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[2014] FCA 939
Federal Court of Australia
2014-09-02
Ms JA, Edmonds J
Original judgment source is linked above.
Introduction 1 By interlocutory application dated 20 June 2014 the first and second respondents seek the following orders: (1) A declaration that the whole of the proceedings brought by the applicant are statute-barred pursuant to: (a) Section 10(1)(a) of the Limitation of Actions Act 1974 (Qld) and/or (b) section 14(1)(b) of the Limitation Act 1969 (NSW). (2) An order that the proceedings be dismissed as against the first, second respondents ("TRT").
Procedural Background 2 These proceedings, commenced by the applicant's originating application and statement of claim ("SOC"), were filed on 14 April 2014. In the SOC the applicant seeks damages for defects in certain elevated work platforms ("ewps"). A total of 79 ewps were purchased by the applicant from the respondents to proceedings NSD 1981/2011 ("Sherrin entities"). 3 It is alleged by the applicant in these proceedings (para 24 of the SOC) that TRT was the "primary designer", the "primary manufacturer" and the "assembler" of the ewps (para 6 of the SOC) and TRT owed the applicant a duty to ensure that each of the ewps - (1) was designed, manufactured and/or assembled with due care and skill; (2) was fit for the purpose for which it was required; (3) was sufficiently robust to cope with reasonable operating conditions in the field; and (4) met the Sherrin Entities' Performance Criteria (para 11 of the SOC). 4 The defects are pleaded at para 21 of the SOC in the following terms: The Platforms on the [ewps] are defective in that: (a) they have glass-reinforced plastic ("GRP") components that are too fragile and unsuitable for use in overhead power line work due to: (i) the moulding process resulting in the GRP having insufficient glass fibres and a heavy build of brittle, unreinforced resin underneath the fibreglass outer sheath; (ii) insufficient thickness of the top and bottom faces of the fly-boom and uneven distribution of the glass fibre around the cross-section perimeter, making the fly-boom too weak in torsion; (b) they have cracking and delamination of the insulating coating due to poorly detailed design of the cover insulation, poor selection of materials (including foam materials and filler used to build up the wall thickness of the fly boom) and poor application techniques; (c) they have cracking at the transition between the lower boom insert and the steel boom sections due to the outer sheath being too thin and, therefore, deflecting more than the insulating insert; (d) they have poor surface preparation of the steel substrate for the application of the insulating insert in the lower boom assemblies; (e) they have large cracks in the fly-booms caused at least in part by the bucket folding down too far in the stow position - a problem exacerbated by the failure to provide an engineering control, such as an interlock, to prevent incorrect levelling of the platform when it is lowered on to the deck (notwithstanding the requirement for such engineering controls imposed by workplace health and safety regulations across Australia); (f) the ribs of the top rim of the baskets have cracks and openings and discontinuities in the glue line between the ribs and the basket, creating voids that track water; (g) the caulking filler used in the basket and applied around the nylon ferrules fitted to the ribs of the basket has not bonded and is offering a path for water ingress; (h) the basket has holes drilled through the ribs to support hydraulic components, the fall arrest attachment and fall arrest lanyard, which permit water ingress; and (i) they have a boom/jacking interlock fault in that the booms can be deployed when the stabilizer controls are set to "legs" and two functions of the Danfoss control levels are operated simultaneously (collectively "the Defects"). 5 The alleged breach of duty is pleaded at para 25 of the SOC in the following terms: 25. Having regard to the presence of the Defects in the [ewps] acquired by the Applicant, each Designer/Manufacturer breached the duty of care it owed the Applicant in that it failed to design and manufacture the [ewps] so as to ensure that the [ewps] did not have the Defects, further particulars of which are provided below. Particulars of Negligence in Design and Manufacture (i) The fly booms have been manufactured in accordance with their design, however, design loads in glass reinforcement layups fail to provide for torsional loads caused by reasonably foreseeable use of the equipment which a reasonably prudent designer would foresee and allow for as normally occurring in the robust operation of the [ewps]; (ii) The design is deficient in that it fails to specify and apply a satisfactory surface preparation to the lower boom insulator bond area. Prudent engineering practice in design requires that surface preparation should be specified by the designer in detailed work instructions and further applicable industry standards also require this; (iii) The design failed to specify outer skin insulation to prevent transverse cracking; (iv) The design failed to specify sufficient fibreglass reinforcement in the outer surface to provide for impact resistance; (v) The design failed to specify or apply satisfactory surface preparation to the steel surfaces before applying fibreglass; (vi) The design failed to specify the use of proven methods and materials. Alternatively, the designer failed to use materials that would have avoided material failure associated with manufacture; (vii) The design failed to specify that reinforcement of the ribs attached to the front of the personnel platform needed to have bonded fully to the platform basket in the manufacture of the [ewps]; (viii) The designer failed to prevent water absorption into the timber core of the fibreglass platform; (ix) The designer has specified, or alternatively the manufacturer has applied without the designer's approval, resin which is too thick without glass reinforcement. Refer to paragraph 12 of the Further Amended Statement of Claim in [NSD 1981/2011]. 6 The applicant's claim for loss and damage was particularised at para 26 of the SOC as follows: The Applicant has been required to carry out the following repairs, at substantial cost, to make good the Defects: (i) Rebuild the lower boom (including strip back; remove old insert; make new insert; machine and cut to size; apply NPR15 resin to steel; set up on joining jig; stand upright and inject NPR15 resin to glue; sand and clean up ready to fill and wrap; re-glass joined boom to specifications; gel coat and detail); (ii) Rework cracked joints; sand; gel coat and paint inside the intermediate boom; (iii) Rework cracked joints; sand; gel coat and paint inside the telescopic boom; (iv) Manufacture new fly jib to specifications and attach bushes; (v) Manufacture new basket transition piece to specifications and attach bushes; (vi) Reinforce the base of the basket to specifications; remove ribs, manufacture new ribs and fix them into position, glass around gaps in steps and repaint the basket. The Applicant has paid for the above repairs to make good the Defects.
Statutory Context 7 Sections 10(1)(a) of the Limitation of Actions Act 1974 (Qld) and 14(1)(b) of the Limitation Act 1969 (NSW) ("Acts") provide that a cause of action founded on tort is not maintainable if brought after the expiration of a limitation period of six years from the date on which the "cause of action arose" or "the cause of action first accrues". 8 The parties were agreed that notwithstanding the form of the orders sought in the interlocutory application - a declaration that the proceedings are statute-barred and an order that the proceedings be dismissed against the first, second respondents - what was being sought was final relief, not some interim declaration; that what TRT was seeking was summary judgment in reliance on s 31A of the Federal Court of Australia Act 1976 (Cth) ("FCA Act") (see, too, Div 26.1 of the Federal Court Rules 2011). Section 31A of the FCA Act provides: (1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers that the Court has apart from this section. (5) This section does not apply to criminal proceedings. 9 It has been accepted in the authorities - see Spencer v The Commonwealth (2010) 241 CLR 118 per Hayne, Crennan, Kiefel and Bell JJ at [53]-[56] and White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at [53]-[60] per Lindgren J - that in enacting s 31A Parliament's intention was to lower the bar for obtaining summary judgment below the level fixed by authorities such as Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130 per Barwick CJ: that the applicant's case "is so untenable that it cannot possibly succeed". 10 It is difficult, if not impossible, and arguably not utile to articulate the distinction in point of principle between the "no reasonable prospects" test and the test in General Steel; certainly, this is not the occasion for it. Sub-section 31A(3) makes it clear that a proceeding or part of a proceeding need not be hopeless or bound to fail for it to have no reasonable prospects of success. If I am satisfied that, by reason of the statutory limitation provisions these proceedings have no reasonable prospects of success, then I will accede to TRT's application for dismissal of them; if not, I will dismiss TRT's interlocutory application.
Relevant Facts 11 The "Defects" pleaded in the sub-paras of para 21 of the SOC are of two kinds: a number plead a physical defect of 'cracking"; one or two plead physical defects of "openings", "discontinuities" and "paths for water ingress"; but all plead either design or manufacturing defects, or what are called "latent defects". 12 The alleged breach of duty of care in para 25 of the SOC is framed by reference to the latent defects namely, those "Defects" in the ewps at the time of their acquisition by the applicant due to the alleged failure of the "Designer/Manufacturer" to design and manufacture the ewps so as to ensure that the ewps did not have those "Defects". 13 It is not in dispute that physical defects in the form of cracks were first discovered by the applicant in at least a small number of ewps in late 2006. 14 Between around late 2006 and around late 2007/early 2008, the applicant observed a number of instances of cracking across various ewps which led to it making inquiries of the Sherrin Entities and/or TRT in relation to those. 15 In response, the Sherrin Entities and/or TRT informed the applicant that: (1) The cracking was superficial or cosmetic and not a structural problem; and (2) consequently the recommended method for repairing the cracking was simply to patch repair the cracks. 16 TRT submitted, fairly in my view, that it cannot be said that by 14 April 2008 (six years before this proceeding commenced) the evidence of these physical defects in the ewps was merely "negligible". 17 It was not until around September/October 2008 that the frequency of cracking across a number of units within the applicant's fleet of ewps led the management of the applicant to become concerned that the cracking may be occurring as a consequence of a design or manufacturing issue. At or around this time and as a result of these concerns, the applicant engaged a third party, GHD, to investigate the causes of the cracking. 18 GHD provided the applicant with the findings of its preliminary investigations in two reports titled "Report for Investigation of Cracking of Travel Towers" dated January 2009 and "Investigation into Cracking of Fly Jib Boom" dated February 2009. 19 The GHD reports suggested for the first time that the cause of the cracking was likely a structural problem due to defective design and/or manufacture. 20 The applicant engaged contractor Marky Industries Pty Ltd to rectify the defective ewps and the rectification program commenced in around early 2011. The rectification works were based on written work instructions and engineering (shop) drawings prepared by Keith Batten, a consultant engineer engaged by the applicant. 21 The work instructions and engineering (shop) drawings were prepared by Mr Batten in around October 2010. The rectification work described by Mr Batten was based on correcting the latent structural/manufacturing deficiencies in the ewps and is significant structural work, in contrast with the superficial patching repair recommended by TRT and/or the Sherrin Entities referred to in [14] above. 22 The applicant's expert witnesses retained in relation to proceedings NSD 1981/2011 are of the view that the "Defects" pleaded in para 21 of the SOC were caused by defective design/manufacture of the ewps. That view remains to be tested.
Relevant Principles 23 The general rule is that a cause of action in negligence accrues when material damage - "damage that is beyond what can be regarded as negligible": Christie v Purves & Ors [2007] NSWCA 182, Ipp JA at [40] (Beazley and Campbell JJA agreeing) - is first suffered. As noted in [16] above, I agree with TRT's submission that it cannot be said that by 14 April 2008 the evidence of physical defects in the ewps was merely "negligible". It was manifest comprehensively across a range of the ewps, if not all of them. 24 But there is an exception to that general rule which comes out of the consideration by the Appeal Division of the Victorian Supreme Court in Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27 of the judgment of Deane J, with whom Mason CJ and Wilson J, albeit in dissent, relevantly agreed, in Hawkins v Clayton (1988) 164 CLR 539: the Victorian Supreme Court held that in a case such as that before it involving a latent defect, in that case the inadequacy or unsuitability of the footings, in the design of a structure, in that case a swimming pool, damage is not sustained, and so time does not begin to run until the latent defect in the structure is actually discovered or it becomes manifest in the sense of becoming discoverable by reasoned diligence (at 45-46). 25 In Cyril Smith & Associates Pty Ltd v The Owners - Strata Plan No 64970 [2011] NSWCA 181 (6 July 2011), the NSW Court of Appeal said at [17]: … Pullen is authority for the proposition that even where actual damage caused by the latent defect in the building has been suffered more than six years before the commencement of the litigation, the cause of action does not accrue until the link between the physical manifestation and the underlying defect is known or ought to be known. Such a principle would constitute an exception to the rule that a cause of action in negligence accrues when material damage is first suffered. 26 At [24] the Court said: The physical consequence of the defect namely the ingress of water, was not itself the defect, although it might well have been sufficient to lead a reasonable person to make inquiry and thus discover the defect.
Application to Present Case 27 By reference to this process of reasoning, the "cracking", "openings", "discontinuities" and "paths for water ingress" referred to in para 21 of the SOC are the physical consequences of the defects, not themselves the defects. 28 Of course there remains the question as to whether these physical consequences were sufficiently manifest prior to 14 April 2008 to lead a reasonable person to make inquiry and discover the defects, but at this stage, there is insufficient evidence to enable me to come to an informed view in response to this question. Much will depend on the expert evidence called by the parties in the proceedings and in proceedings NSD 1981/2011 and the testing of that evidence in cross-examination. 29 At this stage I am not satisfied that, by reason of the statutory limitation provisions these proceedings have no reasonable prospects of success. 30 The interlocutory application must be dismissed with costs. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.
Sherrin Hire Pty Ltd
Tidd Ross Todd Ltd
(1949) 78 CLR 62
(1964) 112 CLR 125
(1988) 164 CLR 539
(2010) 241 CLR 118
(2007) 160 FCR 298