Franks Centre Lofts Pty Ltd v Construction Mangement Group Pty Ltd & Ors [2001] NSWSC 389

New South Wales Supreme Court

CITATION : Franks Centre Lofts Pty Ltd v Construction Mangement Group Pty Ltd & Ors [2001] NSWSC 389 FILE NUMBER(S) : SC 55017/99 HEARING DATE(S) : 27/04/2001 JUDGMENT DATE : 27 April 2001

Franks Centre Lofts Pty Ltd (Plaintiff) Construction Management Group Pty Limited (First Defendant) PARTIES : Michael Henry (Second Defendant) Alfred Attard (Third Defendant) Orlando Interiors (Plaintiff in Lower Court proceedings) JUDGMENT OF : Einstein J

Mr Southwick (Plaintiff) COUNSEL : Ms Stubbs (Defendants) Mr Hogg (Plaintiff in Lower Court proceedings) Harris & Company (Plaintiff) SOLICITORS : James Solicitors (Defendants) Simon Beverley & Associates (Plaintiff in Lower Court Proceedings) CATCHWORDS : Transfer of proceedings DECISION : The Court declines to order that the District Court proceedings be transferred to be heard together with the Supreme Court proceedings..

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION - CONSTRUCTION LIST

EINSTEIN J

FRIDAY 27 APRIL 2001 ex tempore Revised 14 May 2001

55017/99 - FRANKS CENTRE LOFTS PTY LTD v CONSTRUCTION MANAGEMENT GROUP PTY LTD & ORS

JUDGMENT

1 HIS HONOUR: There is before the Court in proceedings number 55017/99, a Notice of Motion in which Construction Management Group Pty Ltd ("Construction Management") seeks orders that District Court proceedings 1802/2000 be transferred to the Supreme Court to be heard with these proceedings. 2 There is a degree of complexity involved in disentangling the causes of action pursued by a number of related parties in the District Court proceedings and in the Supreme Court proceedings. 3 The proceedings in the Supreme Court generally arise out of a construction contract and related subcontracts for the development in Camperdown of some 46 residential apartments, terraces and lofts. The property development was apparently known as Union Square and is located at the corner of Camperdown and Kilner Lane in Camperdown. 4 Apparently, there are some questions as to the precise dates when the relevant contracts were entered into. They do not seem to be particularly material to the present application. 5 Either in late 1997 but varied during 1998 or in early 1998, it appears that the main construction contract was entered into between the developer/proprietor, Franks Centre Lofts Pty Ltd (Franks Centre) and the builder, Construction Management. 6 Pursuant to the main construction contract, Construction Management was to perform the building work for the development. Construction Management was apparently responsible only for building work under the construction contract. 7 Apparently, questions may arise in relation to Supreme Court proceedings as to whether and if so to what extent Construction Management may have had any responsibility for design work under the construction contract. I understand that is a contention which Construction Management disputes. 8 Apparently in early February 1999, Construction Management entered into a sub-contract with Orlando Interiors Pty Ltd ("Orlando"). Pursuant to that subcontract, Orlando was to supply plasterboard ceilings and walls in building two of the development ("the contract works"). 9 Building two of the five building development was apparently the only building that Orlando in fact worked on during performance of the contract. 10 Apparently, Whitehall Property Consultants Pty Ltd ("Whitehall") were appointed architects under the construction contract. An allegation is made that pursuant to the construction contract Whitehall apparently was to provide correct architectural design and construction specifications to Construction Management. An allegation is made that Whitehall's obligations pursuant to the construction contract included an obligation to provide information as to all compliance standards necessary to obtain the approval of Marrickville Council (by way of development and building approval) for the building work to be performed by Construction Management and its subcontractors. 11 There is apparently raised an allegation in the Supreme Court proceedings that Whitehall had a duty of care to provide the correct information in a recognisable format. 12 Apparently, Orlando commenced the subcontract work on building two in about early 1999. It is said to have become apparent that there was a problem with the plan design specifications provided by Franks Centre under the construction contract in relation to the subcontract works to be performed by Orlando. 13 It is said that the architectural layout drawings had a design defect in that the contract works could not be constructed as drawn. It is alleged that the design error in the drawings related to the co-ordination of the hydraulic works through the main shafts in the corridor and the mechanical ventilation. It is said that the plans did not have sufficient tolerances for the required wall thicknesses for both fire and acoustic ratings. It is said that the service risers were incomplete when Construction Management left the site and it had not been enclosed. 14 An allegation is made, as I understand it in the Supreme Court proceedings, that penetration of the shafts was also in issue as the mechanical shafts could not be fitted to the shafts as drawn. Apparently issues raised in the Supreme Court proceedings involve whether or not this meant redesign and reconfiguration. 15 Turning to the parties to the two sets of proceedings, Franks Centre is the plaintiff in the Supreme Court proceedings. Construction Management is the first defendant in the Supreme Court proceedings. Particularly named individuals are further defendants to the Supreme Court proceedings. Certain cross-claims are brought in the Supreme Court proceedings. The first cross-claim is against Franks Centre and the third cross-claim is apparently against Whitehall Property Consultants. 16 The parties to the District Court proceedings are Orlando as plaintiff and Franks Centre as first defendant. Franks Centre has cross-claimed in the District Court proceedings against Construction Management. 17 I turn then to the question of whether or not, on the evidence, the Court ought accept that it is appropriate to move the District Court proceedings into the Supreme Court to be heard together with the Supreme Court proceedings. 18 As I understand the submissions of the parties and the pleadings, the essential burden of the plaintiff's case in the Supreme Court proceedings is that the defendant, Construction Management, wrongfully terminated the contract. 19 The Amended Summons in the Supreme Court proceedings contains a number of causes of action including the cause of action arising out of the alleged wrongful termination of the construction contract. 20 The Amended Summons includes substantial allegations with respect to defects covering many areas in the buildings including, for example plumbing pipes, electrical cables, structural beam fixings, column bases in the lobby, and a number of other matters. 21 Mr Hogg's client is of course not a party to the Supreme Court proceedings. 22 The legal representatives of the other parties represented on the hearing of the Notice of Motion generally accept that the Supreme Court proceedings are likely to involve claims in the order of, if not exceeding, two million dollars. It does seem to be common ground that the Supreme Court proceedings are very substantial proceedings, will involve a considerable period of time before they can be completed and are of a dimension dramatically different to the dimension of the District Court proceedings. 23 The District Court proceedings are proceedings in which quite simply Orlando as subcontractor, having the benefit as against Franks Centre as new obligee, of the novated Orlando - Construction Management contract, pursues Franks Centre for the amounts which Orlando claims it is entitled to under that contract. 24 Orlando sees no reason whatever why it should be drawn into the Supreme Court proceedings for a moment. 25 Ms Stubbs, who has addressed on behalf of Construction Management, has drawn the Court's attention to the cross-claim pursued by Franks Centre against Construction Management in the matter of the District Court proceedings. 26 That cross-claim, in effect, asserts that Construction Management failed to advise Franks Centre that the Building Code of Australia required gyprock to public areas with a fire rating of 90 minutes and alleges that Construction Management failed to instruct Orlando to install gyprock in public corridors with a fire rating of 90 minutes. 27 The cross-claim further alleges that the subject work carried out by Orlando at the direction of Construction Management was in breach of the agreement and had to be re-executed at a cost to Franks Centre of $65,000-odd. 28 The cross-claim further claims that in breach of its duty of care to Franks Centre, Construction Management failed to advise Franks Centre that the Building Code of Australia required gyprock to public areas with a fire rating of 90 minutes and failed to instruct Orlando to install gyprock in public corridors with a fire rating of 90 minutes. 29 The cross-claim further raises allegations that Orlando owed a duty to Franks Centre to advise it of the building code requirements of gyprock to public areas with a particular fire rating of 90 minutes and a duty to install gyprock in public corridors with a fire rating of 90 minutes. 30 The Court is obliged to look very closely indeed at questions which arise when litigation in different courts between the same parties (or some of the same parties covering similar areas in issue) overlap may, unless the proceedings are brought together in the same set of proceedings, cause endemic or practical difficulties on the hearing of the separate sets of proceedings. 31 There is a well established principle that where proceedings covering the same issues between many of the same parties in different courts involve an inextricable interweaving of factual and legal issues, the Court will make appropriate orders to ensure that the two sets of proceedings are heard at the same time or, where appropriate, are consolidated. 32 In the present proceedings, the subcontract works defined in the subject subcontract entered into between Orlando as subcontractor and, on the novated basis, Franks Centre, makes provision in the appendix clause 8.5 under the heading "the subcontract works" for a definition of the work. That item reads, "The whole of the work to be executed and completed by the subcontractor, namely supply and installation of plasterboard wall and ceiling incl fire rated one at building 2 at 2 Cardigan Lane Camperdown." [There is some difficulty in deciphering the "incl"] 33 The formal position at the bar table has been that, of the parties to the District Court proceedings, both the plaintiff, Orlando, and the defendant, Franks Centre, see no difficulty in any form of res judicata by way of the District Court proceedings continuing notwithstanding the Supreme Court proceedings being extant. 34 Only Construction Management, whose legal representative Ms Stubbs, has appeared today, sees a difficulty in that course. In her submissions in endeavouring to persuade the Court that it is appropriate to move the District Court proceedings into the Supreme Court proceedings or for the two to be heard together, Ms Stubbs has referred the Court to the detail in the Amended Summons where one requires to pay attention to paragraph 48, third bullet point "Particulars", to the effect, "not all joints surrounding gyprock works have been filled with fire caulking." She has also drawn the Court's attention to paragraph 52 on page 20 "Services in building 2 were fixed so as to be visible and require additional sheeting to conceal". 35 Notwithstanding Ms Stubbs' attempt to submit that these items are referable to gyprocking in terms of an overlap with the issues in the District Court proceedings, I am by no means satisfied that there is any such or any such significant overlap or that the difficulty which she suggests there is, is in fact a difficulty of substance. 36 As it emerged during the course of the submissions, in effect, when Orlando sues Franks Centre for payment of the work that it carried out and relies upon the written contract, the essential burden of the cross-claim by Franks Centre against Construction Management in terms of its breaches of duty seem not to be capable of amounting to more than a claim that, in effect, Construction Management permitted the incorrect form of wording to be included in Clause B.5 of the original sub-contract. 37 Ms Stubbs' other submission was that the evidence likely to be before the Court in the two sets of proceedings will include an examination of the instructions given to Orlando by Construction Management and an examination of the question whether there were or were not divergent instructions and what directions were given and what conversations took place. 38 To my observation, whilst clearly evidence of that type may well be before the District Court and the Supreme Court, the fact that the District Court will be determining the proceedings by construing and otherwise dealing with the contract to which I have referred with its particular form of wording, strongly suggests that the difficulty to which Construction Management has alluded is not of substance. 39 I am simply not persuaded that notwithstanding the fact that Construction Management and Franks Centre are locked into the major litigation the subject of the Supreme Court proceedings, this is an appropriate case in which to direct that the District Court proceedings be heard together with the Supreme Court proceedings. 40 The Court whilst cautious indeed in every circumstance to closely examine possibilities of res judicata type and issue estoppel difficulties coming forward where proceedings are heard in disparate tribunals with obvious difficulties for the parties and for the Court in hearing the later proceeding, is not here persuaded that this case falls into that category. 41 To my mind, it is clear that the Court has a discretion as to whether or not to order proceedings to be moved to the Supreme Court. It is equally clear that although issues in two different tribunals may not be exactly the same, where there is a common thread, and a clear entanglement of issues in two sets of proceedings, the Court's discretion, depending upon the nature and extent of the overlap, will usually be exercised in favour of transferring the proceedings to be heard together with the other proceedings. 42 In the present case, it seems to me that a claim by the subcontractor for in the order of $75,000 or thereabouts where the prospects of significant overlap are as slender as I perceive in this case, the discretion should be exercised against the making of the order in the Notice of Motion. 43 For those reasons, the Court declines to order that the District Court proceedings be transferred to be heard together with the Supreme Court proceedings.