The State of New South Wales v Bovis Lend Lease Pty Limited

The State of New South Wales v Bovis Lend Lease Pty Limited - [2007] NSWSC 1045 - NSWSC 2007 case summary — Zoe

[7]

Allied Constructions Pty Limited v Hyder Consulting (Australia) Pty Limited & Ors [2004] NSWSC 808 Amaca Pty Ltd v State of New South Wales (2003) 199 ALR 596 Australian Slate Quarries Ltd v Federal Commissioner of Taxation (1923) 33 CLR 416 Avenhouse & Anor v Council of the Shire of Hornsby (1998) 44 NSWLR 1 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Bank of New South Wales v The Commonwealth (1948) 76 CLR 1, Bass v Permanent Trustee Co Limited (1999) 198 CLR 334 Bropho v State of Western Australia (1990) 171 CLR 1 Brutus v Cozens [1972] 2 All ER 1297 Bryan v Maloney (1995) 182 CLR 609 Buckley v Bennell Design and Construction Pty Ltd (1978) 140 CLR 1 Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad (1976) 136 CLR 529 Cape v Maidment (1991) 98 ACTR 1 Cattle v Stockton Waterworks Co (1875) LR10QB 453 Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 Chocolate Factory Apartments Pty Ltd v West Point Finance Pty Ltd [2005] NSWSC 784 Coco v The Queen (1994) 179 CLR 427 Commercial Oil Refiners Pty Limited v South Australia (1974) 9 SASR 88 Deputy Federal Commissioner of Taxation v State Bank of New South Wales (1992) 174 CLR 219 Donoghue v Stevenson [1932] AC 562 Esanda Finance Corp Ltd v Peat Marwick Hungerfords (Reg) (1997) 188 CLR 241 Farmer (Surveyor of Taxes) v Trustees of Cotton [1915] AC 922 Federal Commissioner of Taxation v Broken Hill South Ltd (1941) 65 CLR 150 Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 CASES CITED : Foxman Holdings Pty Ltd v NMBE Pty Ltd (1994) 38 NSWLR 615 Hayes v Federal Commissioner of Taxation (1956) 96 CLR 47 Hill (t/as R F Hill & Associates) v Van Erp (1997) 188 CLR 159 Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605 Hope v The Council of the City of Bathurst (1980) 144 CLR 1 Kelner v Baxter (1866) LR2CP 174 Le Lievre v Gould [1893] 1 QB 491 L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 Minister for Lands and Forests v McPherson (1991) 22 NSWLR 687 Monk v Australia and New Zealand Banking Group Limited (1994) 34 NSWLR 148 Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 628; [1971] AC 793 New South Wales Associated Blue-Metal Quarries Ltd v Federal Commissioner of Taxation (1956) 94 CLR 509 Perre and Ors v Apand Pty Limited (1999) 198 CLR 180 Petersen v Maloney (1951) 84 CLR 91 Potter & Minahan (1908) 7 CLR 277 Poulton v Commonwealth (1952-1953) 89 CLR 540 State Authorities Superannuation Board v Commissioner of State Taxation for the State of Western Australia (1996) 189 CLR 253 State of New South Wales v Commonwealth Bank of Australia [2001] NSWSC 1067 Sullivan v Moody (2001) 207 CLR 562 Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 Torkington v Magee [1902] 2 KB 427 Trendtex Trading Corporation v Credit Suisse [1982] AC 679 Trident General Insurance Co Pty Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270 White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193 Woolcock Street Investments Pty Limited v CDG Pty Limited (2004) 216 CLR 515 Wynyard Investments Pty Limited v Commissioner for Railways (NSW) (1955) 93 CLR 376

[15]

A referee appointed under Pt 72 can have no wider authority. In our opinion therefore the court in deciding what action to take on a referee's report is both entitled and bound to decide for itself whether the referee has erred in law and to correct any such error." ii. The following year, in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 Gleeson CJ (at 563) observed that the judge hearing such an application: "has a judicial discretion to exercise in a manner that is consistent both with the object and purpose of the rules and with the wider setting in which they take their place. That wider setting is a system for the administration of justice according to law. In so far as the subject matter of dissatisfaction with a referee's report is a question of law, or the application of legal standards to established facts, then a proper exercise of discretion would require a judge to consider and determine that matter afresh. That was decided by this Court in Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605: see also, Cape v Maidment (1991) 98 ACTR 1 at 4. That conclusion is entirely consistent with the history of the rules and the reasoning of the High Court in Buckley which, although the case related to different provisions is also instructive as to the present provisions." iii. As I put it in Allied Constructions Pty Limited v Hyder Consulting (Australia) Pty Limited & Ors [2004] NSWSC 808: "There is no implied authority given to the Referee to make errors of law. The Court is bound to decide for itself whether the Referee erred in law and, if such error be found, to correct the error in exercising its discretion under the rules ( Bermria at 609)." iv. The question whether, on a given set of facts, a duty of care was owed is a question of law: see the joint judgment of the High Court in Amaca Pty Ltd v State of New South Wales (2003) 199 ALR 596 (at 602 [26]): "…there may be some question about whether the Court of Appeal, and therefore this Court, could undertake a review of the factual question of breach. But it is clear that the Court of Appeal did have power to determine whether, on the facts found at trial, the State did owe the injured plaintiff a duty of care . That was a question of law. If the Court of Appeal had identified the errors of law which the trial judge made, it would then have been appropriate, and in this case necessary, for the Court of Appeal to go on to consider whether the claim for contribution should have failed on the ground, urged by the State, that the State owed no duty of care to the injured plaintiff." v. A question of statutory interpretation is also a question of law, except to the extent that an expression in the statute is used in the sense that it has in ordinary speech, in which case the common understanding of that expression is to be determined as a question of fact: see Hope v The Council of the City of Bathurst (1980) 144 CLR 1 at 7 per Mason J: "Many authorities can be found to sustain the proposition that the question whether facts fully found fall within the provisions of a statutory enactment properly construed is a question of law. One example is the judgment of Fullagar J in Hayes v Federal Commissioner of Taxation (1956) 96 CLR 47 at 51, where his Honour quoted the comment of Lord Parker of Waddington in Farmer (Surveyor of Taxes) v Trustees of Cotton [1915] AC 922 at 932, which was adopted by Latham CJ in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at 97 that where all the material facts are fully found, and the only question is whether the facts are such as to bring the case within the provisions properly construed of some statutory enactment, the question is one of law only. Fullagar J then said: "… this seems to me to be the only reasonable view. The distinction between the two classes of question is, I think greatly simplified, if we bear in mind the distinction, so clearly drawn by Wigmore, between the factum probandum (the ultimate fact in issue) and facta probantia (the facts adduced to prove or disprove that ultimate fact). The 'facts' referred to by Lord Parker … are the facta probantia . Where the factum probandum involves a term used in a statute, the question whether the accepted facta probantia establish that factum probandum will generally - so far as I can see, always - be a question of law."

[55]

No issue arises as to interference with the autonomy of the contracting parties to the Contract. 16 The Referee's finding that a duty of care was owed by BLL to HAC derived principally from various contractual relationships involving those entities, which contractual relationships did not, however, include a direct contractual relationship between BLL and HAC. As BLL has contended, the imposition of a duty of care depended, ultimately, on findings (at Report [92] and [93]) that HAC was not able to protect itself contractually from the consequences of any fault on the part of BLL in the design and construction of the Aquatic Centre. 17 Earlier, (at Report [6]-[15]), the Referee had outlined the contractual matters relating to the Aquatic Centre's construction and the legislative history relating to the ownership of the land on which the Centre was constructed, then considered the issue of whether SOPA or the State of New South Wales in an "extended sense" was the plaintiff and whether SOPA had standing to sue for breach of the construction contract (at Report [16]-[54]), before finding (at Report [60]-[61]) that SOPA had not acquired any contractual rights and did not have standing to sue BLL in contract. 18 Accordingly, the Referee commenced his consideration of the issue of whether a duty of care was owed by observing that, because SOPA had not acquired any contractual rights from the Minister for Public Works, there was no possibility of a concurrent duty in tort and contract (at Report [62]). 19 It is apparent from subsequent paragraphs, particularly Report [64] and [91]-[93], that the Referee considered that the only issue was whether BLL owed a duty to HAC, not whether BLL owed a duty directly to SOPA. Central to that issue was the question whether BLL owed a duty of care to HAC notwithstanding the absence of a contract between BLL and HAC. 20 However, the Referee initially identified (at Report [62]) the question to be considered, in the absence of any contractual rights in SOPA, as

[63]

"'Vulnerability', in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, 'vulnerability' is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant." 25 It is thus apparent that the finding that BLL owed a duty of care to HAC, depended upon the circumstance, and thus a factual finding, that HAC was simply not in a position to acquire rights, either by contract or, presumably, by statute, against BLL in the event that BLL's design or construction of the Aquatic Centre was defective. Dealing with the issue 26 In my view for the reasons which follow, this conclusion was incorrect. Further, there was no other basis on which a duty of care to HAC could be found. 27 There was no evidence, apart from the documents themselves to which HAC was a party, which went to the issue of whether HAC could protect itself or which identified the so-called "framework of executive decisions" or which established that HAC relied on BLL in any way. No representative of HAC was called. The plaintiff appeared to assume that evidence from officers of the Department of Public Works constituted relevant evidence of reliance on BLL by any emanation of the State. There was a complete absence of direct evidence about HAC's position at any point in time about any matter relevant to the question of whether HAC was "vulnerable". 28 In the Report at [75], the Referee appears to have made a factual error, when he places reliance on BLL and HAC being in a "relationship...under the Supplemental deed". [This error may have been due to the fact that the plaintiff pleaded that BLL was a party to the HAC Supplemental Deed: paragraph 36(d)(iv) of the Second Further Amended Summons.] BLL was not a party to the Supplemental deed and, although BLL was referred to in that document (i.e. as 'Civil & Civic'), the Referee does not explain how those references give rise to a "relationship" or the nature of that relationship or how that relationship is relevant to the issue of whether BLL owed a duty of care to HAC. 29 As the Referee's finding on the existence of a duty of care essentially derives from the contractual relationships between various entities, it is appropriate to immediately observe that a duty of care in tort is not imposed automatically even when there is a contractual relationship between parties, particularly when the duty asserted is in relation to pure economic loss. The guidance which may be obtained from the authorities 30 In truth it is entirely appropriate to acknowledge the care and industry with which the Referee examined the authorities. Much of that analysis cannot be controverted. However in my respectful view the ultimate decision, which I accept treated with the most unusual set of circumstances, is incorrect. The reasons follow. The ultimate question is one of fact 31 McHugh J in Perre at [129] made the important observation that the degree and nature of vulnerability sufficient to found a duty of care will no doubt vary from category to category and from case to case. The proposition included the following:

[88]

Thirdly, in those cases where the loss occurs in a commercial setting, a third party, C, may suffer financial harm as a result of conduct which is regulated by a contract between A and B. It may be that the consequences of such conduct as between A and B are governed and limited by the contract. …" [Emphasis added.] 45 The circumstances in which the Referee determined that BLL owed a duty of care were commercial and were permeated by the complex web of legislative steps earlier identified in these reasons. HAC was not sidelined from a contractual involvement by anything which BLL did: to the contrary the proper inference from what occurred is that BLL was entitled to proceed on the reasonable assumption that HAC's interests would be protected in every necessary parameter by the arrangements being made to constitute its statutory corporation successors with appropriate saving arrangements. BLL of course, had no responsibility for the framework of executive decisions which would come to be made. 46 Further during the time that HAC existed (i.e. prior to 1 January 1992) such contractual arrangements as did include BLL [then Civil & Civic] did not, at that point in time, identify in terms of the design and construction of the Aquatic Centre, what was to be built. The 1991 agreement, read with the September 1991 Facility Brief, went no further than to identify that it would be a swimming facility including a leisure pool: see September 1991 Facility Brief Exh AH tab 2 section A7.1 at p18. However, what was to be built to achieve that broad description was to be identified at some time in the future in a "Brief" to be provided by the Minister for Public Works (see section 3 of the 1991 agreement and in particular cl 3.1: Exh AH tab 3). In other words, although at a later stage there were detailed plans and specifications, before HAC ceased to exist there was insufficient precision in the identification of what BLL's [Civil & Civic's] obligations were, to readily identify the scope of any duty of care. This seems to me also to be yet another indicator of the need for special caution, before imposing upon BLL a duty of care to a non-contracting statutory corporation destined for dissolution and whose interests BLL was reasonably entitled to assume, were being protected by those responsible for determining its statutory corporation's lines of succession. 47 Ultimately, notions of HAC's vulnerability [of the type of which the Referee found gave rise to the duty of care] are misconceived. They offend the necessity to observe 'intelligent limits' to keep the law of negligence within the bounds of common sense and practicality. In the particular context the imposition of the duty of care would impose unreasonable burdens on the freedom, here of BLL, to protect or pursue its own legitimate commercial interests without the need to be concerned with the interests of HAC. BLL was entitled to assume that those interests were being adequately catered for by the detailed web of contractual/statutory arrangements made on behalf of the State of New South Wales authorities in respect of the devolution of rights and interests in one of its authorities, HAC, destined for dissolution. It was entitled to infer that those interests were being protected by the contractual provisions put into place by arms length negotiations and by such other arrangements, if any, as had been (or were to be) put into place by the State authorities to indemnify the owners of the land from any loss they may suffer by reason of the pool facility or other constructions. 48 One only of the measures of protection of HAC's statutory successor, HBDC, is to be found in the Growth Centres (Development Corporations) Act 1974, where a 'development corporation' constituted under Part 2 is charged under Part 3 with the responsibility of promoting, coordinating, managing and securing the orderly and economic development of the growth centre. HBDC was constituted as a development corporation under this Act by the Growth Centres (Homebush Bay Development Corporation) Order 1992. Hence HBDC was granted the responsibilities and power to be involved in the development on its land. 49 Under s 7(2) of the Act the development corporation has and may exercise and discharge particular powers, authorities, duties and functions and these include the requirement to submit to the Minister, such proposals with respect to the development and use of the land as it considers necessary or appropriate (s7(2)(a)) and to carry out research into problems with respect to the development and use of the planning and development of land within the growth centre (s7(2)(c)). In short the statutory scheme and the Order made pursuant to the Growth Centres (Development Corporations) Act 1974 constituting HBDC had the result that HBDC had statutory responsibility to be involved in the development of the Aquatic Centre [on land the title to which had devolved upon it] and under section 18 HBDC had power to make and enter into contracts with any person for, among other purposes, the carrying out of works or the performance of services. 50 By 1992 before any work had been carried out on the site there were detailed statutory provisions which obligated the successor to HAC to be involved in issues concerning it. What effectively occurred appears to have been that HBDC simply permitted the Minister for Public Works to take over. The detailed provisions which obligated and/or empowered HBDC to be involved are section 7 ['responsibility, etc, of development corporation'] and section 18 which provided express power to enter into contracts, section 19 which expressly empowered it to enter into arrangements with other public authorities, including the Minister for Public Works, and even more importantly, section 21 which empowered it to make use of the services of any officers, employees or facilities of any Government Department. Section 22 required that in the exercise and discharge of its responsibilities, powers, etc, it (as far as practicable) consult and negotiate with public authorities and Government Departments whose responsibilities, powers, etc included those of the same or of a similar nature.

[139]

See also to similar effect Dal Pont Law of Agency Butterworths 2001 paragraph 5.13 citing Trident General Insurance Co Pty Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270: "A principal who lacked the capacity to enter a contract at the time when it was made cannot ratify the contract". 67 The difficulty with the plaintiff's reliance on principles of agency in relation to private transactions is that they are not apt to be applied to contracts involving various arms of Government. That is because, unlike in the case of private entities, it would not necessarily be assumed that a Minister, when entering into a contract, would be acting as agent for a statutory corporation such as either HAC or SOPA. 68 The reasonableness of the proposition put forward by the plaintiff depends upon the notion that a private corporation which owned land would have a very real interest in a contract for construction of improvements on that land. That does not follow in the case of statutory corporations, particularly when it is contemplated that the statutory corporation may not operate the facility to be constructed or even continue to own the land. 69 Further, the proposition that the Minister was acting as agent for HAC is at odds with the subsequent legislation which transferred the land but made no express reference to the rights and obligations arising pursuant to the contracts between the Minister and BLL. 70 For these reasons the agency submissions are rejected. 71 In the circumstances I do not see it as necessary to travel through or determine any of the other issues which would have arguably been required to be determined, had BLL failed on the issues referred to above. Statutory vesting of right to sue BLL 72 Notwithstanding it being strictly unnecessary to do so, that in light of the decision that the Referee's finding of a duty of care was incorrect, I propose to deal with the Referee's decision that SOPA acquired a cause of action against BLL by virtue of statutory 'vesting'. 73 In my view that decision was incorrect. The reasons which follow generally adopt the submissions of BLL. 74 The Referee found (Report [64]) that a duty of care was owed to HAC by BLL, and that HAC's "correlative right" in respect thereof, "devolved" to SOPA through its statutory predecessors and by operation of the vesting provisions in the Olympic Co-Ordination Authority Dissolution Act 2002. 75 Earlier, at Report [57], the Referee observed that:

[144]

I have referred to those definition provisions as I think they have some bearing on the assessment of SOPA's entitlement to bring proceedings in tort." 77 Hence on the basis on which the Referee had earlier determined the duty of care issue, the question of whether the right to sue BLL in tort had "devolved" to SOPA involved a process of statutory construction: namely, whether each of the chain of statutes was effective to transfer from HAC to SOPA, something which gave SOPA the entitlement to sue BLL in negligence. 78 The Referee did not expressly state where, within the foregoing definitions, the "correlative right" which he found was bestowed on HAC fell, but it would seem likely that he regarded it as within the definition of "rights". However, as BLL has submitted, whatever "correlative right" was transferred to and vested in SOPA by the legislative scheme, that "right" cannot, by that scheme, be elevated higher than any "right" which was enjoyed by HAC. It follows that, because prior to the dissolution of HAC (i) there had been no act or omission with want of reasonable care on the part of BLL and (ii) HAC itself had suffered no loss or damage, no 'complete' right to sue in negligence could have been conveyed from HAC to its successors. In that sense, whatever "correlative right" HAC enjoyed by reason of BLL owing a duty of care to it, that "correlative right" was inchoate. 79 An alternative interpretation of the reasoning by which the Referee concluded that SOPA, which came into existence more than seven years after the Aquatic Centre was constructed, had a right to sue BLL in negligence, is that he regarded the "correlative right" that vested in SOPA as a chose in action and therefore an "asset" within the first limb of the definitions. If that were a correct interpretation of the Referee's reasoning, then that also suffers from an error of law, for the reasons that follow. 80 A chose in action has been defined as "a known legal expression used to describe all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession": Torkington v Magee [1902] 2 KB 427 at 430 per Channell J; as "a right enforceable by action, or the right of action itself" [Butterworths Australian Legal Dictionary p192]; and as "a right of proceeding in a court of law to ... recover pecuniary damages for the infliction of a wrong..." [Osborn's Concise Law Dictionary p73]. Because no damage was suffered by HAC, a necessary element of the tort of negligence was missing at the time of HAC's dissolution and, accordingly, there was no right which could be enforced by action and thus no "chose in action". 81 A further problem facing the proposition that there was vested in SOPA, a right to sue BLL in negligence arises from the general principle that a right of action for damages in tort is incapable of assignment either at law or equity: Poulton v Commonwealth (1952-1953) 89 CLR 540 per Fullagar J at first instance at 571, and per Williams, Webb and Kitto JJ (on appeal) at 602. 82 Starke's Assignments of Choses in Action in Australia (Butterworths, 1972) cites (at paragraph 56) Poulton as authority for the proposition that a right to sue for damages for tort is not a statutorily assignable chose in action:

[146]

"It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights or depart from the general system of law without expressing its intention with irresistible clearness; and to give any such effect to general words, simply because they have that meaning in their widest, or usual or natural sense, would be to give them a meaning in which they were not really used." This passage has been endorsed by the High Court in subsequent decisions: see Bropho v State of Western Australia (1990) 171 CLR 1 at 18; Coco v The Queen (1994) 179 CLR 427 at 437. 84 The presumption has been held to operate such that legislation will, in the absence of an unambiguous contrary intention, be interpreted 'so as to be in consonance with the principles of equity': Minister for Lands and Forests v McPherson (1991) 22 NSWLR 687. In McPherson, the Court of Appeal held that the power in the Supreme Court, exercising its equitable jurisdiction, to provide relief against forfeiture was not removed because there was no clear intention to do so in the statute under consideration. 85 Hence, as a matter of construction of each of the statutes which transferred or vested "assets", the expression "chose in action" does not include a bare right to sue in tort: this is because the mere inclusion of the term 'choses in action' in the definition of 'asset' does not express 'with irresistible clearness' an intention to achieve a result so discordant with equity's prohibition on such assignments. 86 Thus even if HAC had enjoyed a right of action in tort against BLL, the vesting provisions to which the Referee referred did not operate to assign or vest such a bare right of action. As a minimum, it would be necessary for the statute to state in the clearest of terms that the vesting provisions included causes of action arising from breaches of duties of care owed to HAC and thereby assigned the benefit of such duties to HAC's successors. 87 SOPA submitted that the words of the statutes were extremely wide and were sufficient to transfer both present and future "assets" and "rights". To my mind that proposition simply does not address the issue as to whether a duty of care in respect of which there has been no breach and no damage is either an "asset" or "right". Hence the authorities relied upon by SOPA [Monk v Australia and New Zealand Banking Group Limited (1994) 34 NSWLR 148 and Trendex Trading Corporation v Credit Suisse [1982] AC 679] are not of assistance as they involve the assignment of complete rights of action in tort, not merely the purported transfer or assignment of a 'duty of care' which has not yet been breached. 88 As BLL has submitted prior to breach, a duty of care which is "owed" is an 'obligation' on the part of the person by whom the duty is owed: it is not a 'right' which is held by the person or persons to whom it is owed which is capable of enforcement. Until damage is suffered [or, alternatively, at least until breach], the 'duty of care' has no "correlative right" which is capable of enforcement in law or equity. To assign a completed right of action is one thing. To purport to assign the benefit of an obligation to take reasonable care is quite another - particularly, as in this case, where the duty arises because of the particular 'vulnerability' of the transferor. 89 Indeed and as further submitted by BLL, if no duties were owed independently to the assignee, it is difficult to see how the person owing the duty to the assignor is to know what is required to discharge the duty to the assignee, who may be in a quite different position to the assignor in terms of knowledge, experience or capacity. I accept that because any duty of care not to cause pure economic loss depends on the particular personal characteristics of the person claiming the benefit of the duty, such a duty of care is a truly personal obligation which is simply not apt to be assigned. 90 Even if BLL did owe a duty of care to HAC not to cause pure economic loss to it, that obligation, if not breached prior to the dissolution of HAC in January 1992, simply ceased to exist at the moment of dissolution. There was simply nothing to be passed on to any of HAC's successors, including in their capacity as registered proprietors of the land. 91 Of course it must be remembered that the Referee did not find that there was a duty owed by BLL directly to any of the subsequent registered proprietors of the land. This follows from the decision in Woolcock.

At a glance

Court

Decision date

Before

Source

Judgment (149 paragraphs)

Parties

Legislation Cited (14)

Cases Cited (39)