Tzaneros Investments Pty Ltd v Walker Group Constructions Pty Ltd & Anor

The pleadings in the proceedings 5Tzaneros first alleged in its Construction List Statement (filed on 30 September 2009) that Walker had undertaken the design and construction of the pavement works, and that it had breached the contract by reference to alleged defects and its failure to rectify such defects. At this time, there in fact were three defendants in the proceedings. The first and second defendants at that stage were companies associated with Walker, and the third defendant was AMT. As against AMT, Tzaneros alleged it had undertaken the design of the pavement works negligently and in breach of its common law duty of care. 6Approximately one year later, in an Amended Construction List Statement (filed on 29 September 2010), Tzaneros alleged that Walker had undertaken the design and construction of the pavement works, and had breached the contract in the construction of the pavement works. As against AMT, Tzaneros made no allegation to the effect that it had undertaken the design of the pavement works negligently and in breach of its common law duty of care. Relevantly, Walker filed a Construction List Response (on 27 October 2010) which included for the first time a defence which effectively sought to lessen its liability by alleging that AMT was a concurrent wrongdoer under Part 4 of the Civil Liability Act 2002. 7In its proposed Further Amended Construction List Statement (the subject of its present motion), Tzaneros seeks to include an allegation, against each of Tzaneros and AMT, that the defects and damage claimed were caused by the inadequate design of the pavement works. Tzaneros relies respectively on the expert reports of Anthony John Davis dated 19 April 2013 (served 23 April 2013) and of Jeffrey Roesler dated 22 April 2013 (served 24 April 2013) identifying inadequacies in the design of the pavement works as the primary cause of the failures and defects the subject of the claims. Tzaneros submits that insofar as Walker is concerned, the proposed amendments are trivial, inconsequential, and should be a matter of indifference to Walker. 8Turning to Walker's proposed cross-claim, Walker seeks to make claims against AMT for breach of contractual and general law duties AMT allegedly owed to Walker, misleading and deceptive conduct, and contribution and indemnity under s 5(1) of the Law Reform (Miscellaneous Provisions) Act 1946 on the basis that Walker and AMT are joint tortfeasors.

The parties' positions 9Tzaneros' proposed amendments are driven by the combined effect of first, the content of the two recently obtained expert reports, and secondly, the allegations made by Walker in its Construction List Response (even though it was filed as early as 27 October 2010) that AMT was a concurrent wrongdoer. The obvious significance of the inclusion of a defence of proportionate liability in Walker's Construction List Response, is that Tzaneros will not be able to obtain full recovery from Walker if that defence succeeds. Tzaneros is seeking to prevent that situation of incomplete recovery by one of two ways. First, it is seeking to amend its pleading in order to direct the design defect allegations against AMT (not just against Walker), and alternatively (if those proposed amendments are not permitted) to prevent Walker from relying on a proportionate liability defence that would have the effect of limiting the extent to which Tzaneros' may recover from Walker. Accordingly, in the event that Tzaneros' proposed amendments (seeking to include design defect allegations against AMT) are refused, Tzaneros seeks to strike out the paragraphs in Walker's Construction List Response which contain the proportionate liability defence to Tzaneros' claim against Walker. Either way, Tzaneros will be able to fully recover its alleged losses arising from design defects from Walker. 10In the hearing before me, Walker said it did not oppose Tzaneros' proposed amendments if Walker was also granted leave to file its own cross-claim against AMT as proposed in its own motion. Walker says that, in its current form, Tzaneros' pleading only alleges a breach against Walker in relation to the construction of the pavement works, but not their design, and that the effect of allowing the amendment would be to introduce a new claim in relation to the design of the pavement works. It says that Tzaneros' position, namely that the amendments are of no consequence to Walker, is based on the incorrect premise that the allegation that Walker breached the contract in the construction of the pavement works should be read as including an assertion that Walker breached the contract in relation to both the design and construction of the pavement works. Indeed, Walker alleges that the amendments sought are a recognition by Tzaneros that the present pleading does not incorporate any allegation of breach against Walker arising from the design of the pavement works. 11Walker says that the proposed amendment, if permitted, would introduce new and substantial claims against it, including that it breached its contractual warranties in respect of the design of the pavement works, and that it is liable for the acts and omissions of AMT in the design, inspection and certification of the pavement works. Walker alleges that the introduction of these allegations necessitated its own motion seeking leave to file a cross-claim against AMT. If Tzaneros' proposed amendments are not permitted, then Walker will not press its motion seeking leave to file a cross-claim. However, Walker submits that if Tzaneros' proposed amendments are permitted, then Walker should be permitted to file its proposed cross-claim against AMT, and conversely if Walker is not permitted to file a cross-claim, then Tzaneros' proposed amendments should be disallowed. Walker alleges it would suffer incurable prejudice if Tzaneros is permitted to amend so as to raise new allegations against Walker, but Walker is not permitted to file its proposed cross-claim. 12AMT's position, unsurprisingly, is to oppose Tzaneros' proposed amendments. Its primary ground of opposition is that AMT did not and could not owe a duty of care to either P & O or its successor in title, Tzaneros, in relation to the original design of the pavement works and associated services. If that is so (i.e. that no such duty is owed), then Walker's proportionate liability defence will fail, and the plaintiff will be able to seek full recovery. AMT also relies, as matters relevant to the court's discretion to grant leave, on the alleged fact that the amendments are statute barred (by reason of s 14 of the Limitation Act 1969), and that the late raising of the new cause of action after expert evidence has been obtained, will cause prejudice and be productive of expense. 13AMT also opposes leave being granted to Walker to file its proposed cross-claim. In particular connection with Walker's claim for contribution, AMT says that leave should not be granted to permit Walker to make such a claim under the Law Reform (Miscellaneous Provisions) Act 1946 as such a claim is "doomed to fail", because a claim cannot be brought under s 5(1) of the Law Reform (Miscellaneous Provisions) Act 1946 if it is subject to the proportionate liability regime under Part 4 of the Civil Liability Act 2002 (see s 36), and this claim is alleged to be subject to the latter. More generally, while AMT accepts that s 74 of the Limitation Act 1969 may have the effect of deeming any cross-claims to have been made in September 2009 (when proceedings were commenced), the court still has a discretion as to whether that section should take effect, and Walker is still required to obtain leave under r 9.1 of the UCPR. 14AMT points, as matters relevant to the court's discretion, to the prejudice it would suffer (previously referred to), to the fact that the pleadings in their present form do not require an investigation of the design work carried out in 2003 to 2004, and the further delay the amendments would bring to the proceedings.

Consideration and conclusion 15The change in language, and the procedural history, of Tzaneros' pleading, are strong indications, at least in my mind, of the existence of a distinction between an allegation of defective construction, and an allegation of defective design. Such a distinction accords with common sense, and the plain English meaning of the words. Walker submitted that it never understood the relevant contentions in Tzaneros' pleading filed on 29 September 2010 as attributing blame for the defective design of the pavement works to Walker. I accept Walker's submission, and consider its position to be appropriate, especially given the procedural history of Tzaneros's pleading. I reject Tzaneros' submission that the proposed amendments are of little or no consequence to Walker. To the extent that Tzaneros' proposed amendments are seen as an attempt to revive a once "abandoned" claim (namely design defects), I should note that such conduct, though not best practice, is not, in the circumstances of this case, in violation of the prohibition against approbating and reprobating (Sydney Attractions Group Pty Ltd v Frederick Schulman (No 2) [2013] NSWSC 1153 at [8] and [35]-[44]). 16I accept the submissions of Tzaneros and Walker that it is not appropriate at this interlocutory stage of the proceedings to determine whether Walker's proportionate liability defence is good at law. I am firmly of the view that Walker's proportionate liability defence should not be struck out from its Construction List Response. 17I have also formed the view that it is not appropriate, at this stage of the proceedings, to determine whether or not AMT could have owed a duty of care to either P & O or Tzaneros. Contrary to AMT's submission, it is not clear, at least to me, that Tzaneros was not owed a duty of care by AMT. The authorities referred to in the submissions of both Tzaneros and AMT indicate that the question is far from clear, as it involves not just questions of law, but also questions of fact. Indeed, the level of analysis into which Tzaneros and AMT descended on this point in support of their respective positions, fortifies my view that the position is not as clear as AMT would have it. In a recent decision of the UK Supreme Court concerning the principles relating to non-delegable duty of care, Lady Hale (with whom Lords Clarke, Wilson and Toulson agreed) referred to the undesirability of stifling the development of the common law (Woodland v Essex County Council [2013] UKSC 66 at [28]). 18There is obviously an interest in having all issues between the parties ventilated once and for all; especially those which may not be capable of being agitated at a later stage, due to Anshun or other estoppels or principles. I do not understand the parties in this case to dispute that the expert reports recently obtained by Tzaneros legitimately raise the question of design defects in the pavement works. 19Against this, there are of course a number of countervailing considerations which must be taken into account. If Tzaneros is given leave to amend its pleading in the manner proposed, Walker will obviously suffer prejudice unless it is given leave to defray liability via a cross-claim (The Owners - SP 67635 v Metlej Developments Pty Ltd and others [2013] NSWSC 1564). 20Another factor which AMT submits is relevant to the exercise of my discretion, is that the amendments Tzaneros seeks are allegedly statute barred by s 14 of the Limitation Act 1969. The correctness of AMT's submission is doubtful (see s 64(3) and 65(2)(c) of the Civil Procedure Act 2005), as it is obviously arguable, and as I see it, almost certainly the case, that the design defect claims arise out of the same or substantially the same facts. Any amendment should therefore take effect from the date on which the proceedings were commenced. 21AMT also submits that Walker's cross-claim may be statute barred. However, as I have noted above, AMT accepts that s 74 of the Limitation Act 1969 has the effect that Walker's cross-claim is deemed to have been made in September 2009 (when proceedings were commenced), but says the court still has a discretion as to whether that section should take effect. I have taken into account (mainly below) the matters relevant to the exercise of that discretion. 22If Tzaneros' proposed amendments are permitted, and the filing of Walker's proposed cross-claim is permitted, the parties (or at least Walker and AMT) will almost certainly need to prepare and file further evidence. The delays involved in retaining further experts and preparing the evidence to finality, are obvious, and have been highlighted in the evidence filed by the parties for the purpose of the present motions. There has also been a joint expert regime, which I understand has been finalised. 23In the present case, no date has been fixed yet for the final hearing of this matter. Overall, I do not think that Tzaneros' proposed amendments and Walker's proposed cross-claim, if permitted, would result in prejudice of such a nature or of such a degree that would be incurable by an appropriate costs order. 24Taking these factors into account, I am prepared to grant leave to Tzaneros to amend its pleadings as sought in its motion filed on 26 July 2013, with effect from the date on which the proceedings commenced. Any costs thrown away (by Walker and AMT) as a result of Tzaneros' motion should be borne by Tzaneros. 25I am also prepared to grant leave to Walker to file a Cross-Summons and List Statement as referred to in its motion filed on 29 August 2013, with effect from the date on which AMT has been a party to these proceedings, which I understand to be the date of the commencement of these proceedings. I am satisfied that Walker filed its present motion in response to the belated amendment sought by Tzaneros to its own pleading. Any costs thrown away (by Walker and AMT) as a result of Walker's motion should be paid by Tzaneros. 26In arriving at these conclusions, and in forming a view as to the appropriate costs orders, I have borne in mind the principles expressed in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175, and the firm comments recently made by the High Court in Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd [2013] HCA 46 concerning the importance of parties giving effect to the aims of, and carrying out the duties imposed by, ss 56-59 of the Civil Procedure Act 2005. 27I invite the parties to prepare short minutes of order giving effect to my reasons, including an order re-listing the matter in the Commercial List, at a time suitable to the parties, for directions.

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: 08 November 2013