Stockland (Constructors) Pty. Ltd. v. Retail Design Group (International) Pty. Ltd. [2003] NSWCA 84

LOWER COURT Supreme Court - Equity Division JURISDICTION : LOWER COURT ED55046/99 FILE NUMBER(S) : LOWER COURT Einstein J JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40880/02 ED 55046/99

SHELLER JA HODGSON JA DAVIES AJA

Thursday 17 April 2003 STOCKLAND (CONSTRUCTORS) PTY. LTD. V. RETAIL DESIGN GROUP (INTERNATIONAL) PTY. LTD. Judgment 1 SHELLER JA: I agree with Hodgson JA. 2 HODGSON JA: On 1 September 2002, Einstein J gave leave to the opponent (Retail Design) to amend its cross-claim against the claimant (Stockland Constructors) and an associated company (Stockland Properties) by insertion of paragraphs 16-56. Stockland Constructors seeks leave to appeal from that decision. The application for leave has been argued on the basis that, if leave is granted, the appeal will be decided without further argument.

CIRCUMSTANCES 3 The cross-claim is brought in proceedings in which the plaintiffs are Stockland Constructors and Stockland Properties, and the defendants are Retail Design and two associated companies, all of which carried on business as architects (the architects). The substance of the claim by Stockland Constructors and Stockland Properties, so far as it is relevant to this application, is as follows. 4 In about November 1993, Stockland Constructors entered into a contract with the proprietor of Earlville Shopping Centre at Cairns to carry out an extensive re-development of the Centre at a cost of $75 million (varied in early 1997 to about $82 million). The proprietor itself held this property as trustee of a trust associated with what has been called the Stockland Group of companies, and I will refer to the proprietor and its successor as such trustee as the trustee, and in its role as such trustee I will treat it as part of the Stockland Group. 5 Previously, in about August 1992, Stockland Properties by itself or as agent for Stockland Constructors had engaged the architects to provide architectural services in relation to this re-development project. 6 In January 1995, Stockland Constructors made an agreement with a sub-contractor (which I will call Story) for provision of structural steel for the project for a price of $1,658,203.00, such agreement incorporating drawings prepared by the architects. Subsequently, Story claimed extras amounting to $566,650.00. 7 Story brought proceedings for this amount in the Supreme Court of Queensland. Stockland Constructors settled these proceedings, by a deed of settlement dated 24 December 1997, to which the trustee was a party, on terms which apparently involved paying the amount claimed; and Stockland Constructors claims to have reasonably incurred an additional $253,475.00 in investigating, defending and settling Story's proceedings. 8 These proceedings in the Supreme Court of New South Wales were commenced in 1999. In them, Stockland Constructors and Stockland Properties claim these two sums, that is $566,650.00 and $253,475.00, plus interest, on the basis that they became liable for and incurred those amounts by reason of negligence of the architects in preparing the drawings incorporated in Story's contract. 9 In their defence, the architects deny negligence. They also allege to the effect that the drawings incorporated in Story's contract were not final drawings, and that Stockland Constructors and Stockland Properties knew this and knew of the risk of entering into a contract incorporating those drawings, but nevertheless did so because of other commercial considerations favouring early entry into that contract. 10 The defence also, in par.17A-17E, pleads on behalf of Retail Design the same matters as are more fully pleaded in the challenged parts of the cross-claim, and seeks to set off associated damages against any liability it may have to Stockland Constructors and Stockland Properties. 11 The relevant paragraphs of Retail Design's cross-claim in substance claim damages pursuant to the Trade Practices Act for misleading conduct by Stockland Constructors, constituted by certain representations made by Stockland Constructors to Stockland Properties and to other companies associated with the Stockland Group including the trustee, in particular representations that the architects were the cause of Story's claim, and were liable in negligence for the losses of Stockland Constructors and Stockland Properties arising from that claim, and that Stockland Constructors believed these things to be true. Retail Design's cross-claim alleges to the effect that these representations were false to the knowledge of Stockland Constructors, that in reliance on them Stockland Properties and other companies in the Stockland Group formed the belief that the architects were not competent, and that as a result Retail Design suffered loss in that, whereas previously it had been making substantial profits from work for the Stockland Group, from March 1997 onwards it no longer had that work and those profits. 12 In support of the allegation that those representations were in trade or commerce, the cross-claim pleaded that the representations were made for the commercial purpose of bringing these proceedings against the architects, and ensuring that the trustee did not seek reimbursement of the additional $7.157 million which it had paid in early 1997. In further support of the allegation that the representations were untrue, and that Stockland Constructors knew this and had a duty to disclose the truth, the cross-claim also made the following allegations: (1) that in return for a bribe of $18,000.00, an employee of Stockland Constructors had disclosed to Story a range within which its tender would be successful and that Story's successful bid was within that range; (2) that Story's tender was not properly accepted and no written contract was entered into with Story; (3) that another employee of Stockland Constructors became aware of the bribe in about September 1995, and that solicitors acting for Stockland Constructors became aware of it in about September 1997; and (4) that Stockland Constructors deliberately concealed this knowledge from Stockland Properties and other companies in the Stockland Group. 13 The primary judge was dealing with a Notice of Motion seeking to amend the cross-claim to include additional paragraphs. In his decision, the primary judge rejected some parts of the proposed amendment on the basis that they did not state the basis of the claim with sufficient clarity. However, with some doubts, the primary judge considered that the paragraphs under consideration in this application did state the claim being made with sufficient clarity and he allowed them. 14 Stockland Constructors seeks leave to appeal from that decision on the following grounds: 1. His Honour erred in concluding that the proposed amendment disclosed an arguable case.

2. His Honour erred in failing to find that the proposed amendment was embarrassing or an abuse of process.

ISSUES ON THIS APPLICATION 15 Mr. Grieve QC for the claimant submitted that the case as pleaded in the relevant paragraphs could not make out the essential elements of a claim under s.52 of the Trade Practices Act, namely that a misrepresentation was made in trade or commerce, that it was misleading, that the cross-claimant relied on it, and that the cross-claimant suffered damage. He also submitted that there was error by the primary judge in that the paragraphs allowed by the primary judge suffered from the same defect as relied on by the primary judge in rejecting the other paragraphs of the proposed amendment, namely grossly inadequate clarity and particularity in relation to alleged positive misrepresentations and in relation to matters allegedly giving rise to a duty to speak and thus supporting an allegation of misrepresentation by silence. Mr. Grieve submitted that there would be substantial injustice if the primary judge's decision was not reversed, because the proceedings would be very significantly protracted and extended. 16 Mr. Street SC for the opponent, as well as responding to these submissions, submitted that there was no error of principle by the primary judge identified either in the proposed Notice of Appeal or in the claimant's submissions. 17 I will deal in turn with the points I have identified.

TRADE OR COMMERCE 18 Mr. Grieve submitted that an assertion made in or in connection with litigation is not made in trade or commerce. He submitted that Concrete Constructions (NSW) Pty. Ltd. v. Nelson (1990) 169 CLR 594 established that s.52 of the Trade Practices Act was limited to conduct of a corporation towards persons with whom it had or might have commercial dealings, in the course of activities of a commercial nature. He submitted that Little v. Law Institute of Victoria (No.3) [1990] VR 257 at 273 supported the proposition that statements made during the course of litigation cannot be categorised as statements made in trade or commerce. 19 Mr. Street submitted that the commercial character of the representations was properly alleged in the challenged paragraphs by identification of their commercial purpose; and though the representations were alleged to have a connection with the settlement of the Queensland proceedings and the bringing of these proceedings, they were not alleged to have been made in the course of either proceedings. Mr. Street also referred to Jamieson v. The Queen (1993) 177 CLR 574 at 581, for the proposition that where an extraneous circumstance gives rise to a collateral representation that assertions in a Statement of Claim are true, service of the Statement of Claim could complete the making of a representation that those assertions were true. 20 I note that Jamieson, at 582 and elsewhere, refers to the general proposition stated by Lord Mansfield in R. v. Skinner (1772) Lofft 54 at 56, 98 ER 529 at 530, that "neither party, witness, counsel, jury or Judge, can be put to answer, civilly or criminally, for words spoken in office" and to certain specific exceptions to that proposition; and that proposition was in fact applied in Jamieson. 21 That proposition approved and applied in Jamieson would appear to show that representations made in the Queensland proceedings themselves by Stockland Constructors as a party to those proceedings, and in these proceedings in this Court made by Stockland Constructors as a party to these proceedings, could not found liability under the Trade Practices Act, unless it were considered that the principle embodied in that proposition was displaced by the Trade Practices Act itself. However, the allegation in the cross-claim is not that the representations were made in or in the course of either proceedings, but rather that they were made in connection with settling and/or bringing the proceedings, so that it would appear that the principle would not apply. In any event, the principle itself has not been relied on by the opponent. 22 The statement in Little appears to be limited to representations made during the course of litigation, and so this statement also would not, in my opinion, apply to representations made in connection with the bringing of proceedings but not made in the course of the proceedings themselves. 23 In my opinion, it is open for Retail Design, on the basis of the allegations in the challenged paragraphs, to seek to establish that the alleged representations were made by Stockland Constructors in the course of activities of a commercial nature to persons with whom Stockland Constructors had commercial dealings, so that the test propounded in Nelson could be satisfied. In my opinion, the challenged paragraphs are not liable to be struck out on the basis that the representations alleged could not be representations made in trade or commerce.

MISLEADING 24 Mr. Grieve submitted that, although the challenged paragraphs allege that the representations were untrue, they do not allege that persons were relevantly misled. 25 In my opinion, the paragraphs do allege that Stockland Properties and others in the Stockland Group were caused by the representations to believe that the architects were not competent, with the clear implication being that this was because they were caused to believe that the architects had acted negligently in relation to the Story contract. It is clear from the pleadings as a whole that Retail Design claims that it had not acted negligently in relation to the Story contract, and that accordingly it claims that Stockland Properties and others in the Stockland Group were misled in that respect. 26 Accordingly, in my opinion, the relevant paragraphs are not liable to be struck out on that basis.

RELIANCE 27 Mr. Grieve submitted that there was no allegation that Retail Design had relied on the representations. However, there is no requirement in the Trade Practices Act to the effect that damages are recoverable under s.52 and s.80 only if they are caused to a plaintiff by reason of the plaintiff itself being misled by the representations. A plaintiff may be able to recover damages for loss suffered by the plaintiff because others are misled by a defendant's misleading conduct: see Flamingo Park Pty. Ltd. v. Dolly Dolly Creations Pty. Ltd. (1986) 65 ALR 500, Janssen-Gilag Pty. Ltd. v. Pfizer Pty. Ltd. (1992) 37 FCR 526.

DAMAGE 28 Mr. Grieve submitted that there was no proper allegation of causation of damage. 29 However, in my opinion, although the matter could have been better expressed, it is sufficiently alleged that, until the occurrence of the conduct complained of, Retail Design had an on-going profitable business relationship with the Stockland Group, which was detrimentally affected by the misleading conduct, leading to loss of profits and damage to Retail Design's business. Stockland Contractors may well be entitled to further particulars of these allegations, but there is not in my opinion a defect here requiring the disallowance of the pleading. 30 Of course, the causation of damage in this way may well be difficult to prove. It may be that the member of the Stockland Group most instrumental in the previous business relationship with Retail Design was Stockland Constructors itself, and that representations by Stockland Constructors to other members of the Group would have little bearing on the future of that relationship. However, that does not affect the sufficiency of the pleadings; and Stockland Constructors has not put on evidence to show that, as a matter of evidence and fact, the claim of causation of damage is hopeless.

CLARITY OF THE PLEADING OF THE REPRESENTATIONS 31 Mr. Grieve submitted that the allegations were of representations known to be false, so that they had to be pleaded clearly and specifically: see Minister Administering The Crown Lands (Consolidation) Act and The Western Lands Act v. Tweed Byron Aboriginal Land Council (1990) 71 LGRA 201, Ghazal v. Government Insurance Office of NSW (1992) 29 NSWLR 336. In so far as positive representations were alleged, the pleadings should identify who said what on what occasion; and if this was not possible, should specify material relied on for drawing the inference that such a representation was made. In so far as the allegation was of representation by silence, the pleading should clearly specify all facts relied on to give rise to the duty to speak. Furthermore, he submitted, the paragraphs allowed by the primary judge were no better in this respect that those disallowed; and this inconsistency indicated error. 32 Mr. Street submitted that the pleading gave sufficient notice to Stockland Constructors of the case put against it, referring to Banque Commerciale SA En Liquidation v. Akhil Holdings Ltd. (1990) 169 CLR 279 at 285-6, 293. 33 In my opinion, the pleading does not with ideal clarity indicate what positive representations are alleged and what representations by silence are alleged, or what facts are relied on to give rise to the duty to speak. However, in my opinion the pleading does sufficiently indicate what representations are alleged and in what respects they are alleged to be false and alleged to be known to be false. It indicates some matters of which Retail Design is able to give details, and strongly suggests that the remainder are matters of inference, that is, that it is to be inferred that representations were made either positively or else impliedly by silence; and that the circumstances relied on as supporting the inference and the duty to speak are the claiming and receipt of the additional $7.157 million from the trustee in respect of costs overruns, the entry into the arrangement for disposal of the Queensland proceedings and the bringing of these proceedings, coupled with the knowledge of agents for Stockland Constructors of the falsity of certain of the representations. In those circumstances, I would not strike out the pleadings, and would regard the deficiencies in ideal clarity as capable of being remedied by the supply of further particulars, if these are sought. 34 Since I take that view, I do not think there is any need to consider the question of inconsistency.

OTHER MATTERS 35 Having regard to the views I have expressed, the question whether the challenged paragraphs would cause the hearing of the matter to be very substantially protracted does not need to be determined by this Court. I will however make a few comments on this matter. Stockland Constructors' opposition to the amendments should have been combined with an application to strike out paragraphs 17B-17E of the defence, because those paragraphs plainly cover the same ground, although they are less fully pleaded. Despite that omission, I would have been prepared to approach the matter on the basis that, if the challenged paragraphs were otherwise objectionable, paragraphs 17B-17E of the defence would have been liable to be struck out. However, even then paragraphs 17A and 17G of the defence (alleging that Story's contract was illegal and unenforceable because of the bribe) and defences alleging that Stockland Constructors knowingly used plans which were not the final plans in the Story contract would remain; and many of the issues under the Trade Practices Act claim either are relevant to these issues or could be used as going to the credit of Stockland Contractors' witnesses. In those circumstances, although I would accept that removal of the trade practices issues would have shortened the case, it is not clear that it would make a very great difference to the length of the case. 36 As to whether any error is identified in the grounds of appeal, I would not, in the light of the submissions that have been made, have refused leave to appeal merely because of the extreme generality of the grounds stated in the notice. 37 Finally, I note there was a suggestion in written submissions that there was some problem because the alleged misrepresentations concerned all three architects, yet this aspect of the cross-claim was relied on only by Retail Design and not the other two architects. In my opinion, clearly this is not a problem: the claim is not a contract claim, and Retail Design claims only in respect of damage allegedly caused to it. It may be that this is so because only Retail Design had a previous ongoing relationship with the Stockland Group; but whether or not this is so, it does not matter.

CONCLUSION 38 I have dealt with the issues at some length, because some of them were possibly of some significance. However, in the last analysis, the case is one of an interlocutory decision where the discretion of the primary judge is not shown to have miscarried. In my opinion, it is appropriate that leave to appeal be refused with costs. 39 DAVIES AJA: I agree with Hodgson JA. **********

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