The University of Sydney v Multiplex Constructions Pty Ltd

Supreme Court of NSW|2023-04-13|Before: Stevenson J

Solicitors: Minter Ellison (Plaintiff/Applicant) Norton Rose Fulbright (First and Second Defendants/First and Second Respondents) Colin Biggers & Paisley (Third Defendant/Third Respondent) Moray & Agnew (Fourth Defendant/Fourth Respondent) Lander & Rogers (Fifth Defendant/Fifth Respondent) Carter Newell Lawyers (Sixth Defendant/Sixth Respondent) Gadens Lawyers (Seventh Defendant/Seventh Respondent) Clyde & Co Australia (Eighth Defendant/Eighth Respondent) Mills Oakley (Ninth Defendant/Ninth Respondent) File Number(s): 2019/401010

JUDGMENT

The plaintiff, The University of Sydney, brings these proceedings against the defendants in relation to allegedly defective building work in the Charles Perkins Centre at the University's Sydney campus.
The defendants include the builder, Multiplex Constructions Pty Ltd, its guarantor, Brookfield Australia Investments Ltd, and a number of subcontractors and consultants including, relevantly for the purpose of these reasons, the sixth defendant, McKenzie Group Consulting (NSW) Pty Ltd.
On 11 November 2022, the University filed a Notice of Motion seeking: 1. leave to file a Second Further Amended Technology and Construction List Statement; 2. leave to adduce further lay or expert evidence; and 3. disclosure of identified documents.
Most of the issues arising from the University's Notice of Motion have been resolved.

The University's claim against McKenzie Group

The University's claim against McKenzie Group is found in pars 154 to 185 of its Proposed List Statement, a copy of which is attached to these reasons. The annotations show amendments already made to the List Statement as underlined, and the amendments the subject of the application in the University's Notice of Motion of 11 November 2022 as coloured blue.
During argument, I was informed that the context in which the University's claims are made against McKenzie Group relates to the cladding of the Charles Perkins Centre.
The University alleged that McKenzie Group is a "certifying consultant" and that: 1. on 29 April 2013, McKenzie Group issued a "BCA Compliance Report" which identified areas in the Charles Perkins Centre "required to be assessed against the performance requirements" of the Building Code of Australia; [1] and 2. on 18 December 2013, McKenzie Group issued a "Certificate of Compliance" which certified, amongst other things, that: 1. the elements of the Contract Works the subject of McKenzie Group's expertise (which I understand is the cladding) had been completed in accordance with relevant standards; 2. those parts of the Contract Works had reached practical completion; and 3. those works would operate and function in the manner envisaged by and in accordance with the relevant building contract.
I was informed, during argument, that the cladding the subject of the 18 December 2013 Certificate of Compliance had, by that date, been completed.

Statutory duty of care

McKenzie Group makes a number of complaints about the manner in which the University proposes to plead its case arising under s 37 of the Design and Building Practitioners Act 2020 (NSW) ("the DBP Act"). [2]
Section 37(1) of the DBP Act provides: "A person who carries out construction work has a duty to exercise reasonable care to avoid economic loss caused by defects - (a) in or related to a building for which the work is done, and (b) arising from the construction work."
"Construction work", as referred to in s 37(1), is defined in s 36 of the DBP Act as: "… any of the following - (a) building work, (b) the preparation of regulated designs and other designs for building work, (c) the manufacture or supply of a building product used for building work, (d) supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any work referred to in paragraph (a), (b) or (c)."
The University's proposed pleading in relation to s 37(1) of the DBP Act is in proposed par 166A which is in the following terms: "166A. Further and alternatively … at all material times, McKenzie was a person who carried out construction work in relation to the [Charles Perkins] Centre within the meaning of section 37(1) of the [DBP] Act. Particulars The University repeats paragraphs 24 to 30 [3] and 155 [4] and 162 [5] above. The matters relied upon to support the contention that the definition of construction work is satisfied are matters for submissions, but are expected to include: (a) a reference to 'building work' in Part 4 of the [DBP] Act applies only to building work relating to a building within the meaning of that Part: section 36(2) of the [DBP] Act; (b) 'building' has the same meaning as it has in the [Environmental Planning and Assessment Act 1979 (NSW)]: section 36(1) of the [DBP] Act; (c) 'building work' includes (and is therefore not limited to) residential building work within the meaning of the [Home Building Act 1989 (NSW)]: section 36(1) of the [DBP] Act; (d) in the premises, McKenzie carried out: (I) building work; (II) the preparation of regulated designs and other designs for building work; (III) the supply of a building product used for building work; or (IV) supervising, coordinating, project managing or otherwise having substantive control over the carrying out of any of the above within the meaning of 'construction work' in section 36(1) of the [DBP] Act." (Footnotes added.)
Proposed par 166A(d) thus alleges that McKenzie Group engaged in each of the four activities referred to in the definition of "construction work" in s 36 of the DBP Act.
In fact, the University's claim is more confined than the proposed pleadings, as is evident from this passage from the submissions of Mr Shipway, who appeared for the University: "The University intends to submit at trial that in exercising the role of certifier, McKenzie did have 'substantive control over the carrying out of' the building work within the meaning of s 36(1) of the Design and Building Practitioners Act 2020. The submission will be that had McKenzie declined to certify any of the work, it can be assumed that the work would be changed so that it was able to be certified. It is (at the very least) arguable that influence of that kind amounts to 'substantive control'."
Thus, despite the terms of proposed par 166A(d), the University's case concerning the "construction work" that McKenzie Group is alleged to have carried out is confined to the proposition that McKenzie Group had "substantive control" of the carrying out of the relevant building work; being one element of the fourth activity referred to in the definition of "construction work" in s 36 of the DBP Act.
For that reason alone, I decline to permit the University to amend its List Statement to include the proposed par 166A.
There is, however, a wider problem.
To show that McKenzie Group had "substantive control" over the relevant work, that is, the work dealing with the cladding, the University would have to show either that McKenzie Group actually controlled how the cladding was installed (and there is no such suggestion) or that it had "the ability and power to control how the work was carried out". [6]
The facts on which the University relies to make out this proposition appear to be those first mentioned under the heading "Particulars" in par 166A, being those referred to in pars 24 to 30 and in pars 155 and 162.
As I have earlier stated (by way of footnote), pars 24 to 30 deal with the design of the cladding on the Charles Perkins Centre. There is no suggestion that McKenzie Group had any involvement in that activity. Pars 155 and 162 refer to McKenzie Group's 29 April 2013 BCA Compliance Report and 18 December 2013 Certificate of Compliance.
I cannot see how the fact that McKenzie Group issued those two documents could, itself, lead to a conclusion that McKenzie Group had the ability or power to control how the relevant work was carried out.
Even if one were to accept what is put in the passage from Mr Shipway's submissions to which I have referred, it is hard to see how such matters, if proven, could bespeak substantive control.
As indicated during argument, I will give the University an opportunity to reformulate its proposed amendment to the List Statement.

Breach of duty - causation

A further issue arises as to the manner in which the University has pleaded causation, both in relation to McKenzie Group's alleged breach of the duty under s 37 of the DBP Act and also its alleged duty under the common law.
The structure of this aspect of the University's claim is to allege: 1. breach by McKenzie Group of the "McKenzie Common Law Duty of Care" and the "McKenzie Statutory Duty of Care"; [7] 2. that McKenzie Group knew of the risk of harm to the University; [8] 3. that McKenzie Group knew or should have known that the University would rely upon McKenzie Group's skill and expertise; [9] 4. that a reasonable person in the position of McKenzie Group would have taken precautions against such risk, including requesting information from the builder, Multiplex, and from the cladding subcontractor, and inspecting the cladding works; [10] 5. that McKenzie Group should have, but did not, take those steps; [11] and 6. matters relevant to the requirements of s 5D of the Civil Liability Act 2002 (NSW). [12]
The Proposed List Statement then continues: "167K. Had McKenzie carried out its role as a BCA Consultant as alleged in paragraph 167E above, it would have: (a) warned [Multiplex] of the BCA non-compliance of the Substitute Thermal Insulation Product; (b) warned [Multiplex] of the increased risk of fire spread from the use of the Substitute Thermal Insulation Products. 167L. Thereby causing or contributing to: (a) Arup [the fire engineer] developing an Alternative Solution for the Thermal Insulation Works; or (b) the Substitute Thermal Insulation Products not being used in the [Charles Perkins] Centre; or (c) the Substitute Thermal Insulation Products being used in a manner which complied with the BCA. 168. Insofar as [Multiplex] and [Brookfield] prove their contentions in their Further Amended List Response relating to the breach by McKenzie of a duty of care, then the University also contends that, by reason of McKenzie's breach of the McKenzie Duty of Care and the McKenzie Statutory Duty of Care: (a) the [Charles Perkins] Centre contains the Façade Panel Defects; and (b) caused the University to suffer loss or damage. 168B. The University also contends that by reason of McKenzie's breach of the McKenzie Duty of Care and the McKenzie Statutory Duty of Care: (a) the [Charles Perkins] Centre contains the Thermal Insulation Defect; and (b) the University thereby suffered loss or damage."
Thus, in proposed par 167K, the University intends to allege that if McKenzie Group had acted as a reasonable person would have acted in its position, it would have warned the builder, Multiplex, of certain matters.
Proposed par 167L then follows. That paragraph is expressed in the passive voice and sets out a number of consequences that the University alleges would have come to pass had McKenzie Group given Multiplex the warnings referred to in proposed par 167K.
The pleading does not state how the giving of warnings to Multiplex as referred to in par 167K would have "caused" or "contributed to" the bringing about of the states of affairs referred to in proposed pars 167L(a), (b) or (c). In particular, it is not alleged what Multiplex, to whom it is alleged the warning should have been given, would have done.
That leaves unexplained, on the pleading, how the alleged breach by McKenzie Group of its duty of care leads to the loss alleged in proposed par 168B.
I am not prepared to permit the amendments proposed by the University until these matters are clarified.

Misleading or deceptive conduct - causation

Mr Weinberger, who appeared for McKenzie Group, submitted that a similar problem arises in relation to the manner in which the University has formulated its claim against McKenzie Group under s 18 of the Australian Consumer Law. [13]
In substance, what the University alleges is that: 1. by issuing the 29 April 2013 BCA Compliance Report and the 18 December 2013 Certificate of Compliance, McKenzie Group made certain representations; 2. if Multiplex's allegations made in these proceedings about those representations are made out, McKenzie Group's representations were misleading or deceptive; and 3. as a result, the University has suffered loss and damage. [14]
Mr Weinberger submitted there is a lacuna between the matters I have set out at 35 and (b) on the one hand, and the matter at 35 on the other. However, such lacuna that may exist in this part of the University's case was present by reason of earlier amendments to the List Statement and does not arise from the University's current proposal to amend its List Statement.
Nonetheless, and to avoid the possibility of a further interlocutory application in these proceedings, those advising the University should take into account what has been said on behalf of McKenzie Group in relation to this aspect of the University's pleading.

Costs

The University does not dispute that there should be a costs order in favour of the defendants arising out of its application to amend its List Statement.
A number of the defendants submit that the University ought to pay the costs "of and occasioned by" the amendment.
That expression appears in Uniform Civil Procedure Rules 2005 (NSW), r 42.6: "Unless the court orders otherwise, a party that amends a pleading or summons without leave must, after the conclusion of the proceedings, pay the costs of and occasioned by the amendment."
That rule has no application to the circumstances now before me.
The expression "costs of and occasioned by the amendment" has potentially wide application and might, in the context of an amendment to pleadings, include such matters as evidence later adduced in response to the amended case. But to order that the University pay the defendants' costs "of and occasioned by the amendment" now, without qualification, would be to proceed upon the assumption that the University would not be successful in relation to the amended aspect of its claim, an assumption which obviously could not, and should not, be made. For those reasons, I do not propose to make such an order.
The University accepts that it should pay the defendants' costs thrown away by the amendment to its List Statement.
The meaning of the expression "costs thrown away" has been considered in a number of authorities.
The decision most commonly referred to is the decision of Mukhtar AsJ in Edelman v Badower. [15]
Parker J considered that decision in Salmon v Albarran (No 4). [16] His Honour observed: "The expressions 'costs thrown away' and 'costs occasioned by' an amendment are sometimes used interchangeably in practice. But, as Mukhtar AsJ pointed out, there is a distinction between them in principle; indeed, in his Honour's view, they are mutually exclusive. Costs thrown away by an amendment are past costs, necessarily incurred before the amendment is made. On the other hand, costs occasioned by an amendment are 'prospective' or 'consequential' costs incurred after the amendment has been permitted: see at [30], [35]-[36]." [17]
Similarly, in Ziliotto v Dr Hakim (No 2), [18] Davies J said: "The enquiry must be directed to what costs were expended which would not have been expended had it not been for the adjournment and what prompted the need for the adjournment. I agree with Mukhtar AsJ's analysis that 'costs thrown away' is looking to past costs - compensation for work already done and wasted because of the adjournment, or amendment or error. It does not refer to costs which have not yet been incurred even though they would not have been incurred but for the adjournment." [19]
In The Owners - Strata Plan Number 93543 v Zhang (No 2), [20] I expressed a slightly different view when I said, albeit in the context of an adjournment application: "No doubt in most cases the costs that are 'thrown away' by an adjournment are costs in respect of 'work done'. However, in my opinion, the question of what costs are 'thrown away' by an adjournment in a particular case will depend upon the circumstances of that case. I am not able to agree that 'costs thrown away' can never include costs not yet incurred." [21]
In a case such as the present, where an application to amend a pleading or List Statement is to be considered, one cost that will inevitably be "thrown away" is the future cost of the defendant or respondent filing an amended pleading or List Response following the amendment in question.
In those circumstances, I think it is important not to overthink what "costs thrown away" means as an abstract term but to ensure that each order made properly reflects the costs of the defendant or respondent that will be wasted by reason of the amendment.
In those circumstances, once the University's List Statement is in its final proposed form, I will order that the University pay the defendants' costs thrown away by the amendment, such costs to include the costs of the defendants filing their Amended Responses; and any other future costs that the defendants can identify, prior to the making of the order, will inevitably be incurred by reason of the amendment.
As to the costs of the University's Notice of Motion, in circumstances where the dispute between the University and the defendants, other than McKenzie Group, have largely been resolved, my preliminary view is that the appropriate order is that the costs of the University's Motion be those defendants' costs in the cause.
I will hear submissions as to what costs order should be made between the University and McKenzie Group once the form of the University's List Statement has been finalised.

Conclusion

The parties should confer and agree on a date by which the University is to circulate any further proposed amended List Statement and a further hearing date for the University's Notice of Motion of 11 November 2022 so far as it concerns McKenzie Group.

Pars 154-185 of the Proposed List Statement

Endnotes

Par 155.
I appreciate that contentions in a Technology and Construction List Statement are not strictly "pleadings", but I will, for convenience, use that expression.
Which contain allegations as to the design of the cladding or façade of the Charles Perkins Centre; there is no suggestion that McKenzie Group was responsible for the design.
Which alleges the 29 April 2013 BCA Compliance Report.
Which alleges the 18 December 2013 Certificate of Compliance.
See my decision in The Owners - Strata Plan No 84674 v Pafburn Pty Ltd [2022] NSWSC 659 at [25].
Proposed par 167A.
Proposed pars 167B and 167C.
Proposed par 167D.
Proposed par 167E.
Proposed pars 167F and 167G.
Proposed pars 167H to 167J.
Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, s 18.
See especially proposed pars 171, 174, 177, 178, 182 and 184.
[2010] VSC 427.
[2022] NSWSC 114.
Ibid at [19].
[2012] NSWSC 1079.
Ibid at [47].
[2021] NSWSC 360.
Ibid at [37]-[39]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 April 2023

Australian Consumer Law Design and Building Practitioners Act 2020(NSW)

Planning and Assessment Act 1979(NSW)

Building Act 1989(NSW)

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