Supreme Court New South Wales

• Medium Neutral Citation: The Owners - Strata Plan No. 51077 v Meriton Apartments Pty Ltd [2014] NSWSC 129
• Hearing dates: 21 February 2014
• Decision date: 27 February 2014
• Before: Ball J

Decision

See paragraphs 40 and 41 of this judgment.

• Catchwords: PROCEDURE - civil - when a court should exercise power to strike out a claim in a List Statement - when there is no reasonable cause of action - NEGLIGENCE - whether a contractor owes a non-delegable duty of care in respect of activities of a subcontractor - no duty owed where contractor engages a subcontractor to carry out a non-hazardous part of construction project
• Legislation Cited: Practice Note SC Eq 3 Supreme Court Equity Division - Commercial List and Technology and Construction List; Trade Practices Act 1974 (Cth)
• Cases Cited: Burnie Port Authority v General Jones Pty Ltd (1992-94) 179 CLR 520; Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; (2004) 218 CLR 592; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; Mount Albert Borough Council v Johnson [1979] 2 NZLR 234; Transfield Services (Australia) Pty Ltd v Hall [2008] NSWCA 294; (2008) NSWLR 12; UCAK v Avante Developments Pty Ltd [2007] NSWSC 367; Woodland v Essex County Council [2013] UKSC 66; [2014] 1 All ER 482
• Category: Principal judgment
• Parties: The Owners - Strata Plan No. 51077 (Plaintiff); Meriton Apartments Pty Ltd ACN 000 644 888 (First Defendant); Micos Aluminium Pty Ltd ACN 000 351 128 (Second Defendant)
• Representation: F Corsaro SC (Plaintiff); SR Donaldson SC with DA Moujalli (First Defendant); L Shipway (Second Defendant); Bannerman Lawyers (Plaintiff); Meriton Group (First Defendant); Cara Marasco & Company (Second Defendant)
• File Number(s): 2013/283477
• Publication restriction: Nil

Judgment

Background

1 The first defendant, Meriton, was the developer and builder of a 41 storey residential strata development known as "The Princeton" (the Princeton Building), which is situated at 304-308 Pitt Street, Sydney. The plaintiff is the owners corporation for the strata development. The second defendant, Micos, is a subcontractor who it is alleged was engaged by Meriton to design, manufacture and supply the glazing and balustrades for the building.

2 Various defects have developed in connection with the glazing and balustrades and in these proceedings the owners corporation sues both Meriton and Micos in respect of those defects.

3 The owners corporation makes four types of claim against Meriton in its List Statement.

4 First, it alleges that Meriton owed the owners corporation a non-delegable duty of care to see that proper care and skill were exercised in the design, manufacture and installation of the glazing and balustrades and that it breached that duty.

5 Second, the owners corporation alleges in para 20(b) of the List Statement that Meriton owed it a duty "to take reasonable care to construct the Princeton Building with reasonable care, and to supervise the work of Micos in the manufacture, supply (and in the case that the Court finds Micos also installed the Glazing and Balustrades, to [install]) the Glazing and Balustrades" and that it breached that duty.

6 Third, the owners corporation alleges that Meriton engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act1974 (Cth) (as it then was) when it provided to Sydney City Council a certificate provided by Micos and addressed to Meriton in which Micos certified the following:

We certify that the glass to all windows and doors used at the above project supplied by Micos Aluminium Pty Ltd is as per the requirements of Australian Standards 1288, 2208 and 1170.2.

We further certify that all this glass has an external reflexivity index less than 20%.

7 The owners corporation alleges that the certificate was provided to the Council in response to a request by the Council for a certificate by a suitably qualified expert. The certificate is said to be false and the owners corporation is alleged to be a person who has suffered loss or damage by Meriton's conduct in providing it to the Council. The causal chain between the allegedly misleading certificate and the loss suffered by the owners corporation is pleaded in various ways. One way the claim is put is that, had the certificate not been misleading, the Council would not have approved the registration of the strata plan until the defects had been rectified.

8 Lastly, the owners corporation alleges that Meriton owed it a non-delegable duty to see that Micos exercised proper care and skill in issuing the certificate or, alternatively, a duty to take reasonable care in ensuring that Micos certified the glazing properly.

9 By a notice of motion filed on 2 December 2013, Meriton seeks to strike out the claim so far as it concerns it on the ground that the List Statement discloses no reasonable cause of action against it.

10 It is not disputed that the court has power to strike out a List Statement or part of it on the basis that it discloses no reasonable cause of action, even though the List Statement itself is not strictly a pleading: see UCAK v Avante Developments Pty Ltd [2007] NSWSC 367 at [3] per Hammerschlag J.

11 The principle that applies in determining whether the court should exercise that power is not in dispute. It is accepted that a court should not strike out a claim unless relevantly the court is satisfied that it is "so clearly untenable that it cannot possibly succeed": see General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-30 per Barwick CJ. In the case of proceedings in the Technology and Construction List, that principle is reinforced by the applicable practice note. Paragraph 62 of Practice Note SC Eq 3 Supreme Court Equity Division - Commercial List and Technology and Construction List provides:

As a general rule applications to strike out or for summary judgment will not be entertained. Sometimes applications are appropriate, but Practitioners should expect strictness in declining to entertain such applications.

12 It is convenient to deal with each claim in turn.

Non-delegable duty of care

13 Meriton's submission in relation to the existence of a non-delegable duty of care has the following steps:

(a) The Court of Appeal decided in Transfield Services (Australia) Pty Ltd v Hall [2008] NSWCA 294; (2008) NSWLR 12 that a builder did not owe a non-delegable duty of care to persons who could foreseeably be injured by the negligence of a subcontractor by reason of those facts alone;

(b) The reasoning of the Court of Appeal applies a fortiori where the duty is alleged to be a duty not to cause or to prevent economic loss rather than a duty not to cause or to prevent personal injuries;

(c) No other facts are pleaded in the List Statement from which such a duty could arise and, having regard to what is pleaded, it is difficult to see what other facts could be pleaded which could give rise to such a duty.

14 Meriton primarily takes issue with the first step in this argument. It also submits that the law relating to non-delegable duty of care is still developing, that the categories where a person owes a non-delegable duty of care are not closed and that, in those circumstances, it would be inappropriate to strike out the relevant paragraphs of the List Statement. Finally, it points out that the New Zealand Court of Appeal held in Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 that a developer of a housing estate owed a non-delegable duty of care to purchasers of houses on the estate to see that proper care and skill were exercised in the building of the houses; and it submits that that case is indistinguishable from the present one.

15 The circumstances in which a court will hold that a person owes a non-delegable duty of care was explained by Mason CJ, Deane, Dawson, Toohey and Gaudron JJ in the following terms in Burnie Port Authority v General Jones Pty Ltd (1992-94) 179 CLR 520 at 550-1:

In Kondis v. State Transport Authority, in a judgment with which Deane J. and Dawson J. agreed, Mason J. identified some of the principal categories of case in which the duty to take reasonable care under the ordinary law of negligence is non-delegable ... adjoining owners of land in relation to work threatening support or common walls; master and servant in relation to a safe system of work; hospital and patient; school authority and pupil; and (arguably), occupier and invitee. In most, though conceivably not all, of such categories of case, the common "element in the relationship between the parties which generates [the] special responsibility or duty to see that care is taken" is that "the person on whom [the duty] is imposed has undertaken the care, supervision or control of the person or property of another or is so placed in relation to that person or his property as to assume a particular responsibility for his or its safety, in circumstances where the person affected might reasonably expect that due care will be exercised". [Footnotes omitted]

See also Woodland v Essex County Council [2013] UKSC 66; [2014] 1 All ER 482 at 23 per Lord Sumption (with whom Lord Clarke, Lord Wilson and Lord Toulson agreed).

16 In Transfield, a member of the Navy Reserve was seriously injured on a training course when a wire rope being used by the reservist while abseiling broke. The Commonwealth had engaged Transfield to maintain the training course. Transfield, in turn, had engaged a subcontractor who had negligently failed to inspect the wire rope properly. The question in the case was whether Transfield owed the reservist a non-delegable duty of care.

17 At first instance, the trial judge considered whether Transfield owed a non-delegable duty of care on two bases. One was that the relationship between Transfield and the reservist was one where Transfield exercised a degree of control over the reservist and the reservist suffered from a special dependence or vulnerability. The other was that the activity carried out by Transfield's independent contractor was sufficiently dangerous to justify the imposition of the duty. The trial judge rejected the first basis but accepted the second.

18 On appeal, the Court of Appeal rejected the trial judge's conclusion. Her Honour had confused the dangerousness of the activities engaged in by the reservist with the dangerousness of the activities engaged in by the subcontractor. It was the latter, not the former, that was relevant. The activities engaged in by the subcontractor were not dangerous.

19 Mr Corsaro SC, who appeared for the owners corporation, submitted that Transfield could be distinguished from the present case because there the non-delegable duty was said to arise from the dangerous or hazardous activities engaged in by the alleged tortfeasor. It was not concerned with other types of case in which a non-delegable duty of care might be imposed.

20 I do not accept that submission. The question in Transfield was whether a contractor owed a non-delegable duty of care in respect of the activities of a subcontractor. The Court of Appeal held that those features alone did not give rise to a non-delegable duty of care. As Campbell JA, who delivered the leading judgment, explained (at [123]):

Commonplace features of building contracts between a builder and a landowner are that the builder is permitted to subcontract, and that the builder will cause all the work to be carried out in a proper and workmanlike manner. If Mr Campbell's submission were right, then any head building contractor under a contract exhibiting these commonplace features would be likely to owe a non-delegable duty to persons who it was foreseeable could be affected in a serious way by the collateral negligence of the subcontractor. Recognising such a duty would involve, in my view, a radical alteration in the law. ...

21 The trial judge had already rejected the idea that a non-delegable duty could arise because the relationship between Transfield and the reservist was one characterised by control and vulnerability. It is clear that the Court of Appeal thought that her Honour was right to do so: see [2008] 75 NSWLR 12 at [108]ff. However, her Honour was wrong to conclude that the duty arose because of the nature of the activities engaged in by Transfield.

22 There is a suggestion in the owners corporation's submissions that Transfield can also be distinguished on the basis that, in the present case, Meriton was both the developer and builder of the project and that the owners corporation did not exist until the strata plan had been registered. However, it is difficult to see how those facts are relevant to the degree of control that Meriton exercised over the owners corporation or the degree of vulnerability of the owners corporation to the conduct of Meriton. The owners corporation was in no different position than a subsequent purchaser of the building.

23 It is correct that the law relating to non-delegable duty of care is still developing and that the categories where the duty might arise are not closed. But, in my opinion, the Court of Appeal has decided that those categories do not include a case where a builder has simply engaged a subcontractor to carry out a non-hazardous part of the building project. That is this case. The fact that the New Zealand Court of Appeal has reached a different conclusion cannot alter the consequences of the conclusion I have reached.

24 The question still remains whether the court, in the exercise of its discretion, should strike out the claim. That depends on whether there is utility in doing so at this stage of the proceedings. Clearly, there would be utility in doing so if the other claims against Meriton were struck out. Mr Donaldson SC, who appeared for Meriton, submitted that there would also be utility in striking out the claim even if the other claims remained. That was because, if the claim based on a non-delegable duty were struck out, it would no longer be necessary for Meriton to address the question whether Micos had been negligent. Consequently, it would not, for example, need to adduce evidence, including expert evidence, concerning the question whether the design of the glazing was faulty or whether it had been manufactured correctly. I accept that submission. It follows that the claim that Meriton owed the owners corporation a non-delegable duty of care should be struck out.

The ordinary duty

25 There can be no doubt that Meriton owed the owners corporation a duty of care in connection with the construction of the building, although there may be an issue concerning the scope of that duty. Meriton's complaint is that the owners corporation has not identified in the List Statement how Meriton breached that duty.

26 Practice Note SC Eq 3, para 9 provides:

The plaintiff's contentions should:

9.1 avoid formality

9.2 state the allegations the plaintiff makes with adequate particulars and

9.3 identify the legal grounds for the relief claimed.

The Practice Note contemplates the possibility that the List Statement may contain inadequate particulars, since one of the matters on which directions may be given under para 25.4 is "the provision of any essential further particulars that are not contained in the List Statement ...".

27 In determining what particulars are essential, it is important to bear in mind that, in the normal course of events, the plaintiff's evidence in chief will be given in writing in the form of affidavits or statements well in advance of the hearing and before the defendant is required to serve any evidence.

28 Meriton submits that the List Statement does not comply with para 9 of the Practice Note because the particulars of negligence are completely absent from it.

29 Mr Corsaro SC makes two responses to that submission. First, he submits that, if Meriton requires further particulars, it is open to it to ask for them. Second, he points out that what Meriton and Micos did and did not do is peculiarly within their knowledge. The owners corporation is in the process of obtaining information concerning what happened both through a process of discovery and subpoenas and through expert evidence. In due course, it will be required to serve its evidence and its case will be apparent at that time.

30 In my opinion, there is force in Mr Corsaro's submission.

31 Paragraph 20(b) of the List Statement pleads the scope of the alleged duty (that is, a duty to supervise the work of Micos in the manufacture, supply and, if Micos installed the glazing and balustrades, the installation of the glazing and balustrades). In para 22, it is alleged that the duty was breached because the glazing and balustrades did not comply with provisions of the applicable Australian Standards and the Building Approval conditions imposed by the Council (the BA conditions) in various respects. There appears to be an implied premise in this allegation - namely, that had Meriton exercised reasonable care in supervising the work it would have discovered that the work failed to comply with one or more Australian Standards or BA conditions in the respects identified. But I do not think that of itself means that the relevant paragraphs of the List Statement should be struck out. The precise scope of the case that Meriton must meet will be determined by the evidence that the owners corporation must serve. The List Statement is not a pleading. It identifies the scope of the duty that it is alleged that Meriton owed and it identifies the facts which it says demonstrate that Meriton failed to comply with that duty. In my opinion, that is sufficient even if the precise acts or omissions which are said to be negligent are not identified. It may be that they cannot be identified by the owners corporation directly. However, it would still be open to the owners corporation, for example, to lead evidence concerning the degree of supervision a competent builder in the position of Meriton would exercise together with evidence that, if a builder undertook that level of supervision, it would have discovered the particularised faults.

Misleading certificate

32 Meriton submits that the List Statement fails to disclose a reasonably arguable cause of action because it is clear that a person does not engage in misleading or deceptive conduct merely by passing on a representation made by another: see Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; (2004) 218 CLR 592.

33 The List Statement contains the following allegations:

33 On, or shortly before, 7 June 1995, the Council determined that the certification of the Glazing required specialist knowledge and could not be determined by visual inspections, and accordingly it required specialist certification to determine compliance with Council's Requirements.

34 On or about 7 June 1995, at a meeting between Mr S Glanville (from the Council) and Mr P Dix (from Meriton), the Council informed Meriton that Meriton should satisfy the Council that the DA Conditions and the BA Conditions had been satisfied in this regard ("the Request").

35 Micos provided Meriton with the Certificate to enable Meriton to provide the Certificate to the Council in satisfaction of the Request.

34 In my opinion, it is arguable that Meriton did more than pass onto the Council a representation made by Micos. On the allegations in the List Statement, the Council granted to Meriton a Building Approval for the construction of the Princeton Building. It is pleaded that the BA conditions included a number of conditions imposed on Meriton concerning the glazing including a condition that "all glazing materials used in the construction of the Princeton Building were to be selected and installed in accordance with the relevant provisions of AS 1288 SAA "Glass Installation Code"." The certificate given by Micos was given to satisfy the Council that Meriton had complied with that condition, among others. In my opinion, it is at least arguable that in those circumstances Meriton adopted the representation made by Micos in its certificate, since the purpose of the certificate was to satisfy the Council that Meriton had complied with conditions imposed on it.

Duty of care in relation to the certificate

35 In para 48 of the List Statement, it is alleged that Meriton owed the owners corporation:

i. a non-delegable duty to see that Micos exercised proper care and skill in issuing the Certificate; and

ii. alternatively, a duty to take reasonable care in ensuring that Micos certified the Glazing properly.

36 In my opinion, no facts have been pleaded which would justify the allegation that Meriton owed the owners corporation a non-delegable duty in relation to the certificate. As the case is pleaded, the certificate was issued by Micos at the Council's request because the Council required the certificate to be issued by an entity with relevant expertise. There is no basis for saying that Meriton owed a non-delegable duty in those circumstances. On the contrary, as pleaded, the claim is that the Council requested that Meriton delegate the duty to someone with appropriate expertise.

37 In my opinion, there is utility in striking out the claim that Meriton owed a non-delegable duty of care because it will relieve Meriton from having to file evidence relevant to that claim.

38 The claim that Meriton owed an ordinary duty of care in relation to the certificate is more difficult to follow than the claim that Meriton owed a duty of care in supervising the work of Micos. What is alleged is that Meriton owed a duty to take reasonable care "in ensuring that Micos certified the glazing properly". But what that means is not entirely clear. The complaint seems to be that Meriton owed a duty to ensure that Micos's certificate was correct. However, if that is the complaint, then it seems to be one of a failure to comply with an obligation of strict liability rather than a complaint that Meriton was negligent in some respect.

39 It might be suggested that the claim is no different from the claim in relation to the duty that is said to arise in relation to the work itself. In each case, the scope of the duty is pleaded. In each case, it is pleaded that the work or certificate was faulty and in each case it might be said that there is an implied premise that had Meriton complied with its duty it would have discovered the faults (with the work or the certificate). However, the difficulty with this argument is that, in the case of the claim based on negligent supervision of the work, it is apparent that the complaint is a lack of care in supervising the work of Micos. However, in the case of the certificate, it is simply not clear what the complaint is other than a complaint that Meriton failed to ensure a particular outcome, which, as I have said, appears to be a complaint that assumes incorrectly that Meriton owed a duty of strict liability in relation to the certificate. For that reason, in my opinion, the claim should be struck out. However, the claim may not necessarily be hopeless. It is possible that the owners corporation may be able to identify some respect in which Meriton was negligent in connection with the certificate. For that reason, the owners corporation should have an opportunity to replead that part of its claim. If it wishes to exercise that opportunity, it should file and serve an Amended List Statement by noon on 6 March 2014.

Orders and costs

40 The orders of the court are:

(1) The following paragraphs of the List Statement be struck out:

(a) Paragraph 20(a);

(b) The words "the Meriton Non-Delegable Duty and" in paragraph 22;

(c) Paragraph 48(b);

(d) The words "and Meriton" in paragraph 49;

(e) The words "and by Meriton negligently providing the Certificate to the Council" in paragraph 50.

(2) Grant leave to the plaintiff to file and serve by noon on 6 March 2014 an amended List Statement amending its claim that the first defendant owed it a duty of care in relation to the Certificate (as defined in paragraph 5 of the List Statement).

(3) Stand the matter over before the List Judge for further directions on 7 March 2014.

41 Each of Meriton and the owners corporation has enjoyed some level of success. In those circumstances, there should be no order as to costs.

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Decision last updated: 27 February 2014