Supreme Court New South Wales Medium Neutral Citation: Harris for and on behalf of the estate of Harris and Harris v Rapisarda [2019] NSWSC 1088 Hearing dates: 22 August 2019 Decision date: 22 August 2019 Jurisdiction: Equity - Technology and Construction List Before: Stevenson J Decision: Strike out application dismissed Catchwords: ESTOPPEL – Anshun estoppel – where proprietors commenced earlier proceedings against builder alleging defective workmanship – where defendant architects prepared the building contract and supervised builder's work but were not joined in earlier proceedings – where earlier proceedings referred out and referee's report adopted – where proprietors do not in these proceedings seek findings inconsistent with those of referee in earlier proceedings – whether unreasonable for proprietors not to have joined architects in the earlier proceedings so that they are now estopped from bringing these proceedings CIVIL PROCEDURE – pleadings – striking out – abuse of process Legislation Cited: Australian Consumer Law Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Aldi Stores Ltd v WSP Group Plc [2008] 1 WLR 748 Ekes v Commonwealth Bank of Australia [2014] NSWCA 336 Gibbs v Kinna [1999] 2 VR 19; [1998] VSCA 52 Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231 Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404; [1995] NSWSC 136 Harris v Morabito Holdings Pty Ltd [2018] NSWSC 912 Henderson v Henderson (1843) 3 Hare 100; (1843) 67 ER 313 Johnson v Gore Wood & Co [2002] 2 AC 1; [2001] 2 WLR 72 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45 Redowood Pty Ltd v Link Market Services Pty Ltd [2007] NSWCA 286 Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; [2001] NSWCA 142 Solak v Registrar of Titles (2011) 33 VR 40; [2011] VSCA 279 Timbercorp Finance Pty Ltd (in liq) v Collins; Timbercorp Finance Pty Ltd (in liq) v Tomes (2016) 259 CLR 212; [2016] HCA 44 Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 UBS AG v Tyne (2018) 360 ALR 184; [2018] HCA 45 Texts Cited: P W Young, C Croft and M L Smith, On Equity (2009, Thomson Reuters) Category: Procedural and other rulings Parties: John Harris for and on behalf of the estate of Arthur Harris and Anne Harris (Plaintiff/Respondent) Horace Rapisarda (First Defendant/Applicant) H&A Building Designers Pty Ltd trading as MLR Architects (Second Defendant/Applicant) Representation: Counsel: P J Bambagiotti Plaintiff/Respondent L Shipway (Defendants/Applicants) Solicitors: Nexus Lawyers (Plaintiff/Respondent) Lander & Rogers (Defendants/Applicants) File Number(s): SC 2019/162942 Judgment 1. The defendants, Mr Horace Rapisarda and a company with which he is associated, H&A Building Designers Pty Ltd trading as MLR Architects, seek to have these proceedings struck out pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 14.28, dismissed pursuant to UCPR r 13.4 or permanently stayed pursuant to s 67 of the Civil Procedure Act 2005 (NSW). 2. I will refer to the defendants, together, as the "Architects". 3. The Architects contend that the orders sought should be made on the basis of an Anshun estoppel or on the basis that the commencement of these proceedings is an abuse of process. 4. For the reasons that follow, the application should be dismissed. 5. The plaintiff, Mr John Harris, is the executor of the estate of his parents who were, at all relevant times, the registered proprietors of a property at Lilli Pilli. I will refer to them as the "Proprietors" and to Mr Harris as the "Executor". 6. In August 2009 the Proprietors engaged a builder, who I will call the "First Builder", to build a substantial new dwelling on their property. 7. The Proprietors became dissatisfied with the performance of the First Builder and, in circumstances not presently relevant, terminated their contract with that builder in May 2011. 8. In November 2010 the Proprietors engaged the Architects in relation to the project. They retained the Architects to prepare plans and specifications for: 1. rectification of defects in the work done by the First Builder; and 2. completion of construction of the dwelling. 1. In January 2012 the Proprietors entered into a contract with Morabito Holdings Pty Ltd (the "Second Builder") to complete the project (the "Contract"). 2. The Architects prepared the Contract. 3. The Executor contends in these proceedings that the Contract was "inadequate" in that it did not: 1. include the Second Builder's tender in which the Second Builder allegedly represented that its work would achieve "high standards of quality" and a "high standard of workmanship"; and 2. specify that the workmanship of the Second Builder would be of a "high standard". 1. The project achieved practical completion in September 2013. 2. In September 2015, the Proprietors commenced proceedings in the NSW Civil and Administrative Tribunal against the Second Builder. Those proceedings were transferred to this Court. The whole of the proceedings was referred to a referee, Mr Barry Tozer, for inquiry and report. 3. The hearing before Mr Tozer took nine days spread over four months. There were before Mr Tozer some 25 lever arch folders of documents. The Proprietors served 16 expert reports, including one exceeding 560 pages, as well as five affidavits from the Executor and an affidavit from Mr Rapisarda. The Second Builder served reports from seven experts as well as an affidavit from the principal of the Second Builder, Mr Morabito. The transcript of evidence before Mr Tozer occupies over 750 pages. 4. On 31 January 2018 Mr Tozer delivered his report. It was almost 200 pages long. Mr Tozer found that: 1. the Proprietors were entitled to damages from the Second Builder for rectification of defective building work in the sum of $383,168.47 plus reimbursable costs of $2,508.00: a total of $385,676.47; 2. the Second Builder was entitled to amounts for variations and delay costs totalling $57,935.25; and 3. accordingly, the amount payable by the Second Builder to the Proprietors was a difference of $327,741.22. 1. The award of damages proposed by Mr Tozer was very much less than the amount sought by the Proprietors: some $1.65 million. 2. On 19 June 2018, McDougall J ordered that Mr Tozer's report be adopted, except insofar as it deducted from the amount due from the Second Builder to the Proprietors the $57,935.25 on account of variations and delay costs: Harris v Morabito Holdings Pty Ltd [2018] NSWSC 912 at [154]. 3. His Honour entered judgment in favour of the Proprietors against the Second Builder in the sum of $385,676.47. 4. On 24 May 2019 the Executor, on behalf of the estate of the Proprietors, commenced these proceedings against the Architects. The Executor alleges that the Architects: 1. failed properly to prepare and thereafter administer the Contract, in breach of their alleged contractual obligations; 2. made negligent and misleading or deceptive representations about the services they would provide including in relation to the Contract and the suitability of the Second Builder; and 3. were negligent in providing the services they were engaged to provide. 1. By way of heads of loss, the Executor alleges that "by reason of the above breaches, jointly and severally": 1. "the Second Builder's work cost more" and "took longer than it should have or that [sic] was reasonable in the circumstances"; 2. "the Second Builder's work was not of the quality that was expected or required by the Proprietors so that they lost the opportunity of having a home with the higher quality work, materials, and workmanship"; and 3. the Proprietors "found themselves in dispute with the Second Builder, largely arising because of the difference between what proved to be the ordinary standards of quality and workmanship and the high standards of quality and workmanship they expected and were told they would receive". 1. The Architects contend that in order to adjudicate upon the Executor's claims, the Court will have to determine what would have occurred but for the alleged wrongful conduct. For example, the Architects contend, in relation to the alleged maladministration of the Contract, the Court will have to determine: 1. what the Second Builder's work would have cost and how long it would have taken but for the alleged conduct; 2. what quality the works would have achieved but for the alleged conduct; and 3. whether the Proprietors would have "found themselves in dispute with the Second Builder" but for the alleged conduct. 1. The Architects contend that these matters ought reasonably to have been raised by the Proprietors in the Morabito Proceedings. The Architects contend that: 1. the quality of the work done by the Second Builder was directly in dispute in the Morabito Proceedings; 2. the quality of that work was the subject of extensive written and oral expert evidence and lengthy consideration by the Referee in his report in the Morabito Proceedings; 3. it was unreasonable for the Proprietors not to have raised their claim against the Architects in the Morabito Proceedings, hence enlivening an Anshun estoppel. 1. The Architects seek to have the proceedings struck out, dismissed or stayed on the basis that they are barred by an Anshun estoppel, or are an abuse of process. 2. Alternatively, the Architects seek to have a number of paragraphs of the Technology & Construction List Statement struck out on the basis that they are embarrassing and not reasonably arguable. Anshun estoppel 1. It has been pointed out that although named after the decision of the High Court in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45, Anshun estoppel has "like most other species of estoppel, a long pedigree": P W Young, C Croft and M L Smith, On Equity (2009, Thomson Reuters) at [12.70]. 2. That pedigree includes the well-known words of Sir Wigram VC in Henderson v Henderson (1843) 3 Hare 100 at 115; (1843) 67 ER 313 at 319: "Where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not, except in special circumstances, permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward a part of the subject in contest, but which was not brought forward only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points on which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time." 1. In the Anshun decision itself, the High Court said at 602-604: "In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings, e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few… … The likelihood that the omission to plead a defence will contribute to the existence of conflicting judgments is obviously an important factor to be taken into account in deciding whether the omission to plead can found an estoppel against the assertion of the same matter as a foundation for a cause of action in a second proceeding. By 'conflicting' judgments we include judgments which are contradictory, though they may not be pronounced on the same cause of action. It is enough that they appear to declare rights which are inconsistent in respect of the same transaction." (Emphasis added.) 1. More recently, in Timbercorp Finance Pty Ltd (in liq) v Collins; Timbercorp Finance Pty Ltd (in liq) v Tomes (2016) 259 CLR 212; [2016] HCA 44, the High Court, at [97], quoted this passage from Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 at [22], that an Anshun estoppel: "…operates to preclude the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding". (Emphasis added.) Abuse of process 1. In UBS AG v Tyne (2018) 360 ALR 184; [2018] HCA 45 at [1], Kiefel CJ, Bell and Keane JJ said of abuse of process: "The varied circumstances in which the use of the court's processes will amount to an abuse, notwithstanding that the use is consistent with the literal application of its rules, do not lend themselves to exhaustive statement. Either of two conditions enlivens the power: where the use of the court's procedures occasions unjustifiable oppression to a party, or where the use serves to bring the administration of justice into disrepute". 1. The plurality, at [7], cited with approval the observations of Lord Bingham in Johnson v Gore Wood & Co [2002] 2 AC 1 at 31; [2001] 2 WLR 72, that what is required is: "[A] broad, merits‐based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before". The Architects were not parties to the earlier proceedings 1. Unlike the Anshun decision itself, this is not a case where a plaintiff brings second proceedings against the same defendant. The Architects were not parties to the earlier proceedings. 2. An Anshun estoppel may arise in circumstances where the defendant to the second proceedings was not a party to the earlier proceedings. But absent an assertion in the second proceedings of a proposition inconsistent with those agitated in the first, or some other circumstance bespeaking an abuse of process, it is hard to envisage an Anshun estoppel arising in such a case. 3. An example of a case where an Anshun estoppel arose where the present defendant was not a party to the earlier proceedings is Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; [2001] NSWCA 142. But in that case, the plaintiffs were seeking in the second proceedings to re-litigate an issue, their reliance on particular financial statements, that had been decided against them in the first proceedings: per Handley JA at [38]. 4. This issue was considered by Warren CJ, with whom Neave JA agreed, in Solak v Registrar of Titles (2011) 33 VR 40; [2011] VSCA 279 at [67]-[71]: "This case is one of the relatively few cases where the party asserting Anshun estoppel in the second proceeding was not a party to the first proceeding. The High Court is yet to consider the principles applicable in this situation. However, in Redowood Pty Ltd v Link Market Services Pty Ltd [[2007] NSWCA 286] Hodgson JA of the NSW Court of Appeal (with whom Mason P and Bryson AJA agreed) suggested that a stricter test should be applied [at [45]]: 'In cases where the earlier proceedings and the later proceedings are between the same parties, as in Anshun itself, a finding of unreasonableness in not raising a matter in the earlier proceedings would almost inevitably mean that the later proceedings were oppressive and an abuse of process. Where the parties are different, the test of unreasonableness is still relevant; but in my opinion it must either be considered not conclusive, or else must be understood as involving unreasonableness of such a nature that the later proceedings against different parties are an abuse of process.' The court cautioned against applying Anshun estoppel too readily where the party asserting the estoppel was not a party to the first proceeding [at [50]]: '[W]here a plaintiff may have alternative remedies against different parties, to suggest that a plaintiff should generally sue all of them, barring exceptional circumstances, would be to encourage complex and lengthy litigation, and promote the incurring of costs where there is no certainty that a Bullock or Sanderson order would be obtained. … [P]laintiffs should be permitted reasonable latitude in deciding whether to sue just one defendant, or to join a number of defendants in alternative claims.' The English Court of Appeal has expressed a similar sentiment. In Aldi Stores Ltd v WSP Group Plc [[2008] 1 WLR 748] Thomas LJ stated [at 764]: '[T]here is a real public interest in allowing parties a measure of freedom to choose whom they sue in a complex commercial matter and not to give encouragement to bringing a single set of proceedings against a wide range of defendants or to complicate proceedings by cross-claims against parties to the proceedings. That freedom can and should be restricted by appropriate case management.' All of the Australian cases to which the court was referred where a defendant who was not a party to the first proceeding was able to successfully rely on Anshun estoppel in the second proceeding involved the estopped plaintiff attempting to assert in the second proceeding some proposition inconsistent with the judgment in the first proceeding [Rippon v Chilcotin Pty Ltd; Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404; [1995] NSWSC 136]. Even if such a collateral attack by the plaintiff is not a necessary precondition for Anshun estoppel, its absence is a significant factor militating against a finding that Anshun estoppel has arisen [Cf Johnson v Gore Wood 31]. It is not necessary in this case to decide whether special principles or a different test applies where the person asserting Anshun was not a party to the first proceeding. It is clear that the test is at least as strict as the test applicable in a case where the parties are the same. Applying that test, I am satisfied that no Anshun estoppel arises in this case." 1. Similarly, in Ekes v Commonwealth Bank of Australia [2014] NSWCA 336 Bathurst CJ, with whom Beazley P and Emmett JA agreed, having referred to the passage I have set out above from Ashun said, at [131]-[133]: "Their Honours also stated in Anshun at 603 that a factor of importance to take into account was that the prosecution of the second action may give rise to conflicting judgments. This has been emphasised in many of the subsequent cases, particularly in cases where estoppel is sought to be raised against the person not a party to the earlier proceedings: Habib [v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231] at [83], Redowood at [48]-[49], Solak…at [70] and Gibbs v Kinna [[1999] 2 VR 19; [1998] VSCA 52] at [25]. As the appellant submitted, in Redowood Hodgson JA suggested at [45] (Mason P and Bryson AJA agreeing) that in a case where an Anshun estoppel is sought to be raised against a third party, unreasonableness is either not conclusive or of such a nature that the latter proceedings are an abuse of process: see also Solak at [67]-[71]. It was not suggested in the present case that what his Honour said was incorrect, something which would be quite inappropriate to decide on a summary application. Further, it is important to bear in mind that the fact that the appellant could have joined as plaintiff in the company's proceedings is not sufficient to give rise to an Anshun estoppel. The question is whether in not having done so it was unreasonable to bring the second set of proceedings: Anshun at 602 and Johnson v Gore Wood…at 31 per Lord Bingham and 59 per Lord Millett." The Executor is not seeking inconsistent findings 1. Further, this is not a case where a plaintiff proposes to seek findings inconsistent with those made in earlier proceedings. On the contrary, the Executor's case is premised on the correctness of Mr Tozer's conclusions and McDougall J's adoption of them. 2. Indeed, Mr Bambagiotti, who appeared for the Executor, informed me that the Executor undertook to the Court not to seek in these proceedings any finding inconsistent with those made by Mr Tozer, and adopted by McDougall J, in the earlier proceedings. Rather, the Executor to proposes to rely upon the findings made by Mr Tozer, and adopted by McDougall J, that the standard of workmanship called for by the Contract was "the ordinary standard applied to building work" other than some special, higher standard. 3. The Executor's case will be that the Architects prepared the Contract (as McDougall J found at [18]) and the fact the Contract did not call for a special, higher standard was, to adopt Mr Bambagiotti's submissions, "the subject of, and product of, the Architect's breaches of its retainer, negligent conduct and misleading or deceptive conduct contrary to, inter alia, the Australian Consumer Law. 4. As Warren CJ observed in Solak, the fact that the Executor is not seeking to advance any proposition inconsistent with the findings in the earlier proceedings "is a significant factor militating against a finding that an Anshun estoppel has arisen" (see [34] above). 5. Determination of the Executor's claim against the Architects will involve consideration of the quality of the work that would or should have been undertaken by the Second Builder, had the Contract have provided for a "high standard" of workmanship on the part of the Second Builder, and had the Architects supervised the Second Builder's work and ensured that a "high standard" was achieved. In effect, the Executor will run an "alternative transaction" case which will proceed on this hypothesis. 6. It may well be, as Mr Shipway, who appeared for the Architects submitted, that in these proceedings alleged defects already considered in the earlier proceedings will be revisited. 7. As an example, Mr Shipway pointed to the fact that, in the earlier proceedings, the Proprietors sought some $340,000 for "damage to the anodised window frames, sliding door frames and internal sliding doors". 8. The complaint made by the Proprietors about the window frames and doors was not as to their function, but merely as to their appearance. As Mr Shipway said, it was an aesthetic issue only. As Mr Tozer and McDougall J concluded that the Contract did not call for a "high standard" of workmanship, the Proprietors recovered only a nominal amount on account of this matter. 9. If the Executor establishes in these proceedings that the Contract should have provided for a "high standard" of workmanship, the proper characterisation of this defect, and the work required to rectify it, will need to be reconsidered. 10. But I cannot see how that will result in inconsistent findings to those made by Mr Tozer and adopted by McDougall J in the earlier proceedings. Those findings were made in the context of what Mr Tozer and McDougall J concluded was the proper construction of the Contract. 11. The Proprietors' case before the Referee and McDougall J was that, on its proper construction, the Contract called for a higher standard of workmanship than the "ordinary" standard. 12. Against the possibility that such contention be rejected, it would no doubt have been possible for the Proprietors to have joined the Architects as defendants in the earlier proceedings and to argue, in the alternative, and on the assumption that their construction of the Contract was incorrect, that the Architects should pay damages by reason of not ensuring that the Contract did have the construction for which they contended. 13. But that would have been a risky course to adopt, particularly as the Proprietors called Mr Rapisarda as a witness in their case. 14. Mr Shipway submitted that, had the Architects been joined as defendants in the earlier proceedings and the Proprietors run alternative cases against the Second Builder and the Architects, it is likely that issues as the alleged defects and the steps needed to rectify them, on the alternative bases of the Contract calling for "ordinary" workmanship and "high standard" workmanship would have been more efficiently dealt with than will be the case now that separate proceedings have been commenced against the Architects. 15. Mr Shipway also drew attention to observations of Gageler J in UBS AG v Tyne that these questions must be considered not only by reference to the interest of the parties to the proceedings, but also to the "public interest in the timely and efficient administration of civil justice" (at [70]). 16. However, I cannot draw any conclusion as to whether greater efficiency would have been achieved, and at less cost to the parties and the community, had the Proprietors proceeded as Mr Shipway contended they should have. 17. More to the point, I cannot conclude it was unreasonable of the Proprietors to not take that course. 18. As Hodgson JA said in Redowood, "plaintiffs should be permitted reasonable latitude in deciding whether to sue just one defendant, or to join a number of defendants in alternative claims" (see [34] above). Conclusion re Anshun and abuse of process 1. I am not persuaded that the Executor is estopped from bringing these proceedings, nor that bringing these proceedings is an abuse of the process of the Court. 2. The Architects' application to have the proceedings struck out or stayed should be dismissed. Particular paragraphs of the Technology & Construction List Statement 1. Mr Shipway submitted that pars C22, 24, 27, 36, 38, 40 and 42 of the Technology & Construction List Statement were liable to be struck out as being embarrassing. 2. In submissions, Mr Bambagiotti accepted that each of the paragraphs could be more clearly expressed. 3. I propose to give the Executor leave to produce an Amended Technology & Construction List Statement in order that such a result be achieved. Conclusion 1. I make the following orders and directions: 1. The defendants' Notice of Motion filed on 5 August 2019 is, so far as concerns the relief sought in paragraphs 1 and 2, dismissed with costs. 2. Direct the plaintiff to serve a proposed form of Amended Technology & Construction List Statement by 5pm on 30 August 2019. 3. Direct the defendants to notify the plaintiff by 5pm on 5 September 2019 whether they oppose the plaintiff having leave to amend. 4. Stand the balance of the Notice of Motion, and the proceedings over to the motions list on 6 September 2019. ********** 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: 22 August 2019