The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Limited and Ors - [2012] NSWSC 322 - NSWSC 2012 case summary — Zoe

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The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Limited and Ors

[2012] NSWSC 322

Supreme Court of NSW|2012-04-05|Before: Pembroke J

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Court

Supreme Court of NSW

Decision date

2012-04-05

Before

Pembroke J

Catchwords

83 ER 686 Lampon v Corke (1822) 5 B & Ald 606

Source

Original judgment source is linked above.

Catchwords

83 ER 686 Lampon v Corke (1822) 5 B & Ald 606

Judgment (14 paragraphs)

[1]

ith M P Elliott - for the third defendant D Miller SC - for the sixth defendant B McManus - for the seventh defendant Solicitors: Colin Biggers and Paisley - for the plaintiff Watson Mangioni Lawyers Pty Limited - for the first and second defendants Henry Davis York - for the third defendant Wotton + Kearney - for the sixth defendant Kennedys - for the seventh defendant File Number(s): 2005/00270936

[2]

Introduction 1This is an application by the first and second defendants (Multiplex) for an order that certain questions be determined separately. It concerns the effect on the plaintiff's claims in a complex building dispute of a Settlement Deed dated 15 November 2007. The Deed contains a release in favour of Multiplex and the third defendant (Colonial). There are other issues but this is a core question, the resolution of which cannot be avoided. Colonial supports the application. 2Even though the resolution of the questions will not determine the proceedings, Multiplex contends that it will affect the dynamics of the litigation in a way that will be beneficial to all parties. It says that it will narrow the field of litigious controversy; facilitate the just and expeditious determination of the real issues in dispute; promote a realistic appreciation by the parties of their respective prospects of success; remove from contention a swathe of allegations, particularly against Multiplex; and ensure that the hearing is not conducted on a false basis. It adds that the plaintiff should not complain. In June 2009 Hammerschlag J put the plaintiff on notice when he said: "...these claims are either adumbrated in the summons or they are not and if they are not adumbrated in the summons they are barred by the deed". 3I am, of course, conscious of warnings such as those enunciated in Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at [168] - [170] about the dangers inherent in ordering the separate determination of questions. Ultimately however, the question of whether it is appropriate to order a separate question in any particular case is a matter for the discretion, judgment and experience of the trial judge having regard to the unique circumstances of each particular case. Significantly, the warnings in Tepko v Water Board (supra) preceded the introduction in New South Wales of the Civil Procedure Act 2005. The statutory objective that now governs the conduct of proceedings in New South Wales, namely the just and expeditious resolution of the real issues in dispute, intersects with those warnings and dilutes their effect. 4Brereton J has stated that courts should now adopt a more interventionist role in relation to, among other things, the ordering of separate questions: Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2006] NSWSC 1464 at [6]. I agree. And there is a prevailing view among judges of the Commercial Technology & Construction List, which I share, that the judicious use of the power to order separate questions may considerably advance the interests of justice in some complex cases. 5The precise separate questions are as follows: Whether by reason of Clauses 5.1 and 5.4 of the Settlement Deed dated 15 November 2007 (Settlement Deed) the Plaintiff has released and discharged the first, second and third defendants, and is otherwise barred from commencing or continuing, all claims in respect of: (i)fire dampers or fire stopping save for those identified in the column headed "Description" in Annexure 1 to the Summons; (ii)tiling save for tiling in the en suites and bathrooms of apartments in the Pinnacle which are cracked and drummy as detailed in Annexure 1 to the Summons; and (iii)air conditioning other than a claim for breach of the statutory warranties as pleaded in paragraph C23 of the Second Further Amended Technology and Construction List Statement. 6I should add that Multiplex moved for the separate hearing of the first of these issues almost at the outset of the hearing. In the meantime I allowed the evidence of the air-conditioning experts to be heard because it was convenient to do so and it was not affected by the resolution of the proposed separate questions. The intervening period also provided more time for Mr Simpkins SC, who appears on behalf of the plaintiff, to consider his position and marshal his arguments. I thought I should permit him as much time as was reasonable before resolving whether to hear the separate questions and before turning, if necessary, to the evidence on those areas of dispute which will be directly affected by it. A further three weeks of hearing time still remain.

[3]

Settlement Deed 7Central to Multiplex's application is the strength of its claim in relation to the enforcement of the Deed. The Deed contains the following recitals: CThe Owners Corporation considered that there were defects in the Complex attributable to the design and construction work performed under the Contract. DOn 11 November 2005, the Owners Corporation served the Summons, seeking, amongst other things, damages for Multiplex's alleged breaches of its duty of care and for breaches of certain statutory warranties said to arise out of design and construction work carried out by Multiplex. The said defects are described in the Summons as defects and faults in the design and construction of the Complex which include: (a)the Tiling Defect Claim; (b)the Window Defect Claim; (c)the Air conditioning Defect Claim; and (d)the Miscellaneous Defects claim. EMultiplex and Multiplex Constructions deny they are liable to the Owners Corporation in relation to the matters the subject of the Proceedings and all Claims made by the Owners Corporation in relation to the alleged defects in the Complex. FThe parties to this Deed have agreed to resolve that part of the SCS Claim relating to the Window Defect Claim and the Proceedings in accordance with this Deed. 8The operative provisions of the Deed are Clauses 5.1(a), 5.3 and 5.4: 5.1Releases by the Owners Corporation (a)The Owners Corporation releases and discharges Multiplex, Multiplex Constructions and Colonial from all Claims that it has or may have or, but for the execution of this Deed, could, would or might have had against Multiplex, Multiplex Constructions or Colonial in respect of the Complex other than the Tiling Defect Claim, the Air Conditioning Defect Claim and the Miscellaneous Defects Claim made against Multiplex ("Resolved Matters"). 5.3SCS Claim The Owners Corporation must, within 5 Business Days from the date of this Deed, withdraw the [sic] all parts of the SCS claim except those relating to the Tiling Defect Claim, Air Conditioning Defect Claim and Miscellaneous Defects Claim. 5.4Bar to proceedings This Deed may be pleaded as a full and complete defence by Multiplex and Multiplex Constructions to any and all Claims which are the subject of the releases in clause 5.1 of this Deed and which are commenced, continued or taken by the Owners Corporation or on its behalf.

[5]

Structure of the Deed 10The structure of Clause 5.1(a) of the Deed is to provide a release to Multiplex in relation to all Claims that the plaintiff has or may have or, but for the execution of the Deed, would have "other than" certain specified claims. Not only does Clause 5.1(a) make clear that the release is to operate in relation to both present and future claims but the point is reinforced by the definition of "Claims" in Clause 1.1. It includes all claims "whenever arising (albeit in the past, present or future)". 11Each of the specified excluded claims is also defined in the Deed. The parties to the Deed appear to have carefully described and precisely defined which claims were being excluded from the resolution and which claims were not the subject of the release. The latter are the claims which they agreed could continue to be the subject of this litigation. These proceedings, which commenced in 2005, constituted the backdrop to the negotiations that culminated in the Deed entered into two years later. Indeed, the operative terms and definitions in the Deed were formulated by reference to the proceedings. And the Deed defines each of the excluded claims by reference to the Summons in these proceedings. 12In advancing its application, Multiplex invokes one of the primary principles of the civil law, namely that contracts are meant to be adhered to. On the other hand, the plaintiff contends that despite the clear words of the Deed, despite the obvious care and specificity with which the Deed was drafted and despite the Deed's evident purpose, it should be free to ignore the restrictions in the Deed and be permitted to litigate disputes outside the carefully circumscribed description of those specified claims that were excluded from the operation of the release. In the first instance, that contention requires consideration of the terms of the release and the precise description of the three major areas of defect which the parties excluded from its operation. It is then necessary to consider the governing legal principle. It may then be necessary to consider any admissible and relevant evidence on which the plaintiff relies.

[6]

Miscellaneous Defects Claim - Dampers 13I should explain how Multiplex puts its case in relation to the issues that it seeks to have separately determined. The Miscellaneous Defects Claim is one of the categories of claim that is excluded from the release under Clause 5.1(a). It is defined in the Deed to mean the claim in the Summons "relating to various miscellaneous defects outlined in Annexure 1 of the Summons" (emphasis added). Annexure 1 of the Summons identifies those claims with particularity. Indeed Annexure 1 of the Summons is a document of inordinate detail. It consists of 10 closely typed pages, in minute font, itemising and precisely describing many hundreds of defects. There are over 200 separate miscellaneous defects listed, of which some break down into smaller multiples. 14In the midst of the detail of Annexure 1 of the Summons there are two miscellaneous defects entries that relate to fire dampers. If Multiplex's contentions are correct, these are the only two defects for which the plaintiff can claim damages under the Miscellaneous Defects Claim. One entry relates to the fact that fire dampers were allegedly not installed on a number of specified levels of the building. The other entry relates to the fact that an access panel for fire dampers was allegedly not installed in one location. Those complaints involve only 16 dampers. The plaintiff nonetheless seeks to lead evidence and recover damages in relation to an additional 535 dampers. It has pleaded and seeks to prove allegations about those dampers which are different from and substantially more extensive than the complaints recorded in Annexure 1. 15If the proposed separate issue relating to the Miscellaneous Defects Claim were decided in favour of Multiplex, there would be a considerable reduction in the scope of the forensic enquiry that would follow. The expert evidence in relation to fire dampers would implode. Multiplex's expert (Mr Wynn-Jones) would not need to be called. Only the plaintiff's claim against the sub-contractor, Lincoln-Scott, would remain. And Lincoln-Scott's expert (Mr Hill) is in substantial agreement with the plaintiff's expert (Mr Harriman). The remaining issue between the plaintiff and Lincoln-Scott is substantially one of law only.

[7]

Tiling Defect Claim 16The Tiling Defect Claim is another category of claim that is excluded from the release under Clause 5.1(a). It is defined in the Deed to mean the claim in the Summons relating to tiles "which have become cracked and drummy as further detailed in Annexure 1 of the Summons". The use of the definite article in the phrase "... means the claim in the Summons", tends to emphasise the parties' apparent intention that the Tiling Defect Claim be confined to the existing pleaded claim. It appears to be further restricted by the qualification limiting the claim to those tiles "which have become cracked and drummy as further detailed in Annexure 1 of the Summons". The use of the past tense suggests that the parties intended to confine the claim to existing manifestations of cracked and drummy tiles. 17The tiles which appear to meet that contractual description are readily identifiable in Annexure 1 of the Summons. The plaintiff nonetheless seeks to lead evidence and recover damages in relation to many more tiles, including literally tens of thousands of tiles which it says have become discoloured. It seeks damages for the replacement of all tiles in all 161 apartments in the building. While the complaint about tiles being cracked and drummy tends to focus on the workmanship that attended the installation of the tiles, the complaint about tiles becoming discoloured tends to focus on the design selection of the tiles in question. 18If the proposed separate issue relating to the Tiling Defects Claim were decided in favour of Multiplex, there would be a very substantial reduction in the scope of the forensic enquiry. The parties' experts have produced a joint report which makes clear that the extent of rectification that is necessary in relation to drummy tiles is minimal. And the incidence of cracked tiles is so minor as to warrant almost no attention in that report. The Tiling Defect Claim would almost inevitably sink, although there may be a remaining issue as to the meaning of "cracked and drummy" and the precise extent of tiles caught by that description. Almost certainly, the major part of the claim, which relates to the discolouration of tiles, will fall away.

[10]

Grant v John Grant 22The principle for which Grant v John Grant & Sons (supra) stands is sometimes described more widely than is justified. It is not, and never has been, authority for the proposition that the general words of a release can only ever apply to matters then known to the parties. There have been many explications of the principle but none rises any higher than the reasoning in the joint judgment of Dixon CJ, Fullager, Kitto and Taylor JJ in that case. Some of those further explications include: Karam v ANZ Banking Group Ltd [2011] NSWSC 709 at [406]; Seidler v University of NSW [2011] FCA 830; Playcorp Group of Companies Pty Ltd v Peter Bodum [2010] FCA 23 at [206] - [208]; Snowy Mountains Organic Dairy Products Pty Ltd v Wholefoods Pty Ltd [2008] VSC 405 at [33] - [39]; Butler v St John of God Health Care Inc [2008] WASCA 174 at [3] - [4]; Fraser v Irish Restaurant & Bar Co Pty Ltd [2008] QCA 270 at [48]; Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 at 29. 23There are two aspects to the reasoning in the joint judgment in Grant v John Grant & Sons (supra). First, the High Court held, as a matter of construction, that the general words of the release should be construed by reference to the subject matter of the particular disputes which the recitals said the parties had resolved to settle on the terms of the deed. In other words, in accordance with ancient principle and sound practice - "the general words of a release should be restrained by the particular occasion": Knight v Cole (1690) 3 Lev 273, 83 ER 686; "the general words of a release are to be restrained by the particular recital": Payler v Homersham (1815) 4 M & S 423, 105 ER 890; and "If there be introductory matter, that will qualify the general words of the release": Lampon v Corke (1822) 5 B & Ald 606 at 611, 106 ER 1312 at 1314. See generally Grant v John Grant & Sons (supra) at 123. 24Thus the resolution of the first aspect of the decision in Grant v John Grant & Sons depended on the interpretation of the release according to settled rules of construction. It involved no new principle. The joint judgment endorsed the following statement of Lord Langdale: "It has been considered that the general words of release are to be restrained by the contract and intention of the parties, that contract and intention appearing by the deed itself or from any other proper evidence ...": Lindo v Lindo (1839) 1 Beav 496 at 506; Grant v John Grant & Sons (supra) at 127. 25In other words, the intention of the parties that appears from the terms of the contract and any other proper evidence will control and de-limit the operation of general words of a release. The general words should not be permitted to subvert what the parties should be taken to have intended when the release is properly construed in its context. Thus the joint judgment in Grant v John Grant & Sons (supra) described the application of the principle to the facts before them in the following conventional terms: The question depends primarily on the application of the prima facie canon of construction qualifying the general words of a release by reference to particular matters which recitals show to be the occasion of the instrument ... prima facie the release should be read as confined to the matters forming the subject matter of the disputes which the deed recites ... 26This aspect of the reasoning in Grant v John Grant & Sons (supra) assists Multiplex's application for the hearing of the separate questions. The construction of the Deed can be determined conveniently without recourse to extrinsic evidence. And the correctness of Multiplex's construction, applying orthodox principles, is overwhelming.

[11]

Equitable Principle 27However, the second aspect of the decision in Grant v John Grant & Sons (supra) involves the application of equitable principle. The joint judgment explained that acceptance of the facts that were pleaded in that case made it inequitable for the releasee to set up the general words of the release in answer to the particular liability that the releasor now sought to enforce. That is because the liability had nothing to do with the subject matter of the deed of release. It was quite extraneous to it. And the releasee's attempt to defend the liability by resort to the general words of the release was unconscionable and opportunistic. This was an additional ground for arriving at the ultimate result. It was the context in which the pleaded facts relied upon included the propositions that the releasor did not know of the liability now sought to be enforced, did not intend to release it as part of the transaction and did not know of any intention on the part of the releasee that it should be released: Grant v John Grant & Sons (supra) at 130. 28The court held that in the circumstances it would be unconscientious to allow the general words of the release to be relied upon. The equity was described as one "to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances": Grant v John Grant & Sons (supra) at 130. It is clear from what appears earlier on the same page that "the circumstances" might include the actual intention of the releasor. The joint judgment referred to the "state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor": Grant v John Grant & Sons (supra) at 130. It is also clear that the question mark at the bottom of the page is a typographical error. 29This aspect of the reasoning was a particular illustration of one of the many ways in which equity restrains a party from any unconscientious reliance on legal rights. Naturally, the trigger for the application of the equitable principle must be some feature of the facts or conduct of one of the parties that is against conscience. That is why the joint judgment in Grant's case endorsed (at 125) Kerly's statement in his Historical Sketch of the Equitable Jurisdiction of the Court of Chancery that: The peculiar construction of releases in equity, which restricts their operation to matters within the contemplation of the parties, rests also partly on mistake of expression and partly on mistake going to the substance of the transaction. In other words, equity permits an investigation of the circumstances, including consideration of the actual intentions of the parties, in order to determine whether enforcement of the general words of a release would be against conscience. 30Significantly however, the joint judgment in Grant v John Grant & Sons (supra) also recognised that there will always be cases where, properly characterised, the parties should be taken to have intended that the general words of a release should operate to encompass all conceivable further disputes, whether disclosed or not and whether within the knowledge of a party or both parties, or outside of it: Grant v John Grant & Sons (supra) at 129. In such a case there is no room for the application of equitable principle. The equitable principle only has a role to play when it appears from the terms or the context or other admissible evidence, that the enforcement of the legal right would, by a literal application of the general words of a release, be against conscience. It would not be against conscience if the court is satisfied that the parties intended "upon a particular and solemn composition for peace" to release uncertain demands and presently unknown claims: Salkeld v Vernon (1758) 1 Eden 64 at 67-68, cited in Grant v John Grant & Sons (supra) at 129. 31I have not of course reached a final view but this may well be such a case. The evident purpose of the Deed appears to have been to describe the area of dispute which had been resolved; to define the areas of dispute which the parties agreed could continue to be litigated; and to provide for a release in relation to all present and future claims other than those which they agreed could continue. 32There is one respect however in which the release should undoubtedly be read down. If it were read literally, it could apply to unrelated disputes that have nothing to do with these proceedings. Obviously the general words of the release should be confined to the subject matter of the dispute between the parties. That dispute, outlined in the Summons, was the genesis of the Deed. It shaped and controlled the formulation of its terms, influenced its structure and language and must confine its operation.

[12]

Subjective Intention & Knowledge 33I have mentioned that the equitable principle applied in Grant v John Grant & Sons (supra) permits consideration of the actual intentions of the parties. I should however add an observation about the probative value of evidence of subjective intention in such cases. Its utility will vary depending on the circumstances of each case. In a simple case, evidence from the releasor of his or her subjective intention may be probative. But I doubt the value of such evidence in a complex case such as this involving a release that has been negotiated between sophisticated and well-advised incorporated entities, and where the structure, the syntax, the definitions and the carefully chosen language all seem to point objectively to a mutual intention that the release should operate in accordance with its terms, albeit confined to the subject matter of the dispute. 34Importantly, in a case such as this where the releasor was represented by skilled solicitors, where the terms of the release were negotiated over a considerable time and where the circumstances tend to suggest that the parties intended that all claims - whether presently known or not - other than those that were specifically excluded and defined, should be released, evidence of the non-awareness of the existence or likelihood of certain claims may not be significant. After all, the very point of the contractual language chosen by the parties in the Deed in Clause 5.1(a) and in the definition of "Claims" appears to have been to cover unknown claims. 35On the other hand, non-awareness by the releasor coupled with knowledge by the releasee of the circumstances that may give rise to a claim, may in some cases possibly be sufficient to invoke the equitable principle. However it will not necessarily do so. Much will depend on the quality of the releasee's knowledge - whether it is specific or general and whether in some way that knowledge should be seen as affecting the conscience of the releasee. 36A relevant feature of this case is that it involves a major building dispute, where the notorious likelihood of future claims arising from the underlying subject matter would have been well understood by the specialist construction litigation solicitors advising the plaintiff. It seems unlikely that the parties could have been unaware of this likelihood when the Deed was entered into. And there may well be a difficulty for the plaintiff if there is no evidence from its solicitor that his actual intention was different from the ordinary meaning of the words used in the release. The solicitor was after all the person responsible on the plaintiff's behalf for the negotiation of the terms of the release.

[13]

Proposed Evidence 37Against this legal context, Mr Simpkins SC, on behalf of the plaintiff, has outlined the evidence that he hopes to adduce, and the arguments that he hopes to be in a position to propound, in support of the contention that the plaintiff should not be constrained by the apparently clear words of the release; in other words, that it should be permitted to bring a case far wider than the Deed appears to have contemplated. These are reasons, he says, why there should be no separate determination of the proposed separate questions. 38The evidence and arguments on which the plaintiff hopes to rely may be reduced to the following contentions: (1)At the time the Settlement Deed was entered into the plaintiff did not know of any fire dampers or fire stopping claims save for those identified in the column headed "Description" in Annexure 1 to the Summons. (2)At the time the Settlement Deed was entered into Multiplex knew that the fire dampers or fire stopping had been installed in the manner described in the reports of the BCA Logic Reports of 11 September 2009 and 13 October 2011 (the Further Fire Damper Defects). (3)At the time the Settlement Deed was entered into: (a)Multiplex knew or suspected or ought reasonably to have known that the plaintiff was ignorant of the Further Fire Damper Defects; (b)Multiplex withheld its knowledge of the Further Fire Damper Defects from the plaintiff; (c)Multiplex knew or suspected or ought reasonably to have known that if it disclosed what it knew about the Further Fire Damper Defects the plaintiff would or might not enter into the Settlement Deed on the then proposed terms. (4)At the time the Settlement Deed was entered into the plaintiff did not intend to release the Further Fire Damper Defects claim and did not know of any intention on the part of Multiplex that it be released. (5)Prior to the filing of the Summons the plaintiff had made a claim against Multiplex for tiling defects that was not limited to cracked and crummy tiles. (6)After the filing of the Summons the plaintiff at all times up to and including entry into the Settlement Deed maintained a claim against Multiplex for tiling defects that was not limited to cracked and drummy tiles. (7)After the filing of the Summons and up to the entry into the Settlement Deed the plaintiff and Multiplex dealt with each other upon the common assumption that the claim made by the plaintiff and being pursued in these proceedings was a claim for tiling defects that was not limited to cracked and drummy tiles. (8)At the time the Settlement Deed was entered into the plaintiff did not intend to release the Tiling Defects Claim except to the extent that it related to cracked and drummy tiles and did not know of any intention on the part of Multiplex that it be released. (9)At the time the Settlement Deed was entered into: (a)Multiplex knew or suspected or ought reasonably to have known that the plaintiff was ignorant of the matters identified in Pia Francesca's Opening Outline at paragraph 56 (the Multiplex Tiling Conduct); (b)Multiplex withheld its knowledge of the Multiplex Tiling Conduct from the plaintiff; (c)Multiplex knew or suspected or ought reasonably have known that if it disclosed what it knew about the Multiplex Tiling Conduct the plaintiff would or might not enter into the Settlement Deed on the then proposed terms. (10)At the time the Settlement Deed was entered into the plaintiff did not intend to release the Tiling Defects Claim except to the extent that it set out in Annexure 1 to the Summons and did not know of any intention on the part of Multiplex that it be released. 39I should point out at the outset that some of the documentary evidence sought to be relied upon, even if admissible, does not support the plaintiff's contention. Indeed, it appears to have the opposite effect. For example, the email sent on 13 November 2006 from Ms Vivoda, Multiplex Legal Counsel, to Mr Standen, the partner of the firm of Colin Biggers and Paisley acting on behalf of the plaintiff states: 2.In addition to setting out a process for rectifying the windows, the deed intends to encompass all issues between us and your client so that there is clear definition as to what remains to be resolved between us after the windows. This is important as our formal approval for the windows will need to have some regard to what is proposed in relation to the remaining items. (emphasis added) 40It is curious that the plaintiff's contentions set out in paragraph [38] above have only emerged on the hearing of this application, when the plaintiff was faced with the possible early separate determination of the issues concerning the effectiveness of the release. The scope of the release in Clause 5.1(a) of the Deed has been a live issue in the proceedings since Multiplex first served its defence. Nonetheless, although I regard the likelihood of some of the plaintiff's contentions as dubious, they have been put forward by Mr Simpkins SC in good faith and I do not question them for the purposes of the argument on this application. I have made clear however that the allegations should be pleaded in a reply and that any such reply should be appropriately certified with the requisite statement as to a belief that there are reasonable grounds to support them.

The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Limited and Ors

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