UCPR: 171 strike out: no reasonable cause of action & Bryan v Maloney

Tyrrell & Anor v McNab Constructions Pty Ltd & Ors [2014] QCA 52

 

At first instance the statement of claim was struck out with leave to replead. The appellants argued the reasons for decision were insufficient in stating there was no reasonable cause of action or that it would delay or prejudice the fair trial of the proceedings. The respondents cross appealed leave been given to replead.

 

At the heart of the argument was whether Bryan v Maloney (1995) 182 CLR 609; [1995] HCA 17 is still good law and if the cause of action needed to include material facts of ‘vulnerability’.

 

Fraser JA (Gotterson JA and Daubney J concurring)

[6] The appellants’ claim was based only upon alleged negligence. An essential element of a claim in negligence is that the respondents owed the appellants a duty of care to protect the appellants against loss of the kind they sustained. In this case the allegation of a duty of a care was inevitably contentious. It was necessary for the appellants to plead material facts with reference to which it would be open at trial to find such a duty. The primary judge recited the respondents’ submission “that the facts pleaded are incapable in law of establishing a duty of care”, recorded that “the facts giving rise to ‘proximity’ [had] not been sufficiently pleaded”, and similarly made clear his view that facts giving rise to “vulnerability” had also not been pleaded sufficiently. The primary judge’s reference to the insufficiency of the particulars of the alleged latent defects was explained by his observations about the importance of allegations that a “particular defect” was not discoverable and how that was the case. Taken as a whole, the reasons clearly convey that the pleading did not disclose a reasonable cause of action because the pleaded facts were incapable of justifying a finding that the respondents owed the appellants the alleged duty of care. The reasons reveal “what was taken into account and in what manner”[2] and they explain the result in a way which made that clear to the public and in a way which enabled the appellants to frame meaningful grounds of appeal.[3] The reasons were not insufficient.

 

[7] The second ground of appeal contends that the primary judge erred in law in failing to find that the pleaded facts were capable of giving rise to a cause of action in negligence in accordance with Bryan v Maloney. This should be considered together with the third ground of appeal, which contends that the amended statement of claim should not have been struck out because the law was in a state of development. For that contention the appellants cited Project Company No 2 Pty Ltd v Cushway Blackford & Associates Pty Ltd.[4] The relevant law is in a state of development. I will proceed on the basis that this should have been taken into account.

 

[8] The appellants argued that Bryan v Maloney remained good law in relation to the duty of care pleaded in this case and that the pleaded allegations were sufficient to establish an arguable duty of care upon the basis of that decision. The respondents acknowledged that Bryan v Maloney had not been overruled “expressly” but cited authority for their proposition that the concept of proximity had been overtaken by the concept of “vulnerability” as “a key requirement” for a conclusion that a duty of care existed. They argued that the primary judge was correct in holding that the amended statement of claim did not support a duty of care upon the basis of Bryan v Maloney or upon the basis that the appellants were “vulnerable”.

 

[9] In Bryan v Maloney damage to a plaintiff’s house was caused by inadequacy in the house’s footings. That damage was of its nature not discoverable by reasonable inspection when the plaintiff inspected the house before purchasing it. It was not in fact discovered by the plaintiff at that time – the cracks and other defects which subsequently became apparent did not then exist.[5] The contract between the builder and the first owner of the house contained no relevant exclusion or limitation of liability and there was no competing or intervening negligence by the architect, local council, or any other person.[6] The plaintiff relied upon the builder: her evidence was that she “thought it would be built properly… so I bought it”.[7] Mason CJ, Deane and Gaudron JJ took those facts into account when they framed the question for decision as being “whether, under the law of negligence, a professional builder who constructs a house for the then owner of the land owes a prima facie duty to a subsequent owner of the house to exercise reasonable care to avoid the kind of foreseeable damage which Mrs Maloney sustained in the present case, that is to say, the diminution in value of the house when a latent and previously unknown defect in its footings or structure first becomes manifest.”[8] In holding that the builder owed a duty to the subsequent purchaser, their Honours observed that the relationship with respect to the particular kind of economic loss was “marked by the kind of assumption of responsibility and known reliance which is commonly present in the categories of case in which a relationship of proximity exists with respect to pure economic loss”, that ordinarily the builder of a house “undertakes the responsibility of erecting a structure on the basis that its footings are adequate to support it for a period during which it is likely that there will be one or more subsequent owners”, that a subsequent owner would “ordinarily have no greater, and will often have less, opportunity to inspect and test the footings of the house than the first owner”, that such a subsequent owner was likely to be unskilled in building matters, and that a builder should be aware that the subsequent owner “will be likely, if inadequacy of the footings has not become manifest, to assume that the house has been competently built and that the footings are in fact adequate”.[9] Like the relationship between the builder and the first owner, the relationship between the builder and a subsequent owner in relation to the particular kind of economic loss in question was characterised “by assumption of responsibility on the part of the builder and likely reliance on the part of the owner”.[10]

 

[10] The other member of the majority, Toohey J, referred to the similar considerations that: the house was built for the first owner under an ordinary commercial transaction; the builder was to build in accordance with standard building practice and to conform to the standard of a reasonably competent builder, and in particular to build a house with footings which were adequate; inadequacy in the footings might not manifest itself for some years; the builder was responsible for a structure, the defects in which might not readily be ascertained by a subsequent purchaser;[11] a subsequent purchaser had little opportunity to inspect and little experience and knowledge of a construction; and the builder already owed a duty to the first owner to build in a workmanlike manner.[12]

 

[11] The High Court has since rejected the approach adopted by the majority in Bryan v Maloney of using the concept of proximity to determine in a novel case whether there is a duty of care,[13] but unless and until the High Court overrules Bryan v Maloney the decision in that case remains binding. In Woolcock Street Investments Pty Ltd v CDG Pty Ltd McHugh J described the ratio decidendi of Bryan v Maloney as being “that the builder of a dwelling house owes a duty to a subsequent purchaser who relies on the skill of the builder to protect that person from reasonably foreseeable decreases in value resulting from latent defects in the house”.[14] I do not accept the appellants’ argument that this description is not consistent with the reasons of the majority in Woolcock Street Investments Pty Ltd v CDG Pty Ltd. Consistently with McHugh J’s description, the majority observed that the principles in Bryan v Maloney “depended upon considerations of assumption of responsibility, reliance, and proximity” and also, upon “equating the responsibilities which the builder owed to the first owner with those owed to a subsequent owner”.[15]

 

[12] Similarly, in Fangrove Pty Ltd v Tod Group Holdings Pty Ltd[16] the Chief Justice, with whose reasons McPherson JA and Chesterman J agreed, referred to “reliance or assumption of responsibility” as part of the approach which led to liability in Bryan v Maloney. Chesterman J, after observing that “the decision in Bryan should be confined to the particular circumstances which gave rise to liability in that case …”,[17] added that in Woollahra Municipal Council v Sved[18] Clarke JA summarised the factors underlying the decision in Bryan v Maloney and which were prerequisites for liability to be imposed on a builder to pay damages to a subsequent owner as compensation for the diminution in value of a building by reason of its defective construction:

 

“(i) builders ordinarily undertake the responsibility of erecting a structure on adequate foundations for periods in which the building will be owned by successive proprietors;

(ii) a subsequent owner will ordinarily have no realistic opportunity to discover the defects in the house prior to purchase and will rely on the builder to have built carefully;

(iii) the absence of any specific term in the contract bearing on the relationship of proximity such as limitations of liability or an obligation to build in accordance with the original owner’s specifications; and

(iv) the absence of any intervening negligence.” [19]

 

[13] It is not necessary here to expand upon this discussion of the authorities. The facts which the appellants’ amended statement of claim alleged for the duty of care were, in essence, (1) the appellants owned the property upon which one of the respondents had earlier built a dwelling house for one of the other respondents and (2) the building work included work which had not been approved by the local authority, “latent defects”, and work which did not comply with a specified building code. No combination of the allegations in the amended statement of claim was arguably capable of supporting a finding that the appellants relied upon the skill of the builder, or that the builder assumed responsibility for the building work to a subsequent purchaser, or that the alleged deficiencies in construction were not discoverable by the appellants using reasonable diligence before they purchased the property, or even that loss of the kind allegedly suffered by the appellants was reasonably foreseeable by any of the respondents. (The appellants argued that the last mentioned omission was remedied by the allegation summarised in (g) in paragraph 2 of these reasons, but the amended statement of claim did not rely upon that allegation as supportive of the alleged duty of care.)

 

 

Brisbane Barrister – David Cormack

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