New South Wales Supreme Court CITATION : Owners Corporation & 12 Ors v Lido Real Estate Pty Ltd & Ors [2003] NSWSC 718 HEARING DATE(S) : 11/07/03 JUDGMENT DATE : 7 August 2003 JUDGMENT OF : Gzell J DECISION : Leave to amend cross claim. Cross claimants to pay Cross defendants' costs. Notice of motion otherwise dismissed CATCHWORDS : PROCEDURE - Miscellaneous procedural matters - Application to dismiss or strike out cross claim - Cross defendant an architect retained by builder - Cross claimants former owners and developers of unit block - Whether a cause of action against architect for purely economic loss - Amended cross claim conceded to raise triable issue - Whether cross claim should be dismissed or struck out in any event Law Reform (Miscellaneous Provisions) Act 1946 LEGISLATION CITED : Supreme Court Rules 1970 Home Building Act 1989 Perre v Apand Pty Ltd (1999) 198 CLR 180 Dey v Victorian Railways Commissioners (1948-1949) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Penthouse Publications Ltd v McWilliam (unreported, 14 March 1991, CA (NSW)) Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 62 Bryan v Maloney (1994-1995) 182 CLR 609 CASES CITED : Pantalone v Alaouie (1989) 18 NSWLR 119 National Mutual Life Association of Australasia Ltd v Coffey & Partners Pty Ltd [1991] 2 Qd R 401 Craignathan & Co Pty Ltd v Schwager Brooks and Partners (unreported, 4 December 1992, SC (NSW)) National Mutual Life Nominees Ltd v Marble Tile Co Ltd (unreported, 28 July 1992, SC (NSW)) Proprietors Units Plan No 95/98 v Jiniess Pty Ltd [2000] NTSC 89 Voli v Inglewood Shire Council (1963) 110 CLR 74 Florida Hotels Pty Ltd v Mayo (1965) 113 CLR 588 PARTIES : Martin Charles McGrane t/as Martin McGrane Architects - Applicant/4th Cross Defendant Lido Real Estate Pty Ltd - Respondent/1st Cross Claimant FILE NUMBER(S) : SC 55054/02 Mr R J H Darke SC - Applicant/4th Cross Defendant COUNSEL : Mr J Orsborn (Solicitor)- Respondent/1st Cross Claimant Mr I George - 1st Cross Defendant PricewaterhouseCoopers Legal Lawyers SOLICITORS : Holding Redlich Solicitors Russo and Partners Solicitors IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST GZELL J THURSDAY 7 AUGUST 2003 55054/02 OWNERS CORPORATION STRATA PLAN 62285 & 12 ORS v LIDO REAL ESTATE PTY LTD & 2 ORS JUDGMENT 1 The fourth cross defendant to the first cross claim, Martin Charles McGrane, seeks the summary termination of the proceedings against him. 2 The proceedings concern a block of 16 units in Vaucluse, Sydney. The plaintiffs are the owners' corporation of the relevant strata plan and a number of purchasers of units. The first defendant, Lido Real Estate Pty Ltd and the second defendant, Exell Street Holdings Pty Ltd, were the prior owners and the developers of the unit block. The third defendant, Betona Corporation (NSW) Pty Ltd, was the builder. 3 By the first cross claim, the developers sought relief against the builder, Birzulis Associates Pty Ltd, a structural engineer engaged by the builder, Descon Management Pty Ltd, a project manager engaged by the developers and the applicant, an architect engaged by the builder. 4 As against the applicant, the developers alleged that when carrying out architectural services under contract to the builder, the applicant owed the developers a duty of care to ensure that the services were performed in accordance with the relevant Australian standards and the building code of Australia. To the extent that the services did not comply therewith, the developers pleaded that the applicant had breached his duty of care to the developers. The developers claimed an indemnity or contribution from the applicant in respect of any liability they might have to the plaintiffs, pursuant to the Law Reform (Miscellaneous Provisions Act) 1946. 5 The applicant submitted that the pleading did not disclose a cause of action against him. It was submitted that the claim was for economic loss only and, in light of the decision of the High Court in Perre v Apand Pty Ltd (1999) 198 CLR 180, insufficient facts had been pleaded to ground any duty of care owed to the developers by the applicant. In particular, it was argued that there was no pleading of vulnerability to harm on the part of the developers and no pleading of control of the exercise of rights on the part of the applicant. 6 The applicant sought an order under the Supreme Court Rules 1970, Pt 13 r 5 that the first cross claim be dismissed as against him. Alternatively, an order was sought under Pt 15 r 26 that the first cross claim be struck out as against him. 7 The principles applicable to summary dismissal of an action are well understood. The case must be very clear to justify summary intervention to prevent a cross claimant submitting its case for determination in the appointed manner (Dey v Victorian Railways Commissioners (1948-1949) 78 CLR 62 at 91). The Court's powers of summary dismissal should not be exercised to deny a cross claimant access to the Courts unless the lack of a cause of action is clearly demonstrated (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129. It is for the applicant to demonstrate that the cross claim against him is beyond saving by legitimate amendment (Penthouse Publications Ltd v McWilliam (unreported, 14 March 1991, CA (NSW)) citing Mutual Life & Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 631). 8 On the developers' request to stand the matter over to enable written submissions to be placed before me, I directed the developers to do so by 28 July 2003 and, while not deciding whether the developers should have leave to amend their cross claim, I indicated that it would be of assistance for a draft amended cross claim to be delivered with those submissions. I directed the applicant to deliver any written reply by 29 July 2003. 9 In their draft amended first cross claim, the developers allege that the applicant owed them a duty of care when providing architectural services under contract to the builder to use the requisite level of care and skill. It is pleaded that the duty arose out of the applicant's purported expertise as an architect; out of his assumption of responsibility to provide architectural services; in that it was foreseeable that, if he carried out the architectural services negligently, the developers would suffer loss and might incur a liability to the plaintiffs as subsequent owners of the Vaucluse units; in that the developers relied on the applicant when providing the architectural services to use the requisite degree of care and skill; and in that the applicant knew, or ought to have known, that the architectural services provided for the builder were required by the developers in order for the works to be completed by the builder, and the developers would be relying on the applicant when providing the architectural services to use the requisite level of care and skill. 10 It is pleaded that, to the extent that the architectural services were not carried out with the requisite degree of care and skill, the applicant breached his duty of care to the developers. If the developers are found liable to the plaintiffs, and such liability is as a consequence of the architectural services not being carried out with the requisite degree of care and skill, the developers allege that they will suffer loss. 11 In the premises, the pleading alleges that the developers are entitled to an indemnity from the applicant in respect of any liability they may have to the plaintiffs. 12 The draft pleading goes on to raise a claim that the applicant is liable as a joint tortfeasor. It is pleaded that in providing the architectural services, the applicant owed the plaintiffs a duty of care to use the requisite level of care and skill. This was claimed to arise out of the applicant's purported expertise as an architect; out of the applicant's assumption of responsibility to provide the architectural services; and in that it was foreseeable that, if the applicant carried out the architectural services negligently, the plaintiffs would suffer loss. 13 It is pleaded that, to the extent that the architectural services were not carried out with the requisite degree of care and skill, the applicant breached his duty of care to the plaintiffs. In the event that the developers are found to be liable to the plaintiffs, and that liability is as a consequence of the architectural services not being carried out with the requisite degree of care and skill, the developers claim they will be liable with the applicant to the plaintiffs as joint tortfeasors. 14 In the premises, it is pleaded that the developers are entitled to contribution from the applicant with respect to any joint liability they may have to the plaintiffs pursuant to the Law Reform (Miscellaneous Provisions) Act 1946. 15 In his written submissions in reply, the applicant accepts that the draft pleading of the duty of care allegedly owed to the developers, raises a triable issue. 16 Further, while the applicant questions the existence of a duty of care to the plaintiffs of the type referred to by the High Court in Bryan v Maloney (1994-1995) 182 CLR 609 because of the benefit of the statutory warranties under the Home Building Act 1989, s 18B, the applicant concedes that if the developers are permitted to amend their claim for breach of duty of care owed to them by the applicant, that should be a relevant factor in favour of permitting them to make amendments to the joint tortfeasor claim as well. 17 In light of these concessions, in my view properly made, it is unnecessary for me to analyse the cases in which a professional person, engaged by one party, has been held to owe a duty of care to another party. The applicant having articulated his claim in the amended form of the draft should, in my opinion, be given leave to file an amended cross claim in those terms. 18 In addition to Bryan and Perre, the developers supported their submission that a duty of care was owed to them by the applicant by reference to Pantalone v Alaouie (1989) 18 NSWLR 119, National Mutual Life Association of Australasia Ltd v Coffey & Partners Pty Ltd [1991] 2 Qd R 401, Craignathan & Co Pty Ltd v Schwager Brooks and Partners (unreported, 4 December 1992, SC (NSW)), National Mutual Life Nominees Ltd v Marble Tile Co Ltd (unreported, 28 July 1992, SC (NSW)), Proprietors Units Plan No 95/98 v Jiniess Pty Ltd [2000] NTSC 89, Voli v Inglewood Shire Council (1963) 110 CLR 74 and Florida Hotels Pty Ltd v Mayo (1965) 113 CLR 588. 19 The applicant submits that I should make orders in terms of the notice of motion dismissing or striking out the first cross claim as against the applicant regardless of whether leave to amend the cross claim as against the applicant is granted. 20 I reject that submission. Having formed the view that it is appropriate to allow the amended pleading, I decline to order dismissal or striking out of the cross claim against the applicant. 21 In his written submissions in reply, the applicant asks for an order that his costs of the motion be paid by the developers and, if leave to amend the pleading is granted, that the developers pay the applicant's costs of and occasioned by the amendments. 22 In their written submissions, the developers argue that they ought to have their costs because they offered to supply further particulars and sought to have the applicant's motion stood over pending that performance. 23 In his written reply, the applicant argues that the motion was properly brought in face of a clearly defective cross claim that was not defended in the developers' written submissions and was subject to significant refinement in the draft amended cross claim. 24 I agree with the applicant's submissions on costs. The cross claim as it stood was, in my view, deficient and it was as a result of the motion that the draft amended cross claim was brought into existence. The applicant should have his costs of the notice of motion and his costs of and occasioned by the amendments. The notice of motion should otherwise be dismissed. 25 I direct the parties to bring in short minutes of orders reflecting these reasons. ********** Last Modified: 08/12/2003 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.