Tyrrell v The Owners Corporation Strata Scheme 40022

CATCHWORDS: PROCEDURE - Supreme Court procedure - New South Wales - procedure under rules of court - determination of a preliminary or separate issue under rule 28.2 - TORTS - negligence - duty of care - assumed facts for the purpose of a separate decision

Council of the Shire of Noosa v J E Farr Pty Limited [2001] QSC 60 Houghton v Arms [2006] HCA 59 Interchase Corporation Limited v ACN 010087573 Pty Limited [2001] QCA 191 Rexstraw v Johnson [2003] NSWCA 287 CASES CITED: Robt Jones (363 Adelaide Street) Pty Limited v First Abbott Corporation [1997] QSC 210 Sealand of the Pacific v Robert C McHaffie Limited (1974) 51 DLR (3d) 702 Trevor Ivory v Anderson (1992) 2 NZLR 517 Williams v Natural Life Healthfoods Limited (1998) 1 WLR 830 Woolcock Street Investments Pty Limited v CDG Pty Limited (2004) 216 CLR 515

PARTIES: Mr Jeremy White Tyrrell (Appellant) The Owners Corporation Strata Scheme 40022 (Respondent)

COUNSEL: J. L. Glissan QC; J. S. Whyte (Appellant) S. Burchett (Respondent)

SOLICITORS: P. Stroud, Penmans Solicitors (Appellant) D. Sachs, Sachs Gerace Lawyers (Respondent)

• 10 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40842/05

SPIGELMAN CJ MASON P CAMPBELL JA

6 February 2007 JEREMY WHITE TYRRELL v THE OWNERS CORPORATION STRATA SCHEME 40022 Judgment 1 SPIGELMAN CJ: This is an appeal from a judgment of Judge Rein answering a separate question in the proceedings before his Honour which was separated under r 28.2 of the Uniform Civil Procedural Rules.

2 The proceedings involve certain building work undertaken by a company of which the Appellant was the principal. The company is now in liquidation. The nature of the proceedings in the District Court is that the Respondent, which is an Owners Corporation under a strata scheme, and the unit holders of the apartment block seek damages for allegedly defective building work. 3 The separate issue determined in the District Court is an important question concerning the scope of the liability of, in effect, a person operating through a one man corporation, where there is a contractual liability parallel to the alleged personal liability in tort. 4 Judge Rein and this Court have been informed that what is involved is some hundreds of thousands of dollars. Nevertheless, even in a case involving such an amount a building dispute of this character is capable of giving rise to legal costs which are a substantial proportion of what is at stake. 5 In such circumstances it is desirable for the Court to encourage the parties to put themselves into a situation in which the real issues in dispute are resolved in the most expeditious manner possible. 6 Pursuant to s56 of the Civil Procedure Act 2005 (NSW) the Court, when exercising its power under Pt 28.2 of the Rules, is obliged to exercise it to serve the overriding purpose, namely to facilitate the just, quick and cheap resolution of the real issues in the proceedings. Similarly, pursuant to s56(3) each party to civil proceedings is under a duty to assist the Court to further the overriding purpose. 7 In this case the parties have attempted to do so by seeking to separately determine the existence of a duty on a certain set of assumptions which would, if the Appellant (the defendant below) had been successful, have disposed of the proceedings in the most expeditious manner possible. This is a desirable objective, and the results of this appeal should not be understood as in any way detracting from the utility of such conduct on the part of legal practitioners when advising their clients. 8 The law of negligence, particularly in the context of liability for economic loss, is not an easy area for purposes of separate determination of an issue. It is regrettable that this is so, but the concepts involved in the law of negligence have a quality of amorphousness that do not allow for the clear delineation of a question of law. 9 The issue of duty, involves mixed questions of law and fact. It also involves considerable overlap with many of the other issues that arise in negligence litigation, including breach, reliance, remoteness and causation. In a context such as this, where what is being asserted is something of a novel duty, it would be desirable, if possible, to decide the question separately to the other issues, if that can be done. 10 In the present case both parties agreed that the Statement of Claim, particularly pars 1 to 7 and perhaps par 7A, were the basis upon which the separate question was to be determined by Rein DCJ. I will set out pars 1 to 7A.

1. The Plaintiff is the Owners Corporation of Strata Scheme 40022 ["the Strata Scheme"] for premises located at 93-95 North Steyne Manly ["the Property"] and is able to bring these proceedings in relation to the Property, and on behalf of the owners of the lots within the scheme pursuant to the Strata Schemes Management Act 1996.
2. The First Defendant is a company liable to be sued in its corporate name and style.
3. In or about July 2000, the First Defendant, through its servants or agent, Jerry Tyrell, was retained by the Plaintiff, or by the Plaintiff's Strata Manager acting as agent on behalf of the Plaintiff, to: a) Provide advice to the Strata Manager, the Plaintiff and owners of lots within the Strata Scheme in relation to the design, construction and installation of revised balustrades to the Property; b) Design, or procure and supervise the design of, suitable revised balustrades, which inter alia complied with the Building Code of Australia; c) Procure, or supervise the procurement of, appropriate persons, trades and materials to manufacture and install revised balustrades to the Property; d) Provide advice to the Strata Manager, the Plaintiff and owners of lots within the Strata Scheme in relation to the design, construction and installation of measures necessary to rectify tiling and water penetration problems to the Property and units within the property; e) Design, or procure and supervise the design of, measures necessary to rectify water penetration problems including suitable and functional waterproof membranes, tiling, hobs, and flashings, which inter alia prevented the ingress of water to units on the property and complied with reasonable building standards and the Building Code of Australia; f) Procure, or supervise the procurement of, appropriate persons, trades and materials to manufacture and install suitable and functional waterproof membranes, tiling, hobs and flashings; g) Procure, or arrange and supervise the procurement of, appropriate persons, trades and materials to manufacture and install a suitable and functional system to ensure that water penetration problems were rectified; h) Manage and supervise all of the above work on behalf of the Plaintiff and the owners of lots.
4. It was a term of the First Defendant's retainer that the works to be executed by the Defendant, or carried out under the supervision of the First Defendant, included all the work specified in paragraph 3 above, all variations required, instructed or sanctioned under the terms of the retainer and all minor items of work obviously to be inferred from the terms of retainer for the proper execution and completion of the works and for the proper performance by the First Defendant of its obligations under the retainer.
5. It was a term of the retainer the First Defendant would ensure that all materials and standards of workmanship used in the works by the First Defendant, or by persons or trades acting under the supervision of the First Defendant, would be of a kind that was suitable for its purpose and consistent with the nature and character of that part of the works for which it was used.

7B The Second Defendant personally owed the plaintiff and the owners of lots of duty of care in and about the performance of his duties on the behalf of the First Defendant.

7C The Second Defendant was negligent in and about the performance of his duties relating to the First Defendant's retainer. 11 In addition to the Statement of Claim, an agreed bundle of documents was tendered before his Honour, but it was for the purpose of further informing his Honour of the facts in the Statement of Claim. The facts as alleged were to be understood by reference to the additional documentation. 12 In a case such as this, in my opinion, the distinction between "assumed facts" and "agreed facts" is an important one. It would be appropriate in another case to determine the existence of duty as a separate and preliminary issue, so long as the Court knew the range of materials upon which the parties relied on the question of duty, notwithstanding the possibility of overlap between those facts and questions of breach, causation, reliance and remoteness of damage and other matters to which the same facts may go. (Note however Woolcock Street Investments Pty Limited v CDG Pty Limited (2004) 216 CLR 515 at [7].) However, in this case, what was put before the District Court, and is pursued in this Court, was a set of assumed facts, not agreed facts. 13 In a context such as this, where the existence of duty is a mixed question of fact and law, in my opinion it would be necessary to agree such facts as are capable of being agreed and to put such further evidence before the Court as is material, or as the parties believe to be material, to determine the existence of the duty, perhaps requiring some fact finding exercise on the part of the judge. In a case involving a novel duty it may be that that can be done largely on documents, but that was not the case in the present proceedings. What we have here are assumed facts and both parties retain the right to challenge the finding on existence of duty should other factual findings be made contrary to the assumed facts. 14 The determination of a question as a separate question, in the form that I have set out above, does contain one possible difficulty that others may find determinative. It is possible in a context of agreeing facts for the purpose of determining duty that, eventually when, say, the issue of breach is to be determined, overlapping as it so often does with the question of duty, that a fact that was agreed for purposes of duty is found not to be so for purposes of breach or causation or reliance or some other aspect of the negligence decision making process. 15 I do not find anything particularly incoherent that parties who engage in litigation ought be permitted to, and in circumstances such as those before the Court encouraged to, agree to facts for a purpose such as duty, even though it may be that those facts are found ultimately not to be the case. I do not find anything particularly anomalous about such an agreement. Parties can agree in the course of litigation to conduct that litigation on a basis that is in some respects contested and proves to be wrong. Nevertheless that is not the position in the present case. 16 What we have is a matter that, notwithstanding the desirability of having something like this determined separately, was put before the District Court and is put before this Court on a basis that leaves much too much open to disputation and does not allow the Court to resolve either way the matter in a final and determinative manner. In my opinion, this was not an appropriate case for a separate question. 17 The issue that was considered by Rein DCJ is a matter of significance. There are a number of cases, particularly overseas authorities, which are considered by Rein DCJ in his judgment. I refer, for example to Trevor Ivory v Anderson (1992) 2 NZLR 517; Williams v Natural Life Healthfoods Limited (1998) 1 WLR 830; Sealand of the Pacific v Robert C McHaffie Limited (1974) 51 DLR (3d) 702, and other authorities referred to. One of the issues before this Court would have been whether or not the references that appear to be to the contrary of certain of the submissions in this Court's judgment in Rexstraw v Johnson [2003] NSWCA 287 were either directly or indirectly determinative of the issue before this Court. 18 I notice, however, that there are a number of authorities relevant to this matter in Australia that are not referred to in the submissions, particularly from Queensland. See the judgment of Chesterman J in Council of the Shire of Noosa v J E Farr Pty Limited [2001] QSC 60; the judgment of White J in Robt Jones (363 Adelaide Street) Pty Limited v First Abbott Corporation [1997] QSC 210, affirmed on appeal but with no reference to this point in [1999] QCA 49. I also refer to the observations in Interchase Corporation Limited v ACN 010087573 Pty Limited [2001] QCA 191, [2003] 1 QLR, Qd R 26 esp at [77]. The matter is also considered in the text S Walmsley et al, Professional Liability in Australia (2002) esp at [1.750] and in the article by K Tapsell, "Turning the Negligence Juggernaut" (2002) 76 ALJ 581 esp at 592-593. There are also the observations of McPherson JA in the Interchase Corporation case supra referring to the note by P Watts, "The Company's Alter Ego - an Impostor in Private Law" (2000) 116 Law Quarterly Review 525. Also see Houghton v Arms [2006] HCA 59 at [40]. 19 The issue is one of considerable significance. Alternative views have been expressed both overseas and within Australia. I should indicate my own view that it is, of course, important that this is being dealt with in the context of economic loss, rather than personal injury. I will say no more about that for present purposes. 20 The matter was appropriate for leave to be granted because of its significance. However, when leave was granted by Hodgson and Bryson JJA on 4 July 2006, each of their Honours expressed doubts about the appropriateness of this being one case for the separate determination of the issue. Leave was granted, notwithstanding that, by reason of the significance of the legal issue that has arisen. However, the possibility of the course that I propose be taken by this Court was expressly left open by their Honours. 21 I regret that, notwithstanding the significance of the issue, the way the case has been presented as a separate issue it is not, in my opinion, an appropriate question to answer. It is not sufficient for this Court simply to withdraw the leave it has given, because that would leave the answer to the question given by Rein DCJ on foot and binding on the parties. 22 Accordingly the orders I propose are:

2. Set aside the answer to the question of Rein DCJ given on 12 October 2005.

4. The costs of the separate question both in the District Court and in this Court be costs in the cause.

23 MASON P: I agree with the Chief Justice's reasons and with the orders he proposes. I just add the following remarks. 24 I endorse his Honour's remarks about the significance of the underlying question, and although we had not heard any argument on the point I would venture the opinion that nothing in Rexstraw v Johnson [2003] NSWCA 287 casts any light on the issue given that on my reading of that case it deals with the issue of accessorial liability. By contrast the present case presents issues as to whether or not there was a duty in the Appellant in his own right. 25 The answers given to this Court by counsel for the respondent about the nature of the issues and the limited use of the material tendered has only served to highlight my concerns as to the definition of the issues that have been tendered by the plaintiff in the pleadings. It is far from clear to me whether the plaintiff intends to rely upon one or several causes of action, whether it contends for negligence in performance and/or negligence in failure to perform. It is also unclear as to the extent to which advice given or not given at the outset of the relationship with the company or during the currency of the performance of the company's contract is intended to be isolated as the ground of a separate cause of action. 26 The matter is not before us and I do not say that the pleading is vexatious. I simply invite the attention of the parties to clearer definition. They may also consider whether the pleading sufficiently identifies what appears to be a claim by individual unit holders lying outside and in addition to the pleaded claim by the owners corporation itself. 27 In short the appeal that is before us raises mixed questions of law and of contested fact in a context where the pleadings and the information we have been given disclose the presence of a number of permutations and combinations without clearly identifying the relevant causes of action and the material facts on which they are based. 28 CAMPBELL JA: Subject to one matter I agree with the Chief Justice's reasons and proposed orders, and with the additional remarks of the President. The one matter that I would prefer to reserve for further consideration is the possibility as a matter of principle, and desirability on pragmatic grounds, of having facts agreed for the purpose only of a preliminary question relating to the existence of a duty of care, in a negligence case. In a negligence action the litigation involves analysing the one set of facts at different levels of generality for the purpose of answering the questions of existence of duty, breach of duty, and consequential suffering of damage. 29 The concern that I have relates to what the court does at a hearing if it finds that one of the facts that had been agreed for the purpose of duty is in fact incorrect. It is not necessary to address that question any further today. I agree with the orders that are proposed. 30 SPIGELMAN CJ: The orders are as I have indicated. **********

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