltd [2022] NSWSC 1761, cited / Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 7) [2019] QSC 241, cited / Santos Limited v Fluor Australia Pty Ltd [2020] QCA 254, cited / Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2004] QSC 457, cited / Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2022] NSWSC 144, cited
COUNSEL: D P de Jersey KC for the appellant / S W Couper KC, with F Y Lubett for the respondent
SOLICITORS: Landers & Rogers for the appellant / Turks Legal for the respondent
BOND JA: John and Lorraine Corbett (the original trustees) were trustees of a superannuation trust fund. In their capacity as trustees of that fund they held certain real property in the Brisbane CBD (the Property), on which a 6-storey commercial building (the Building) was constructed.
The original trustees insured the Building with Chubb Insurance Australia Limited (the insurer) pursuant to an industrial special risks policy. After a storm damaged the Building they made an insurance claim under the policy. The insurer appointed the appellant (the loss adjuster), amongst other things, to assess the damage and to determine what needed to be done. A builder carried out certain rectification works.
The original trustees appointed the respondent (the new trustee) as the new trustee of the superannuation trust fund and retired as trustees. Shortly thereafter the new trustee became registered as legal owner of the Property. Unfortunately, there was then a second storm and the Building was damaged again. The new trustee contended that the total of the costs of repairing the damage and certain ancillary costs was about $2.6 million.
The new trustee says the damage caused to the Building by the second storm occurred because the builder failed to carry out properly the rectification works for the damage caused by the first storm. The new trustee contended that the loss adjuster owed the original trustees, or alternatively the new trustee, a duty of care in tort to avoid property damage and economic loss. It contended that the loss adjuster breached that duty essentially by the way in which it had provided instructions, site inspections and monitoring in relation to the original repair work carried out by the builder. If the loss adjuster had fulfilled its duty, the builder would have done the original repair work properly and the loss caused by the second storm would have been avoided.
The new trustee commenced a proceeding against the builder and the loss adjuster seeking to recover the $2.6 million loss and damage it had suffered. Before the primary judge the loss adjuster applied to strike out various paragraphs of the new trustee’s statement of claim on the following bases:the new trustee was not the proper plaintiff to make the claim for breach of any duty of care owed to the original trustees and s 12(6) of the Trusts Act 1973 (Qld) did not operate to permit the new trustee to sue for breach of the duty of care owed to the original trustees;the facts pleaded by new trustee’s pleading could not give rise to the alleged duty of care owed by the loss adjuster to the new trustee; andeven if a duty of care was owed by the loss adjuster, the new trustee had not pleaded a coherent causal link between any breach of that duty and the new trustee’s alleged loss.
Relevant legal principle
Four aspects of legal principle should be noted at the outset.
First, appellate courts exercise caution in reviewing interlocutory decisions, particularly discretionary decisions on points of practice or procedure which do not determine substantive rights. Although there is no absolute rule and each case must be considered in light of its own particular circumstances, generally an appellate court will not interfere unless, in addition to error of principle, the appellant demonstrates that the order will work a substantial injustice to one of the parties.1
Second, the power summarily to determine all or part of a case by exercising the power to strike out all or part of a pleading is reserved for clear cases.2 But, having heard argument, if a Court is persuaded that a pleading (or a part of a pleading) is defective because it does not disclose a reasonable cause of action, has a tendency to prejudice or delay a fair trial, contains allegations which are unnecessary, scandalous, vexatious or embarrassing, or is otherwise an abuse of the processes of the Court, the Court should not shrink from exercising its power.
Third, if causation is an essential element of a pleaded cause of action:The pleader must plead the material facts which establish the necessary causal link between the alleged wrongful conduct and the claimed loss.3That duty extends to require the pleader to plead the material facts on which the party relies to establish any counterfactual relied on to establish the requisite causal link.4The pleading so framed, must give rise to a reasonable inference that the alleged wrongful conduct and the claimed loss stand to each other in the relation of cause and effect.5The entitlement to have the foregoing matters pleaded should be regarded as an incident of the essential function of pleadings, which is to ensure the basic requirement of procedural fairness that a party should have the opportunity to meet the case put against it.6
I interpolate that not every case will require the specific pleading of a counterfactual. The causal link may be obvious. Or a specific counterfactual may not form part of the claimant’s case. But, on the other hand, the causal link might not make sense without a pleaded counterfactual. Or the requisite inference of cause and effect might not be able to be drawn without a pleaded counterfactual. Or it might be unfair to the other party not to plead the counterfactual relied on. In such cases a specific pleading of the counterfactual is required.
The new trustee’s pleaded case
Although I have already outlined the broad nature of the new trustee’s case, consideration of the issues arising on this appeal requires a more detailed identification of the way in which the new trustee pleaded that case. I seek to do so under this heading.
Before the primary judge, the operative pleadings were the new trustee’s third amended statement of claim; the loss adjuster’s amended defence to that statement of claim; and the new trustee’s reply to the loss adjuster’s amended defence. A draft fourth amended statement of claim had been prepared and was before the primary judge and, although that pleading had not then been filed, both parties were content to proceed by reference to it. It has since been filed. Accordingly, as it was below, it is appropriate to regard that version of the pleading as the new trustee’s operative pleading. It is convenient to refer to that pleading as the 4ASOC.
In order to make more sense of the case pleaded in the 4ASOC it is appropriate to record the relevant material facts there advanced in chronological order, even though that is not how the 4ASOC is set out. Although I will consider the loss adjuster’s grounds of appeal under discrete headings below, it will assist in understanding the view I ultimately reach if, on the way through, I identify some inadequacies in the manner of expression of the pleading.
On 27 November 2014, the original trustees were the trustees of their own superannuation fund, called “the Corbett Superannuation Fund”, and referred to in the pleading simply as “the Fund”: 4ASOC at [1B(a)]. It seems implicit in the way the case has been advanced that the trust must have been established pursuant to an express written trust instrument called “the Corbett Superannuation Deed”, but, nevertheless, the new trustees did not plead that fact. Nor did it plead the terms of the trust, or, more importantly, albeit with the exception of subsequent reference to cl 14.3 of the Deed, what were the relevant powers, authorities and discretions which the trust instrument conferred on the original trustees. These were obvious deficiencies in the pleading.
On 27 November 2014, the original trustees were the registered proprietors of the Property under the Land Title Act 1994 (Qld): 4ASOC at [1B(b)].
On 27 November 2014, a storm subjected the Building to heavy rain, hail and wind and caused it significant water and hail damage: 4ASOC at [4] and [5].
At this juncture it is appropriate to interpolate the identification of two curious absences in the chronological pleading of relevant material facts:Having regard to the defence8 and the reply, it appears to be common ground that at the time of the storm the original trustees had insured the Building with the insurer. But the 4ASOC did not plead that fact. Indeed, the 4ASOC did not plead anything at all about the nature of any relationship between the original trustees and the insurer when one would have expected something to be pleaded about the fact and nature of the insurance policy and the nature of the obligations which the insurer had assumed to the original trustees thereby. These were obvious deficiencies in the pleading and, it will appear, may affect the consideration of the causation plea.On the same basis, it also appears to be common ground that shortly after the storm the original trustees made an insurance claim against the insurer. But, again, the 4ASOC did not plead any material facts concerning any insurance claim made by the original trustees or whether the insurer granted indemnity, although presumably it must have. This was another obvious deficiency in the pleading, and for the same reasons.
to exercise reasonable care to avoid property damage and/or economic loss, including consequential loss, in approving and providing instructions to the builder, and maintaining site inspections and monitoring the repair works performed by the builder, to ensure it was carried out in accordance with those instructions: 4ASOC at [20B].
The original trustees and the new trustee were unable to protect themselves from the consequences of the loss adjuster’s failure to exercise reasonable care (4ASOC at [20CA]) because –The circumstances of the transfer of the Property from the original trustees to the new trustee were such that no third-party warranty that the Property was free from defects could be obtained: 4ASOC at [15AB] to [15AD].The original trustees had no contractual rights against the builder for defects in the Rectification Work which could be assigned to the new trustee: 4ASOC at [15AE].The original trustees had no contractual rights against the loss adjuster because it was engaged by the insurer, not the original trustees, and therefore the original trustees had no contractual rights which could be assigned to the new trustee: 4ASOC at [20C].
Further, by reason of earlier pleaded matters, the new trustee’s claim against the loss adjuster does not result in any indeterminacy of liability: 4ASOC at [20D].
By reason of earlier pleaded matters, the loss adjuster owed a duty to the new trustee (as subsequent owner of the Building) to exercise reasonable care to avoid property damage and/or economic loss, including consequential loss, in approving and providing instructions to the builder, and maintaining site inspections and monitoring the repair works performed by the builder, to ensure it was carried out in accordance with those instructions: 4ASOC at [21].
The loss adjuster breached the duty of care owed to the new trustee or alternatively the original trustees, by failing to inspect and monitor the Rectification Work with reasonable care, in that it failed to do things which would have identified and required the builder to rectify the inadequacies in the way in which the builder had carried out the original Rectification Work: 4ASOC at [22].
By reason of earlier pleaded matters, the risk of property damage to the Building and/or economic loss including consequential loss resulting from a breach of the duty of care owed to the original trustees or alternatively to the new trustee was – a risk of which the loss adjuster knew or ought reasonably to have known;a risk that was not insignificant; anda reasonable person in the position of the loss adjuster would not have acted in the manner earlier pleaded as amounting to a breach by the loss adjuster of its duty of care: 4ASOC at [22A].
The new trustee advanced two counterfactual propositions:4ASOC at [22AB] alleged that if the loss adjuster had discharged the duty of care owed to the new trustee, or alternatively the original trustees, it would have inspected and monitored the Rectification Work and in the course of so doing identified that the builder was not following relevant instructions and would have informed the builder or alternatively the original trustees of that fact.4ASOC at [22B] alleged that if the loss adjuster had acted in the manner pleaded at [22AB] the Rectification Work would not have been done in the defective way complained of, or the defects would have been identified and remedied because the builder would have followed instructions or rectified the work as required, with the result that the ingress of rainwater after the second storm would have been avoided and the ultimate loss and damage avoided.
The standing issue
The grounds of appeal
“1.The primary judge:
erred in holding that the effect of section 12(6) Trusts Act 1973 is that the [new trustee] is entitled to sue in respect of alleged conduct of the [loss adjuster] occurring prior to 17 April 2015 (at reasons [18], [19] and [21]); and
ought to have found that the concepts of “powers, authorities and discretions” in section 12(6) Trusts Act 1973 do not give standing to a trustee to sue in respect of causes of action for breach of duty which were incomplete upon the trustee’s appointment and which have not been assigned to the trustee.
2.The primary Judge:
erred in holding that at common law, the [new trustee] had standing to enforce a pre-existing right of action for a tort committed in respect of the trust property (reasons at [22] and [23]); and
should have held, as was identified in Young v Murphy [1996] 1 VR 279 per Brooking J at 291, that “The appointment of new trustees and the transfer of the trust property to them are two distinct matters: Noble v Meymott (1851) 14 Beav 471; 51 ER 367 at Beav 478” and that a vesting order or an assignment of choses in action arising out of alleged conduct of the [loss adjuster] occurring prior to 17 April 2015 or alternatively prior to 29 June 2015 was necessary for the [new trustee] to sue in respect of causes of action arising out of such alleged conduct; neither of which could have occurred because there was no complete causes of action at these times.”
Consideration
“12****Power of appointing new trustees
Where a trustee, … -
…
seeks to be discharged from all or any of the trusts or powers reposed in or conferred on the trustee; or
…
then the person nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust, … may by writing appoint a person or …to be a trustee or trustees in the place of the trustee first in this subsection mentioned.
…
Every new trustee appointed under this section has the same powers, authorities, and discretions and may in every respect act, as if the new trustee had originally been appointed a trustee by the instrument (if any) creating the trust, both before and after all the trust property becomes by law or by assurance or otherwise vested in the trustee.
…
The provisions of this section relating to a person nominated for the purpose of appointing new trustees apply whether the appointment is made in a case specified in this section or in a case specified in the instrument (if any) creating the trust, but where a new trustee is appointed under this section in a case specified in that instrument, the appointment shall be subject to the terms applicable to an appointment in that case under the provisions of that instrument.”
“1BA (a) By clause 14.3 of the Corbett Superannuation Deed, the [original trustees] had the power to appoint a new trustee of the Fund.
The [original trustees] sought to be discharged as trustees and retired as trustees of the Fund.
The [original trustees] appointed [the new trustee] as trustee of the Fund pursuant to the said power.
In the premises, the appointment of [the new trustee] as trustee was an appointment within the meaning of s 12(1) of the Trusts Act 1973 and was, within the meaning of s 12(6) of the Trusts Act 1973, an appointment under s 12.
1CBy operation of s 12(6) of the Trusts Act 1973 (Qld), upon appointment of [the new trustee] as trustee of the Fund in place of the [original trustees], [the new trustee] had the same powers, authorities, and discretions and could in every respect act as if [the new trustee] had originally been appointed as trustee of the Fund, both before and after all the trust property of the Fund became vested in [the new trustee].
1CAIn the premises, for the purpose of this proceeding, [the new trustee] is deemed to have been at all material times the trustee of the Property.”
Those paragraphs have several technical deficiencies. The new trustee has thought it to be material to assert at [1C] the conclusion that it succeeded to the powers, authorities, and discretions of the original trustees. But, as I have already mentioned, it failed to plead either the instrument pursuant to which the trust was established or the terms of that instrument, so it is not apparent what those powers, authorities, and discretions of the original trustee were. Further, in order for an appointment under s 12(1) to have the effect asserted at [1C], namely that the new trustee would have the same powers, authorities, and discretions as the original trustees, the appointment would have to be by a person nominated for the purpose of appointing new trustees by the instrument creating the trust, and that plea is not made. Further, the appointment would have to have been made in writing and that plea is not made.
However, none of those points were taken by the loss adjuster. Its point is rather different and concerns whether s 12 could arguably give standing to the new trustees to sue for breach of a duty owed to the original trustees in respect of causes of action for breach of duty which were incomplete upon the date of the new trustee’s appointment (because loss had not yet been suffered).
It is convenient to deal with appeal ground 2 first.
The relevant aspect of the pleaded chronology of events may be recapitulated:On 27 November 2014, at which time the original trustees had legal title to the Property (and therefore the Building built on it), the original storm damaged the Building.On 17 April 2015, the original trustees ceased being trustees and the new trustee became trustee.On 29 June 2015, legal title to the Property vested in the new trustee when the new trustee became the registered proprietor of the Property under the Land Title Act.From on or about 28 November 2014 until on or about 26 June 2015 the builder did the repair work.On 22 October 2015, the second storm damaged the Building.
It is a trite proposition that a cause of action in tort is not complete until damage is suffered. On the face of the pleading, damage was not suffered until after the new trustee was appointed and legal title to the Property had vested in it. Indeed, before this Court, the new trustee acknowledged that it was common ground that there was no complete cause of action in tort at the time the new trustee took over as trustee from the original trustees, so there was no cause of action capable of assignment by the original trustee to the new trustees. Accordingly, the contention advanced at appeal ground 2(a) may be accepted. But, as the new trustee contended before this Court, that is not to the point. The new trustee does not contend that complete causes of action were held by the original trustee which then vested in it by virtue of its appointment. Accordingly, appeal ground 2(b) is irrelevant.
“The argument, if sustained, would produce surprising results. It would mean that the [original trustees] could not sue for a breach of duty owed to them because the damage was suffered by [the new trustee]. And [the new trustee] could not sue for the damage [it] suffered because the relevant duty was owed to the [original trustees]. It would mean that a new trustee, who takes over from a retired or deceased or delinquent trustee would have no remedy for any cause of action where the elements fall on either side of the appointment of the new trustee.”
The pleading issues
The challenge to the primary judge’s decision not to strike out the alleged duty of care in tort.
“The primary judge erred in finding at [24] of the reasons that the principles in Bryan v Maloney (1995) 182 CLR 609 and Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 applied with the result “that this is not a clear case where the court could exercise its discretion to strike out” where his Honour ought to have held that the principles in those two cases could not apply in this case.”
It is true that the primary judge expressed the view that the present was not a sufficiently clear case to justify striking out the alleged duty of care in tort. However, as I mentioned at [15] above, authority recognises that it may well be appropriate for a Court to form that view, and to exercise its discretion accordingly.
In the present case, there is very evident factual uncertainty surrounding the pleaded matrix of relationships between the original trustees; the insurer, the loss adjuster and the builder and in relation to the various aspects of knowledge which have been pleaded. There is no reason to conclude that the primary judge erred in principle in reaching the view that the case was not sufficiently clear to warrant exercising the power to strike out or to summarily dismiss. Nor does the loss adjuster demonstrate that the order will work a substantial injustice to it. There is no basis on which this Court should intervene in relation to this appeal ground.
That view is further justified by the conclusions expressed below that some aspects of the pleading should be struck out with leave to replead.
The challenge to the primary judge’s rejection of complaints concerning the adequacy of the plea of the loss adjuster’s appointment.
“5A.[The loss adjuster] was appointed by [the insurer] to:
assess the damage caused to the Property by [the storm];
… ;
determine the nature and scope of the repair works to the Building … in consultation with [the builder] and maintain site inspections and monitoring of repair works performed by [the builder] to ensure they were carried out in accordance with those instructions setting out the scope of work;
conduct further meetings with [the builder] in relation to repairs costs estimates, and review actual quotations and expenses incurred concerning asbestos material removal;
provide progressive reports and advice to [the insurer] on developments.
Particulars
The best particulars that [the new trustee] can presently provide are:
[The loss adjuster] was appointed on about 28 November 2014;
the terms of the appointment are evidenced by the content of a report entitled "BRISBANE HAIL STORM - REPORT 1" (the First Report) prepared by [the loss adjuster] for [the insurer], including, in particular, section 10.
[The loss adjuster’s] involvement in determining the scope of repair works is also evidenced by section 2.1.3 of the report entitled "BRISBANE HAIL STORM - REPORT 4" (the Fourth Report) prepared by [the loss adjuster] for [the insurer].
[The new trustee] will provide further particulars after disclosure and inspection.”
The primary judge concluded that a fair reading of paragraph 5A suggested that what was contended was that the insurer retained the loss adjuster informally. He thought that the new trustee was pleading that there was no letter of appointment or written appointment of the loss adjuster. He noted that the alleged terms of the appointment were identified and that it was pleaded that the appointment was "evidenced by" the two reports. His Honour found that the fact that the words of the particularised reports did not support the terms of the appointment was beside the point. The primary judge concluded that the new trustee had advanced a sufficient plea of the insurer’s contract with the loss adjuster.
Appeal ground 4 was in these terms:
“The primary Judge
erred in holding that paragraph 5A of the draft [4ASOC] pleads adequate material facts to identify how the [loss adjuster] was appointed by [the insurer] to perform the work alleged in paragraph 5A(c) (reasons at [32] to [34]);
erred in holding that the [new trustee] provided sufficient particulars of the terms of the appellant’s appointment at paragraph 5A of the draft [4ASOC] (reasons at [32] to [34]);
should have held the appointment of the [loss adjuster] pleaded by the respondent in paragraph 5A of the draft [4ASOC] does not comply with rules 149(l)(b) and 149(l)(c) Uniform Civil Procedure Rules 1999;
should have held that the [new trustee] provided insufficient particulars of the [loss adjuster]’s appointment at paragraph 5A of the draft [4ASOC] so as to avoid the [loss adjuster] being taken by surprise at trial; and
should have found that as the particulars of the [loss adjuster]’s appointment at paragraph 5A of the draft [4ASOC] do not support the allegations in paragraph 5A(c) of the draft [4ASOC], paragraph 5A(c) of the draft [4ASOC] should be struck out.”
In my view the loss adjuster was entitled to a pleading which identified –whether the alleged contract between it and the insurer was oral, written, or to be implied;to the extent the contract was made orally, the substance and effect of who said what to whom;to the extent the contract was written, the written component of the contract; andto the extent the contract was to be implied, the circumstances relied on to justify the implication that the contract was made, containing the terms alleged.
As presently formulated, the 4ASOC does not do that. And, contrary to the primary judge’s interpretation, the 4ASOC does not confine itself to a case that the appointment was informal. Nor does it plead that the appointment was “evidenced by” the reports. To the contrary, so far as the terms of the contract are concerned, the 4ASOC pleads at particular (i)B that the terms of the appointment are evidenced by the content of a particular report. If, as the primary judge correctly found, they are not, then that case cannot stand.
The truth is that all the pleading presently asserts is a sound basis for thinking that there was probably a contractual relationship between the insurer and the loss adjuster. It does not presently assert a sound basis for the allegation that the contract had the terms alleged. The plea is inadequate as a basis on which the loss adjuster should be required to go to trial. Indeed that much is recognised by the pleaded acknowledgement that the new trustee will provide further particulars after disclosure and inspection.
In my respectful view, his Honour erred in not recognising the inadequacy of the pleading of the contract between the insurer and the loss adjuster. Given the significance to a trial of the pleaded cause of action of a proper understanding of the extent of the loss adjuster’s task in relation to the builder’s work, both in relation to an understanding of the alleged duty of care and in relation to an understanding of the causation case, I view this as an error of principle which is likely to cause the loss adjuster a substantial injustice. This Court is justified to intervene. The paragraph should be struck out.
The question arises whether there should be leave to amend. There is good reason to think that there must have been some form of contract between the loss adjuster and the insurer, but that the new trustee could not be expected properly to plead that contract until after disclosure (including presumably non-party disclosure from the insurer) and inspection. Striking out the paragraph now does not foreclose those procedural possibilities being pursued to enable the new trustee properly to advance its case. Indeed, there is no reason why it could not pursue an application for limited disclosure to enable it to plead this fact properly. I would give the new trustee leave to amend and leave it to pursue in the trial division whatever procedural steps are necessary to put it in a position to draft that amendment.
The challenge to the primary judge’s failure to strike out on the basis of alleged inconsistency between the statement of claim and the reply.
“The primary Judge:
erred in holding that paragraph 5A(c) of the draft [4ASOC] is not directly contrary to paragraphs 7(d), 7(f), 12(b) and 28(c) of the reply (reasons at [36] to [39]);
should have held that the allegations in paragraph 5A(c) of the draft [4ASOC] are inconsistent with the allegations in paragraphs 7(d), 7(f), 12(b) and 28(c) of the reply, with the result that paragraph 5A(c) of the draft [4ASOC] should be stuck out; and
should have held that the allegations in paragraphs 20B and 21 of the draft [4ASOC] are inconsistent with the allegations in paragraphs 7(d), 7(f), 12(b) and 28(c) of the reply, with the result that paragraphs 20B and 21 of the draft [4ASOC] should be stuck out.”
4ASOC Loss adjuster’s defence New trustee’s reply
5A. [The loss adjuster] was appointed by [the insurer] to … (c) determine the nature and scope of the repair works to the Building … in consultation with [the builder] and maintain site inspections and monitoring of repair works performed by [the builder] to ensure they were carried out in accordance with those instructions setting out the scope of work; [5A](d)(i) on or about 28 November 2014, [the insurer] (in its own capacity or on behalf of [the original trustees]) or the [the original trustees] engaged: / (A) [the builder] to scope and perform repair works on the Building following the [first storm] to give effect to the original trustees’ entitlements under the [insurance policy]; / (B) Nathan Ryan or Corbett Maintenance or CM52 Pty Ltd (Nathan Ryan) to provide superintendent services in relation to the repair works performed by [the builder]; [7(d)] As to [defence [5A](d)(i)], [the new trustee] denies the allegations contained therein and believes the allegations are untrue because: / (i) on or about 28 November 2014, [the insurer] (either in its own capacity or on behalf of [the original trustees]) did not engage [the builder] as alleged in subparagraph (A); / (ii) on or about 28 November 2014, [the original trustees] did not engage [the builder] as alleged in subparagraph (A); / (iii) on or about 28 November 2014, [the insurer] (either in its own capacity or on behalf of [the original trustees]) did not engage Nathan Ryan as alleged in subparagraph (B); / (iv) on or about 28 November 2014, [the original trustees] did not engage Nathan Ryan as alleged in subparagraph (B);
[7(f)] As to [defence [5A]], [the new trustee] says that [the insurer] did not exercise any control or provide direction over [the builder] in relation to the repair works
20B By reason of the matters pleaded in paragraphs 1 A, 1 B, 1 BA, 1 C, 1 CA, 2, 3A, 3B, 4, 5, SA, 6, 7, 7A, 8, 19 and 20 hereof, [the loss adjuster] owed a duty to exercise reasonable care to the [the original trustees] (as the members and beneficiaries of the Fund) or, alternatively, to the registered owner of the Property (also being the [original trustees] to avoid property damage and/or economic loss including consequential loss in: / (a) approving, and providing instructions in respect of, the proposed repair works including the Rectification Work; / (b) maintaining site inspections and monitoring the repair works performed by [the builder] including the Rectification Work, to ensure it was carried out in accordance with those instructions. [18(b)(i) and (ii)]: (i) [The insurance policy] required [the insurer] to indemnify [the new trustee] for the costs of repairing the damage to the Building caused by [the first storm] and restoring the damaged portions of the Building to a condition substantially the same as, but not better or more extensive than their condition when new; / (ii) [The insurer] breached [the insurance policy] by: / (A) assuming conduct of and responsibility for the repair of the Building after the [first storm] and failing to ensure that the damaged portions of the Building were restored to the condition required under the [insurance policy]; / … / (B) failing to indemnify the Plaintiff for the costs of restoring the damaged portions of the Building to the condition required under the [insurance policy]; [12(b)] with respect to subparagraph [18(b)(ii)]: / (i) repeats and relies upon the matters pleaded in subparagraph (a) hereof; / (ii) denies that [the insurer] had an obligation to ensure that the damaged portions of the Building (after the [first storm]) were restored to the condition alleged in subparagraph (A) (such condition not being admitted) and believes the allegation is untrue because any obligation on the part of [the insurer] did not extend to ensuring that the damaged portions of the Building were restored to the condition required under [the insurance policy]; / (iii) denies that [the insurer] assumed responsibility for the repair of the Building after the [first storm] and believes the allegation is untrue because it did not assume such responsibility; / (iv) in the premises pleaded in subparagraphs (ii) and (iii) hereof, denies that [the insurer] breached the [insurance policy] (as defined) in the manner alleged in subparagraphs (A) and (B);
21 In the premises pleaded in paragraphs 1 to 1 CA, 3 to 6B and 19 to 20D hereof, [the loss adjuster] owed to the [new trustee] (as subsequent owner of the Building) a duty to exercise reasonable care to avoid property damage and/or economic loss including consequential loss in: / (a) approving, and providing instructions in respect of, the proposed repair works including the Rectification Work; / (b) maintaining site inspections and monitoring the repair works performed by [the builder] including the Rectification Work, to ensure it was carried out in accordance with those instructions. [22(a)(ii)] [The loss adjuster] had no control over the repair works to the Building performed by [the builder] and had no authority to intervene in those works absent instructions from [the insurer] [28(c)] As to paragraph 22(c) of the amended defence, [the new trustee] denies that [the loss adjuster] had no authority to intervene as alleged therein and believes the allegations are untrue because [the loss adjuster], and not [the insurer], dealt with and had the authority to direct [the builder] in respect of the repair works.
There is no inconsistency between 4ASOC [5A(c)] and reply [7(d)] or [7(f)]. The reply paragraphs merely assert the untruth of the particular characterization of the contract as asserted in the relevant paragraphs of the defence.
There is no inconsistency between 4ASOC [5A(c)] and reply [12(b)], although if 4ASOC [5A(c)] is true it is difficult to understand how reply [12(b)(iii)] could stand. But the application is directed to the paragraphs of the 4ASOC, not to the reply.
There is no inconsistency between 4ASOC [5A(c)] and reply [28(c)]. The reply paragraph asserts the existence of control on the part of the loss adjuster because it and not the insurer had authority to direct the builder. The flaw in the reply lies not in inconsistency with 4ASOC [5A(c)], but with the inadequate assertion of authority. But the application is directed to the paragraphs of the 4ASOC, not to the reply.
Accordingly, I reject this ground as a basis for establishing error in the refusal to strike out 4ASOC [5A(c)].
Insofar as the inconsistency ground is advanced in relation to 4ASOC [20B] and [21], the ground adds nothing to appeal ground 3. Appeal ground 5 fails.
The challenge to the primary judge’s failure to strike out relevant parts of the causation plea.
“The primary Judge:
erred in failing to provide reasons for refusing to disallow or, alternatively, strike out the amendments proposed in paragraphs 22AB and 22B of the draft [4ASOC]; and
ought to have disallowed or, alternatively, struck out the amendments in paragraphs 22AB and 22B of the draft [4ASOC].”
The two paragraphs impugned by the new trustee were the pleas of the counterfactual propositions on which the pleaded causation hypotheses rested.
Reduced to its essence, the chain of causation alleged by the counterfactuals first relies on the proposition that if the loss adjuster had discharged its duty of care, it would have identified relevant problems in the rectification work and so informed the builder with the result that the builder would have done something different, and the loss would have been avoided. A second proposition supporting the same outcome was that if the loss adjuster had discharged its duty of care, it would have told the original trustees about the problems and that would have resulted in the builder doing something different and the loss being avoided.
The problem with the first proposition is that the 4ASOC advanced no allegation that the builder had a contractual or other relationship with the insurer, the loss adjuster, or indeed anyone else which provided any reason to think that the loss adjuster had authority over the builder or, for some other reasons, the builder would have been minded, let alone obliged, to have any regard to anything which the loss adjuster said or did. The pleaded facts in the 4ASOC omit the link between the loss adjuster identifying a problem to the builder and the builder rectifying the problem. The link might rest on some contractual relationship the terms of which gave the loss adjuster authority over the builder, or which obliged the builder to comply with the loss adjuster’s directions. Or the link might rest on treating the loss adjuster as an officious bystander to whom the builder would inevitably have paid attention. Perhaps there is some other way in which the link could be expressed. Some hint of what the link might be may be gleaned from reply [28(c)] which, though expressed as a denial, is pregnant with a pleaded positive case, namely that the loss adjuster had some form of authority from someone in some way to give directions to the builder. But from whence did that authority derive? And how could it be consistent with reply [7(d)] which asserted that the insurer did not exercise any control or provide direction over the builder in relation to the repair works? Whatever the true link is, it has not been pleaded in the 4ASOC. The loss adjuster is left to guess at what the case is that it has to meet on this critical question. Without a proper plea of the link, there is no reasonable inference that the alleged wrongful conduct by the loss adjuster and the claimed loss stand to each other in the relation of cause and effect.
The problem with the second proposition is similar. Why would the builder have been minded, let alone obliged, to have any regard to anything which the original trustees said? The pleaded facts omit the link between the original trustees becoming aware of a problem and the builder rectifying the problem. The 4ASOC had asserted at [15AE] that the original trustees had no contractual rights against the builder for defects in the Rectification Work. Presumably the ability of the original trustees to influence the builder would turn in some way on the relationship between the original trustees and the insurer and then on the insurer’s relationship with the builder, but as I have earlier mentioned, nothing is pleaded in the 4ASOC about the nature of any relationship between the original trustees and the insurer when one would have expected something to be pleaded about the fact and nature of the insurance policy and the nature of the obligations which the insurer had assumed to the original trustees thereby. Whatever the new trustee’s case is as to the link between the original trustees becoming aware of a problem and the builder rectifying the problem, it is not pleaded. Again, the loss adjuster is left to guess at what the case is that it has to meet on this critical question. And, again, without a proper plea of the link, there is no reasonable inference that the alleged wrongful conduct by the loss adjuster and the claimed loss stand to each other in the relation of cause and effect.
Conclusion
I would make the following orders:Appeal allowed.Set aside paragraph 1 of the orders made by the primary judge on 29 November 2023 and on 15 December 2023.Strike out paragraphs [5A], [22AB] and [22B] of the respondent’s fourth amended statement of claim, with leave to replead.The parties are directed to file written submissions on the costs orders to be made in respect of the appeal and of the application before the primary judge within 7 days, such submissions not to exceed 4 pages in length.
CALLAGHAN J: I agree with Bond JA.
CROWLEY J: I agree with Bond JA.
Just GI Pty Ltd v Pig Improvement Co Aust Pty Ltd [2001] QCA 48 at [14] per Williams JA (with whom Davies JA and Mullins J agreed); Santos Limited v Fluor Australia Pty Ltd [2020] QCA 254 at [29]; Adeva Home Solutions Pty Ltd v Queensland Motorways Management Pty Ltd (2021) 9 QR 141, at 149 per Bond JA (Fraser JA and Wilson J agreeing). ↩
General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; [1964] HCA 69 at [8] to [10] per Barwick CJ; Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 at 91 per Dixon J. ↩
Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 221 to 222 per French J; Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221 at [26] to [27] per Jackson J; Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 7) [2019] QSC 241 at [17] per Bond J; Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2022] NSWSC 144 at [291] to [293] per Ward CJ in Eq; English v Vantage Holdings Group Pty Ltd [2021] WASCA 47 at [100] to [104] per Murphy and Vaughan JJA. ↩
Berry v CCL Secure Pty Ltd (2020) 271 CLR 151 at 190 [72] per Gageler and Edelman JJ; English v Vantage Holdings Group Pty Ltd [2021] WASCA 47 at [100] to [104] per Murphy and Vaughan JJA. ↩
Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2004] QSC 457 at [15] per Chesterman J; Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221 at [26] to [27] per Jackson J; Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 7) [2019] QSC 241 at [17] to [21] per Bond J; English v Vantage Holdings Group Pty Ltd [2021] WASCA 47 at [100] to [104] per Murphy and Vaughan JJA. ↩
Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11 at 286 to 287 per Mason CJ and Gaudron J; Richmond Valley Council v JLT Risk Solutions Pty Ltd [2022] NSWSC 1761 at [120] per Williams J.
Sedgwick Australia Pty Ltd
JLOC Super Pty Ltd [2024] QCA 218
(2000) 201 CLR 553
(1990) 169 CLR 279
(2020) 271 CLR 151
(1987) 14 FCR 215
(1949) 78 CLR 62
(1964) 112 CLR 125
(1995) 182 CLR 609
(2004) 216 CLR 515
(2017) 94 NSWLR 83
The primary judge dismissed the application.
By its appeal to this Court, the loss adjuster contends that the primary judge erred in the construction of s 12(6) of the Trusts Act 1973 (Qld) and in the application of rr 149 and 154 of the Uniform Civil Procedure Rules 1999 (Qld). It seeks to have this Court set aside the order made by the primary judge and to make an order striking out the relevant paragraphs.
For reasons which follow:I reject the loss adjuster’s argument that the new trustee was not the proper plaintiff.I conclude that there is no proper basis to intervene in relation to the primary judge’s exercise of discretion not to regard this as a sufficiently clear case to strike out the pleaded cause of action in tort or to summarily dismiss that case.I would otherwise form the view that the primary judge’s response to some of the attacks on the adequacy of the pleading involved errors of principle likely to cause substantial injustice to the loss adjuster and therefore sufficient to warrant this Court’s intervention.
The result is that I would allow the appeal, set aside the order made by the primary judge and in lieu thereof I would make an order striking out paragraphs [5A], [22AB] and [22B] of the respondent’s statement of claim, but with leave to replead. The parties should be given the opportunity to make submissions on costs.
Finally, where a pleading seeks to assert a novel or unusual cause of action in tort, authority recognises that, particularly if there is any uncertainty in relation to the pleaded material facts, it may be appropriate for a Court to form the view that the question whether the law should recognise the existence of the alleged duty should await a trial rather than to be determined on a strike out, and to exercise its discretion accordingly.7
On about 28 November 2014, the insurer appointed the loss adjuster to assess the damage which the storm had caused and to carry out certain tasks in relation to the proposed repair works to the building: 4ASOC at [5A]. It was common ground that the paragraph should be understood as asserting the existence of a contractual relationship between the insurer and the loss adjuster by which the loss adjuster agreed with the insurer to do the specified tasks.
From on or about 28 November 2014 until on or about 26 June 2015, the builder carried out repair works to the Building: 4ASOC at [6]. The 4ASOC specified some of the work which the builder carried out during that period and defined the identified work as the “Rectification Work”: 4ASOC at [6]-[7]. The loss adjuster determined the nature and scope of the repair works to the Building (including the Rectification Work) in consultation with the builder: 4ASOC at [7A]. The Rectification Work was carried out by the builder with the knowledge of the loss adjuster: 4ASOC at [8(a)].
It is appropriate to identify another odd gap in the chronological pleading of relevant material facts. Although the 4ASOC did specify that the builder carried out the Rectification Work in consideration of payment to it by the insurer: 4ASOC at [8(b)], the pleading failed to plead whether the builder had been contracted to do the work and, if so, by whom and on what terms. The significance of that omission is that the 4ASOC advances no allegation that the builder had a relationship with the original trustees, the insurer, the loss adjuster, or indeed anyone else which provided any reason to think that the builder would be minded, let alone obliged, to have any regard to anything which the loss adjuster said or did. This was another obvious deficiency in the pleading, especially when one appreciates that the pleaded counterfactual case against the loss adjuster was that had the loss adjuster complied with its duty of care, either the loss adjuster would have caused the builder to have done things differently or the loss adjuster would have told the original trustees and that would have resulted in the builder doing things differently and, in either case, the loss would have been avoided. I will return to the significance of this issue when considering the deficiency in the causation plea.
On 17 April 2015, the new trustee became trustee of the Fund: 4ASOC at [1(b)]. The new trustee asserted that, for the purposes of the proceeding, the new trustee was deemed to have been, at all material times, the trustee of the Property: 4ASOC at [1CA].
On 29 June 2015, legal title to the Property vested in the new trustee when the new trustee became the registered proprietor of the Property under the Land Title Act: 4ASOC at [1(c)].
On 22 October 2015, a second storm subjected the Building to heavy rain and wind and caused water ingress and consequent physical damage in the form of water damage to ceilings, fixtures, fittings, curtains, carpets, electrical and data cabling, cabinetry, fire alarms and sensors: 4ASOC at [10], [10A], [11] and [12].
The new trustee pleaded that the water damage suffered because of the second storm occurred because of the inadequate way in which the builder had carried out the Rectification Work to repair the damage which had been caused by the first storm: 4ASOC at [13] and [14].
The new trustee then pleaded that the builder had owed a duty of care in tort to the original trustees and also to the new trustee as a subsequent owner of the building: 4ASOC at [15] and [15AA]. For present purposes it is relevant to note that the new trustees pleaded that the original trustees had no contractual rights against the builder for defects in the Rectification Work which could be assigned to the new trustees: 4ASOC at [15AE]. The pleading went on to assert that nevertheless, the new trustee had a right to recover from the builder damages for negligence of about $2.6 million comprising the costs of repairing the damage and certain ancillary costs: 4ASOC at [18].
For present purposes, however, the case by which the new trustee seeks to recover from the builder is not to the point.11 What is material is that the new trustee seeks to recover damages in tort from the loss adjuster. That case was advanced by the 4ASOC in the following way.
At the time of the carrying out of the Rectification Work, the loss adjuster knew that the Property was an asset of the Fund or that the Fund had an interest in the Property and knew or ought to have known that the Rectification Work would benefit the Fund by repairing or restoring the Building which formed part of the Property: 4ASOC at [19(a)] to [19(c)].
Alternatively, the loss adjuster knew or ought to have known that the Rectification Work would benefit the existing registered owner of the Property by repairing or restoring the Building which formed part of the Property: 4ASOC at [19(d)].
In the course of carrying out the tasks the subject of its appointment by the insurer, the loss adjuster consulted with the builder and gave instructions to the builder: 4ASOC at [20].
It was reasonably foreseeable by the loss adjuster that, if it failed to exercise reasonable care in the carrying out the tasks the subject of its appointment by the insurer, that there was a risk of property damage and consequential loss resulting from rainwater ingress to the Building as a consequence of the Rectification Work: 4ASOC at [20A].
By reason of earlier pleaded matters, the loss adjuster owed a duty to the original trustees: as the members and beneficiaries of the Fund; or alternatively,as the registered owner of the Property,
As a result of the loss adjuster’s breach of the duty of care owed to the new trustee, the new trustee suffered loss and damage of about $2.6 million comprising the costs of repairing the damage suffered in the second storm and certain ancillary costs: 4ASOC at [23]. Alternatively, the new trustee suffered that loss as a result of the loss adjuster’s breach of the duty of care owed to the original trustees, for which the new trustee was entitled to sue by virtue of s 12(6) of the Trusts Act 1973: 4ASOC at [24].
The real question so far as standing is concerned is that raised by appeal ground 1, which concerns the proper construction of s 12(6) of the Trusts Act.
The section advances two discrete propositions.
First, after appointment, a new trustee has the same powers, authorities, and discretions as if the new trustee had originally been appointed a trustee by the instrument (if any) creating the trust, both before and after all the trust property becomes by law or by assurance or otherwise vested in the trustee.
Second, after appointment a new trustee may in every respect act, as if the new trustee had originally been appointed a trustee by the instrument (if any) creating the trust, both before and after all the trust property becomes by law or by assurance or otherwise vested in the trustee.
The combination of those propositions is sufficiently broad to justify the conclusion that if a person owes to Trustee A a duty of care in tort to avoid causing damage to trust property owned by Trustee A and breaches that duty while Trustee A is still trustee, and if the damage caused by that breach of duty occurs when Trustee B has taken over as trustee and the trust property has vested in Trustee B, then Trustee B will be able to sue for breach of the duty owed to Trustee A in relation to the trust property.
That must be so, because, as the primary judge correctly observed, “[t]he evident objective of that subsection is to ensure that the new trustee truly stands in the shoes of the old trustee ... that is exactly the effect of s 12(6). It places the new trustee in the position as if the new trustee had originally been appointed the trustee.”
The remedial purpose of the section must include enabling the new trustee to fulfil one of the core fiduciary duties assumed upon appointment, namely to act in the best interests of the trust, including by protecting its assets. The primary judge correctly observed of the loss adjuster’s argument to the contrary:
The pleading of the counterfactuals is obviously essential to the new trustee’s causation case. But the pleading is inadequate. It fails to comply with the requirements of the law as I have identified at [13] above.
The primary judge did not address these matters in his reasons. This amounts to an error of principle, either because of the insufficiency of reasons or for failing to apply the principles I have identified. Given the likely significance to a trial of a proper understanding of the causal link between alleged wrongdoing and alleged loss, I view this as an error of principle which is likely to cause the loss adjuster a substantial injustice. This Court’s intervention is warranted. I would strike out the impugned paragraphs. However, I am not presently persuaded that there is no possibility that the problem can be rectified. Accordingly, the new trustee should have leave to amend the pleading to address the deficiencies I have identified.
Agar v Hyde (2000) 201 CLR 553; [2000] HCA 41 at [64] per Gaudron, McHugh, Gummow and Hayne JJ; New South Wales v Spearpoint [2009] NSWCA 233 at [36] per Allsop ACJ (with whom Beazley JA agreed) and cf Perera v Genworth Financial Mortgage Insurance Pty Ltd (2017) 94 NSWLR 83; [2017] NSWCA 19 at [32] to [38] per Leeming JA. ↩
ARB 75 at [5A(b)(i)]. ↩
ARB 91 at [7(b)(i)]. ↩
ARB 75 at [5A(b)(i)]; ARB 91 at [7(b)(i)]. ↩
At the hearing of the present appeal, counsel for the builder was refused leave to appear on the appeal. ↩