The Owners Strata Plan v Brookfield Multiplex Limited

I propose to grant the defendant leave to file an amended Technology and Construction list response. DECISION : 1. Subject to the following order, order the defendant to pay the plaintiffs' costs of and incidental to and thrown away by reason of the amendment of its Technology and Construction list response. 2. Order that the costs of today be costs in the proceedings. 3. I direct the defendant to file and serve its amended list response by 5pm on 28 April 2010. I stand the proceedings over to the directions list on 30 April 2010.

CATCHWORDS : PROCEDURE - application by defendant for leave to amend list response to allege sub-contractors are concurrent wrongdoers - proportionate liability - where pleading did not identify relevant acts or omissions and causal connection between those acts or omissions and the losses in respect of which the plaintiffs sue - whether pleading sufficient to demonstrate what is necessary to show duty of care between sub-contractor and subsequent owner - leave granted - Civil Liability Act 2002 (NSW) Pt 4.

LEGISLATION CITED : Civil Liability Act 2002 (NSW) Home Building Act 1989 (NSW)

Gunston v Lawley [2008] VSC 97 HSD Co Pty Ltd v Masu Financial Management Pty Ltd [2008] NSWSC 1279 CASES CITED : Shrimp v Landmark Operations Ltd (2007) 163 FCR 510 St George Bank Limited v Quinerts Pty Ltd [2009] VSCA 245 Ucak v Avante Developments [2007] NSWSC 367 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515

The Owners - Strata Plan No. 63312 (First Plaintiff) PARTIES : The Owners - Strata Plan No. 66849 (Second Plaintiff) The Owners - Strata Plan No. 66850 (Third Plaintiff) Brookfield Multiplex Limited (Defendant)

COUNSEL : M G Rudge SC / T Davie (Plaintiffs) L V Gyles SC (Defendant)

SOLICITORS : David Le Page (Plaintiffs) Gilbert + Tobin (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST

2007/266728 THE OWNERS CORPORATION SP 63342 & ORS v BROOKFIELD MULTIPLEX LIMITED JUDGMENT

1 HIS HONOUR: The plaintiffs are the Owners Corporations of three strata title developments. They sue the defendant, who they say was the builder, for alleged defects. Their causes of action rely both on breach of statutory warranties under the Home Building Act 1989 (NSW), and breach of duties of care said to have been owed. 2 The defendant denies liability. It says, however, that if it is liable, then a number of sub-contractors, who carried out various aspects of the work, are concurrent wrongdoers for the purposes of Part 4 of the Civil Liability Act 2002 (NSW). The defendant seeks leave to amend its List Response to allege that some nine identified sub-contractors were responsible for various of the acts or omissions on which the plaintiffs rely as having caused them loss or damage. 3 The debate proceeded on the basis that if a proportionate liability defence were to be "pleaded", (an inaccurate but convenient term), the defendant should identify the alleged concurrent wrongdoers, identify their relevant acts or omissions and identify a causal connection between those acts or omissions and the losses in respect of which the plaintiffs sue. (See Ucak v Avante Developments [2007] NSWSC 367; see also HSD Co Pty Ltd v Masu Financial Management Pty Ltd [2008] NSWSC 1279 at [17] and [18], and the references given by Rothman J in the latter of those paragraphs.) 4 The debate proceeded also on the basis that, for a person to be a concurrent wrongdoer under Part 4 of the Civil Liability Act, the person must be liable to the plaintiff: perhaps, an extended reading of the word "caused" in the definition of "concurrent wrongdoer" in s 34(2) of that Act. The reasons for that construction were given by Besanko J in Shrimp v Landmark Operations Ltd (2007) 163 FCR 510 at 523 [62]. His Honour's analysis was adopted and applied by Nettle JA, with whom Mandie J and Beach AJA agreed, in St George Bank Limited v Quinerts Pty Ltd [2009] VSCA 245 at [58], [64]. 5 The issue that the plaintiffs relied upon to oppose the grant of leave was that the pleading propounded by the defendant did not allege material facts that would satisfy the two-stage analysis spelled out in the decision of the High Court of Australia in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; see also, the analysis of Byrne J in Gunston v Lawley [2008] VSC 97 at [22]. 6 It was common ground that the Court need only consider the pleading against one of the sub-contractors. That pleading:

(1) identifies the sub-contract; (2) identifies the obligations of the sub-contractor under that sub-contract; (3) alleges that the sub-contractor performed its obligations (or purported to do so) under that sub-contract; and (4) alleges a number of matters that are said to give rise to the conclusion that the sub-contractor should have known that "the owners" of the particular development and its successors in title "would be reliant upon [the sub-contractor] to properly perform the work in accordance with the terms of the sub-contract...or otherwise with due care and skill", and that accordingly those owners and their successors, "would be vulnerable to suffer loss and damage if [the sub-contractor] did not properly perform its work...". 7 In those circumstances, it is alleged that it was reasonably foreseeable to the sub-contractor that if it did not perform its work in accordance with the terms of the sub-contract, or with proper care and skill, then that would, or might, cause loss to the owner of the building in question and its successors in title. 8 It is also alleged that the relevant plaintiff was more vulnerable than most successors in title to suffer loss by reason of any breach of duty on the part of the sub-contract because, the strata plan not having then been registered, the relevant plaintiff did not exist. That, I think, is intended to pick up the relevant plaintiff's articulation as against the defendant of the reasons for which it was owed a duty of care, even though it was not the person for whom the defendant carried out the work. 9 There is no express allegation that, by reason of the matter that I have summarised, the sub-contractor owed "the owners" a duty of care. It is however, alleged, that by reason of those matters, it owed the relevant plaintiff a duty of care: a duty of care to use reasonable care to prevent economic loss arising from defects and to carry out the sub-contract with reasonable care and skill. 10 The question is whether a pleading in the form that I have summarised is sufficient to demonstrate what is necessary to show a duty of care between a sub-contractor and a subsequent owner (or, in another case perhaps, between a head contractor and a subsequent owner). As Byrne J pointed out in Gunston, there is no general principle of law that a sub-contractor cannot owe a duty of care to a principal. However, his Honour said, the duty of care will arise only if there is reliance or vulnerability on the part of the principal. It seems to me that what his Honour said must be equally applicable as between a sub-contractor and a successor in title of the principal. 11 In the present case, although there is no express allegation of the conclusion of law that the sub-contractor owed "the owners" a duty of care by reason of the matter pleaded, the material facts that would support the existence of such an allegation are set out. I do not think that it can be said at the level of principle or on some a priori basis, that if evidence were led to make good the matter pleaded, nonetheless, as a matter of law, there could be no duty of care owed by the sub-contractor to "the owners".

12 The mere failure of the pleading to allege the consequence, as between sub-contractor and "the owners" of the allegations of reliance, vulnerability and reasonable foreseeability of harm, is not of itself a matter to say that the proposed pleading is bad in law. 13 Further, it seems to me, it cannot be said as a matter of certainty that, on a case developed in accordance with the matters pleaded, nonetheless, there could be no duty of care as between sub-contractor and owners. 14 For those reasons, I think, the proposed amendments are not hopeless, or doomed to fail. On the contrary, I think, they are capable of demonstrating the elements of a duty of care as between sub-contractor and owners, and therefore of demonstrating something that could satisfy the "anterior step" to which the plurality referred in Woolcock Street at 527 [14] and 532 [27]. 15 For those reasons I propose to grant the defendant leave to file an amended Technology and Construction list response substantially in the form of the document that I shall now initial for identification and date today's date. 16 In circumstances where the point is difficult and the opposition could not be said to have been unreasonable but where, nonetheless the application succeeded, and taking into account the correspondence exchanged between the parties prior to the hearing, I think that the appropriate costs orders are as follows:

1. Subject to the following order, order the defendant to pay the plaintiffs' costs of and incidental to and thrown away by reason of the amendment of its Technology and Construction list response.

2. Order that the costs of today be costs in the proceedings.

3. I direct the defendant to file and serve its amended list response by 5pm on 28 April 2010. I stand the proceedings over to the directions list on 30 April 2010.

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