Wimmera-Mallee Rural Water Authority v FCH Consulting Pty Ltd [2000] VSC 102

5. The Authority's case is that the collapse was a result of a deficiency in the design of the main beam to column connection. In particular, it complains of the omission of a horizontal compression brace at the column head and the omission of web stiffeners, bracing or framing to provide torsional restraint to the end of the beams.

8. The tank was designed and constructed by R & L Tank Fabrications Pty Ltd ("R&L") under an agreement made between it and the Authority dated 29 April 1996. FCH joined R&L as a third party on 9 April 1998 and, on 20 May 1999 by order of the Court of Appeal, the third party was joined as the second defendant. R&L has not entered an appearance or taken any active part in the proceeding.

11. The proceeding then moved through its interlocutory stages and, on 27 August 1999, the judge in charge of the Building Cases List ordered that it be set down for hearing. A trial order was made by the Listing Master on 14 October 1999 including a mediation order and directions for the preparation and delivery of a Court Book by 9 February 2000 and witness statements, including expert witness statements, by 16 February 2000. It may be that, at this time too, the proceeding was fixed for trial to commence on 8 March 2000 with an estimate of seven to 10 days, because an order varying the October order by the insertion of this final date was made by the Listing Master on 9 February 2000.

14. Meantime, FCH, by summons filed on 2 February 2000, again applied to join a third party. On this occasion it was MGZ Pty Ltd ("MGZ"). In the third party statement of claim it is said that the design of the tank was prepared for R & L by MGZ. It is said, too, that this design work was performed negligently and that the Authority's loss and damage was caused or contributed to by this negligence. FCH then claims contribution pursuant to s. 23A of the Wrongs Act 1958. On 9 February 2000 I gave leave to FCH to file and serve the third party notice. An application at this time by FCH to join MGZ as a further defendant was foreshadowed. As a consequence of this addition of a new party, I vacated the trial date.

17. MGZ was served on 16 February 2000 but has not entered an appearance.

20. And so, by summons filed on 16 February 2000, FCH seeks an order pursuant to Rule 9.06 that MGZ be added as a third defendant to the proceeding. The application was opposed by the Authority on the basis that it did not appear that a cause of action in the Authority against MGZ had been shown and, further, that as a matter of discretion I should refuse this late application. MGZ did not appear in response to the summons.

23. In Boral Resources Pty Ltd v Robak Engineering & Construction Pty Ltd[1], the Court of Appeal has held that a joinder in circumstances similar to the present is permitted by Rule 9.06(b)(ii). What was submitted to me on behalf of the Authority was that FCH must demonstrate that there exists a viable cause of action in the Authority against MGZ and that this demonstration must be based on proper material. In my opinion, the question whether a cause of action is viable in this sense requires the application of the conventional pleading test[2]. Accordingly, I should treat the cause of action as viable unless I am satisfied that it is clearly hopeless.[3] In a case such as the present, FCH must show to that standard that MGZ owed a duty of care to the Authority, that it was in breach of that duty and that the damages which the Authority claims, were, in part at least, caused by this breach.[4] Since the application is not a true pleading application, but an application to join a party, the applicant must adduce material, including, if need be, hearsay in accordance with Rule 43.03(2), sufficient to satisfy the court of these matters as well as as to matters which may be relevant to the exercise of the discretion of the court.

26. When the matter came on for hearing before me on 25 February 2000 and counsel for the Authority pointed to deficiencies in the material of FCH, I gave liberty to that party by 3 March to file and serve any further material upon which it relied and by 10 March 2000 for either party to present written submissions or to call the matter on for further oral argument. This liberty has been availed of. I have received an affidavit of Philip Joseph Quinn sworn 2 March 2000 supplementing his affidavits of 2 February 2000 and 16 February 2000. In his third affidavit Mr Quinn exhibits an expert witness statement dealing with the causes of the failure of the tank delivered by the Authority in accordance with the trial order. He exhibits also a proposed amended third party statement of claim against MGZ. Each of the Authority and FCH has, on 10 March 2000, filed written submissions on this application. I have had regard to this material. Neither party has sought to present further oral argument.

29. Adopting the approach of the Court of Appeal in Boral Resources Pty Ltd v Robak Engineering & Construction Pty Ltd,[5] I first identify the questions which may exist between FCH and MGZ arising out of or relating to or connected with the Authority's claim against FCH in this proceeding. This is "the question of [the] individual liabilities [of FCH and MGZ] (if any) to the Authority for the Authority's alleged damage having regard to their respective responsibilities for its cause"[6]. In this regard it should be noted that "question" is defined in Rule 1.13 as follows:

"'question' means any question, issue or matter for determination by the Court, whether of fact or law or of fact and law, raised by the pleadings or otherwise at any stage of a proceeding by the Court, by any party or by any person not a party who has a sufficient interest."

33. The question as to the individual liability of FCH appears from the Authority's statement of claim and may be assumed to exist. It alleges in its statement of claim three causes of action. First, breach of contract, in paragraphs 3, 4, 5, 6, 7, 8, 9 and 10; breach of duty of care in paragraphs 5, 6, 7, 8, 11, 12 and 13; and, thirdly, misleading and deceptive conduct under s. 52 of the Trade Practices Act in paragraphs 13A, 13B, 13C, 13D, 13E, 13F, 13G and 13H. There is a claim for Hungerfords damages in paragraph 14. These allegations have, for the most part, been put in issue by FCH.

36. I turn now to consider the basis for the contention of FCH that MGZ is at least partly responsible for the damages claimed by the Authority. I start with the third party statement of claim. It makes the following relevant allegations:

"1. For the purposes of this Statement of Claim and for no other purpose, the First Defendant repeats the matters referred to in paragraphs 5, 6, 7, 8, 10, 11, 13, 13A, 13C, 13H of the Amended Statement of Claim dated 30 June 1999. ... 3. At all material times the design was prepared by the Third Party. ... 6. The design of the tanks was negligently prepared by the Third Party thereby causing or contributing to the collapse of the tank referred to in the Amended Statement of Claim.

PARTICULARS OF NEGLIGENCE

The Third Party was negligent in that it: (a) Failed to prepare a detailed design when requested to do so by both the First Defendant and the Second Defendant. (b) Failed to prepare a detailed design as a term of its retainer by the Second Defendant; (c) Failed to include in the design or any adequate bracing so as to prevent the collapse of the tank; (d) Failed to prepare a design which was capable of ready interpretation and was not confusing."

40. These allegations were criticised on the basis that they did not provide any allegation of the existence of a duty of care or any factual basis for such a duty. Seemingly sensitive to these criticisms, FCH has proposed an amended third party statement of claim in which the liability of MGZ to the Authority is put this way:

"1. For the purposes of this statement of claim and for no other purpose, the first defendant repeats the matters referred to in paragraphs 5, 6, 7, 8, 10, 11, 13, 13A, 13C, 13H of the amended statement of claim dated 30 June 1999. 2. At all material times it is alleged by the Authority as against the first defendant that it failed to properly check the design ('the design') of the tank ('the tank') referred to in the amended statement of claim. ... 4. The second defendant constructed the tank pursuant to a design and construct contract made 29 April 1996 between it and the Authority. 5. The second defendant engaged the third party as a sub-contractor to prepare the design.

PARTICULARS Particulars will be provided after discovery

6. The second defendant constructed the tank pursuant to the design prepared by the third party. 7. In preparing the design of the tanks, the third party owed the Authority a duty of care in respect of the design of the tanks. 8. Wrongfully, and in breach of its duty of care to the Authority, the third party failed to properly design the tanks.

PARTICULARS OF NEGLIGENCE

The third party was negligent in that it: (a) Failed to prepare a detailed design when requested to do so by both the first defendant and the second defendant. (b) Failed to prepare a detailed design as a term of its retainer by the second defendant. (c) Failed to include in the design or any adequate bracing so as to prevent the collapse of the tank. (d) Failed to prepare a design which was capable of ready interpretation and was not confusing."

44. The allegations which are repeated in paragraph 1 of the third party statement of claim and paragraph 1 of the proposed third party statement of claim are made for the purposes of establishing the right of contribution of FCH under Part IV of the Wrongs Act and may, therefore, have little relevance for present purposes.

47. As appears from the judgments in the Boral Resources case, an application of this kind has novel features. The defendant seeks to impose upon the Authority one or more defendants for the purpose of diluting its own liability. There is a potential for abuse if a defendant in this way introduces a large number of co-defendants as might make the trial unmanageable. It may be that the Authority has, for good reason, taken the position that its claim against them or some of them is speculative or so weak as not to warrant the expense of suing them itself. It may be that a reason for this is that the party is of no substance. It may be that the Authority has some commercial or other non-legal reason for not suing them. The prospect of immanageability was put to one side by Chernov JA as a reason for refusing to permit Rule 9.06 to be used in the circumstances of the Boral Resources case with the following observation:

"In many ways, the conduct of a building action with a number of defendants who are added by the original defendant, would be no different from the conduct of a proceedings where the same persons are third and fourth parties. The Court will no doubt have to be vigilant to ensure that the applicant has made out on proper material, a basis for its contention that the person sought to be added is at least in part responsible for the damages claimed by the plaintiff. But this and other like requirements would have to be worked out by the Court in order to accommodate the requirements of particular cases. It will not, however, be a novel experience for the Court."[7]

Encouraged by his Honour's confidence, I turn to the present application.

52. One of the practical difficulties attending an application for the joinder of a defendant in circumstances such as these is that no cause of action is alleged by the Authority against the proposed defendant. This may make it difficult for the applicant to plead the Authority's cause of action against the proposed defendant for it may have little knowledge of the relationship between those parties. It is, however, a difficulty which many defendants have had to face for a long time when preparing a statement of claim alleging contribution against a third party under s. 23B of the Wrongs Act 1958. Since nothing further has been put forward, I shall proceed on the basis that the allegations upon which FCH seeks to rely against MGZ are those contained in its proposed amended third party statement of claim. It is correct to say of this document that, as counsel for the Authority contended, there are no facts alleged in the pleading or by way of particulars which support the existence of the alleged duty of care or which show that the Authority's loss was caused by any breach of such duty of care.

55. The Authority's claim against MGZ would be one in negligence for pure economic loss. Accepting that the law in this area is in a state of development, the cases show that something more than mere foreseeability of loss is required to establish a duty of care.[8] A special relationship must be shown to exist between the Authority and MGZ. This relationship will be inferred from the facts which connect them at the time the duty is said to exist.[9]

58. In a clear or a more conventional case this may not pose an insurmountable difficulty. I shall, therefore, set out briefly by way of chronology the facts as they are alleged in the papers before me which I sense to be uncontroversial.

FCH enters into a contract with the Authority (statement of claim, para. 3; defence, para. 3).

Tender design prepared marked SK1 (defence, para. 5(b)).

R & L submits a tender for the design and construction of the water tank (defence, para. 5(b)).

FCH recommends acceptance of the R&L tender (statement of claim, para. 5(a)).

Detailed design prepared by MGZ including SK1, SK2 and eight sheets of computations (Exhibit A).

Tender design and detailed design checked by FCH (statement of claim, para. 5(b); defence para. 5(b)).

FCH applies for building permit (statement of claim, para. 5(b)).

Certificate of Practical Completion (statement of claim, para. 6).

62. It is apparent from this resume and from allegations in the pleadings which may be more contentious, that the MGZ detailed design was examined before construction both by FCH and by the Swan Hill Building Surveyor as part of the ordinary building approval process. It may well be, however, that the building surveyor would not himself re-check the computations and engineering design in the circumstances of this case. The involvement of FCH was probably disclosed to tenderers, although there is no detail of this before me. But it does not appear whether MGZ prepared the designs on the basis that they would not be checked before construction and, if so, what was the basis for such an expectation. It does not appear that the Authority relied in any way upon the design in authorising construction. Indeed, it is said that FCH, an engineering consultant, was engaged by it to check the engineering designs and that it did so. I do not overlook the allegation of FCH in paragraph 5(c) of the defence that the superintendent, whom I assume to have been engaged by the Authority, directed construction to begin notwithstanding his reservations about aspects of the drawings.

65. The matter is not taken further by the three affidavits of Mr Quinn, even putting to one side the just criticisms as to their form.

68. I mention these matters, not to suggest that those allegations will be made out or that they represent the whole of the circumstances which may bear upon the duty of MGZ to the Authority or upon the reliance by the Authority upon the work of MGZ. It is merely to show that this is a case in which the facts are such that I could not myself infer from them that these two ingredients of the cause of action against MGZ are or are likely to be present. In these circumstances I would expect them to be formally alleged and that there be some material to suggest that the allegations are well founded. In the circumstances, the total absence of pleaded facts on these matters leads me to the conclusion that FCH has not discharged the burden which it bears of showing the basis of its claim that MGZ is at least partly legally liable for the loss of the Authority, even to the standard here required.

71. I should not leave this application without making some general observations about some procedural matters affecting joinder applications of this kind. I am concerned with applications in the Building Cases List by a defendant to join a defendant in order to constitute the proceeding so that it permits the operation of s. 131 of the Building Act 1993.

1. Rule 9.06 permits a party to join a non-party as a defendant. It is not necessary first to bring a third party claim against the proposed defendant. The costs of so doing should not therefore be allowed unless there be some good reason to join that party as a third party.

2. The joinder application should be made on summons served on all existing parties and on the proposed defendant. It should be made promptly and not left to the eve of trial, as was the case here. I include service on the proposed defendant notwithstanding that this might not be appropriate upon an application by a defendant to add a defendant.[10] This will enable the proposed defendant to oppose the application if it be minded to do so and will save the parties the cost of another appearance for the making of directions consequent upon the joinder if that be ordered.

3. As the judgments in the Court of Appeal make clear, the joinder of a defendant requires that a question may exist between the existing defendant and the proposed defendant. This is the question as to their respective liabilities to the plaintiff. Assuming the joinder application is successful there will exist a claim between the two defendants which probably falls within Rule 11.15. Whether it does or not, the proper management of the question between these defendants requires that pleadings pass between them as would be required under that rule.

4. The application for joinder should, in the ordinary course, be supported by an affidavit showing that there exists a question between the defendant and the proposed defendant. The applicant should place before the court a proposed statement of claim for delivery to the proposed defendant to enable the court, the proposed defendant and any other interested party to see precisely how the case is to be put.

5. If the application is successful a time will be fixed for appearance by the added party and directions will be given as to pleadings, discovery and generally.

79. Returning to the matter before me, the application of the first defendant to join the third party as a third defendant is refused with costs.

[1] [1999] VSCA 66.

[2] Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91, per Dixon J; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125.

[3] Boral Resources Pty Ltd v Robak Engineering & Construction Pty Ltd [1999] VSCA 66 at [13], per Batt JA.

[4] Boral Resources Pty Ltd v Robak Engineering & Construction Pty Ltd [1999] VSCA 66 at [76], per Chernov JA.

[5] [1999] VSCA 66 at [13], per Batt JA.

[6] Per Tadgell JA at [3]. See also Chernov JA at [60].

[8] McMullin v ICI Australia Operations Pty Ltd (No.7) [1999] FCA 1814; (1999) 169 ALR 227 at [31] per Wilcox J.

[9] See Bryan v Maloney (1995) 182 CLR 609; Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330; Perre v Apand Pty Ltd [1999] HCA 36; (1999) 164 ALR 606.

[10] Murphy v Burns Philp & Co Ltd (unreported, SC (Vic), Smith J, 21 April 1993).