Category: Case Reports

Owners Corporation 1 Plan No PS 707553K and Ors v Shangri-La Construction Pty Ltd (ACN 130 534 244) and Anor [2023] VCC 1473

CASE NOTE

Owners Corporation 1 Plan No PS 707553K and Ors v Shangri-La Construction Pty Ltd (ACN 130 534 244) and Anor [2023] VCC 1473 (24 August 2023)

County Court of Victoria

Judge McNamara

In Owners Corporation 1 Plan No PS 707553K and Ors v Shangri-La Construction Pty Ltd (ACN 130 534 244) and Anor [2023] VCC 1473 (24 August 2023), County Court of Victoria (Judge McNamara) was considering (for the first time) the State of Victoria’s subrogation right where an Owners Corporation claimed against a building company in respect of defective (combustible) cladding. In particular, the County Court was considering the liability of directors of such a building company and the “lack of knowledge or consent” defence.

Section 137F of the Building Act 1993 (Vic) (commencing on 19 November 2020) provides, so far as relevant, as follows:

“137F Subrogation

(1) This section applies if, after the commencement of section 54 of

the Cladding Safety Victoria Act 2020, Cladding Safety Victoria

pays an amount to an owner of a building (the payee) by way of a

grant of financial assistance in relation to cladding rectification

work on the building.

(2) When the financial assistance is paid to the payee, the Crown is

subrogated to all the rights and remedies of the payee against

any person in relation to the installation or use of any non

compliant or non-conforming external wall cladding product, or

other building work, that required the cladding rectification work to

be undertaken.

(3) If a right or remedy to which the Crown is subrogated under this

section is exercisable against an entity that is not an individual, it

is enforceable jointly and severally against the entity and the

people who were its officers at the time the act or omission that

gave rise to the right or remedy occurred.

(4) If it is proved that an act or omission by an entity occurred without

the knowledge or consent of an officer of the entity, a right or

remedy is not enforceable as provided by subsection (3) against

the officer in relation to the act or omission.

(5) The Crown may exercise its rights and remedies under this

section in its own name or in the name of the payee.

(6) If the Crown brings proceedings under this section in the name of

the payee, the Crown must indemnify the payee against any costs

awarded against the payee in the proceedings.

(7) If, in exercising its rights and remedies under this section, the

Crown recovers more money than the amount of financial

assistance paid to the payee, the Crown must pay the difference

to the payee after deducting costs incurred to recover the money.

(8) The payment of an amount referred to in subsection (1) in relation

to cladding rectification work does not affect any right or remedy

of the Crown by virtue of subsection (2) to recover from a person

in relation to the installation or use of any non compliant or nonconforming

external wall cladding product, or other building work,

that required the cladding rectification work to be undertaken.

(9) A reference in this section to the rights of a payee includes any

right the payee may have under section 86 of the Sentencing Act

1991.

(9A) Despite the amendment of this section by section 54 of the

Cladding Safety Victoria Act 2020, any right of subrogation

conferred on the Crown under this section as in force immediately

before its amendment continues to have effect.

(10) In this section—

officer—

(a) in relation to an entity that is a corporation—means an

officer of the corporation within the meaning of section 9

of the Corporations Act; or

(b) in relation to an entity that is neither an individual nor a

corporation—means an officer of the entity within the

meaning of section 9 of the Corporations Act.”

The key facts:

On 24 November 2014, a fire broke out at the Lacrosse building, a 21 storey apartment tower in Caulfield, Victoria. The fire was largely due to the external (combustible) cladding..
The Lacrosse building in Caulfield, Victoria, was constructed with Expanded Polystyrene Panels (EPS). (At the time that the Lacrosse building was designed, the Building Commissioned, since re-created as the VBA, did not preclude the use of EPS cladding systems. The current VBA Fact Sheet now records that, from 1 February 2021, the Minister of Planning has prohibited the use of EPS as external wall cladding note for this type of building.)
The Design and Construct Contract was entered into around 13 December 2013. The design decision to use RMAX Orange Board, a brand of EPS cladding material, was made around June 2014. The occupancy permit was issued by the building surveyor on 8 September 2015.
On 14 June 2017, the Grenfell 24 storey social housing block, due to external combustible cladding, resulted in 72 deaths.
In 2020, the Victorian government, following the report of a Victorian Cladding Taskforce, introduced amendments into the Building Act 1993 (Vic), creating the Cladding Scheme, which came into operation on 19 November 2020).
In 2019, the Owners Corporation commenced an action in VCAT against the Builder. In 2022, the State of Victoria was joined as an Applicant, and the director of the Builder was joined as a respondent. In addition, the VCAT action was struck out and referred to the County Court. When the action came on for hearing in the County Court, the only active parties were the State of Victoria (claiming pursuant to Section 137F) and the director. (The Builder was in liquidation.)
The claim was made pursuant to the Domestic Building Contracts Act 1995 (Vic) Section 8 statutory warranties, on the grounds that the cladding was not non-combustible as required by the Building Code of Australia.
The Builder’s director claimed, among other things, that he did not know that RMAX Orange Board was a non-compliant cladding board, accordingly, on a proper interpretation of Section 137(4)

His Honour said:

105 The evidence established, and it was not in dispute, that the use of RMAX

Orange Board – a form of EPS – was known to Mr Naqebullah, since he was in

charge of Shangri-La’s building operations. He knew that this material was being

employed, and he consented to it. Dr Wolff contended that the ss(4) defence

was available to Mr Naqebullah if he could be shown to have been ignorant of

what now seems to be known and accepted by everyone: namely, that the

“Alternative Solution” authorised or purportedly authorised by the building permit

for Stage 2 in its original or varied form, and approved in the fire engineering

briefs and report, did not achieve the performance requirements under the

Building Code of Australia 2010. Likewise, it was Mr Naqebullah’s case that, not

being aware of the unsuitability of EPS or external wall cladding, he was

unaware that the material used by Shangri-La under his direction was not

suitable material for external cladding, and that an apartment house clad by this

combustible cladding was not suitable for its purpose.

106 The State contended, and I did not understand Dr Wolff to deny, that the form of

ss(4), and, one may think, the fact that matters of knowledge and consent are

peculiarly within Mr Naqebullah’s knowledge and not within the knowledge of the

plaintiff owners or the State, meant that the burden of proof on this issue rested

with Mr Naqebullah.

107 Mr Naqebullah’s written and oral evidence was to the effect that he was at

relevant times in 2014 and 2015 ignorant that there was any problem with the

use of EPS, and he had his company employ it in construction because it was

“green-lighted” by the relevant building surveyor and by the fire engineer. He

said he was also influenced by what transpired at the design meeting in June

2014 where, as noted above, the discussion between the attendees was as to

the proper brand of EPS to use, and the consensus was that the product RMAX

Orange, the product which was in fact fitted, was the one to use. He said he was

also influenced by an email from the fire engineer indicating the suitability of

RMAX Orange by email dated 9 April 2014, albeit with respect to a different

development at 58 Queens Parade, Fitzroy (CB 5051).

108 Whilst a number of comments were made by Ms Crafti and Mr Chaile, and a

number of attacks in cross-examination were mounted as to these matters, it was

not squarely put to Mr Naqebullah that he was lying in so far as he had given

such evidence; nor could it be said that this evidence was other than probative

as to his level of knowledge at material times. In those circumstances, I accept

Mr Naqebullah’s evidence that he was unaware that EPS or RMAX Orange was

problematic or inappropriate in its use as external cladding on the building at

Hawthorn Road, and that he became aware as to this problematic nature only in

2016 or 2017.

109 The question then becomes whether the knowledge which Mr Naqebullah clearly

did possess, that EPS was being used as external cladding on the building at

Hawthorn Road, is sufficient to negative the defence he claims under ss(4) of

s137F without further proof that he knew that EPS was problematic and noncompliant

in that use.

….

113 Dr Wolff said that the subject matter of the “knowledge” or lack of knowledge

required for a consideration of the ss(4) defence was the relevant “act or

omission by an entity [viz Shangri-La]”. This, according to Dr Wolff, referred one

back to ss(2), identifying the act or omission which might impose liability on the

“entity”, in this case Shangri-La, as being “the installation or use of any noncompliant

or non-conforming external wall product … that required the cladding

rectification work to be undertaken”. He noted that the Act includes a definition

of cladding rectification work in s3 which is in the following terms:

“cladding rectification work means—

(a) building work in connection with, or otherwise related to, a product

or material that is, or could be, a non-compliant or non-conforming

external wall cladding product; or

(b) work of a type specified in a notice under section 185I of the Local

Government Act 1989”.

114 Dr Wolff said that this definition incorporated within itself a requirement that the

relevant material [here EPS] be “non-compliant or non-conforming”.

115 In a broad sense, Dr Wolff’s expatiation on the statutory provisions is plainly

correct. It does not, however, provide an answer to the question posed. As

previously noted, EPS is “non-compliant or non-conforming”. The textual

analysis leaves unanswered the question whether knowing that what is

admittedly a non-compliant or non-conforming material to be used amounts to

sufficient knowledge to exclude the ss(4) defence, whether one knows that the

material is non-compliant or non-conforming or not.

116 I referred the parties to a decision of the High Court of Australia in Yorke v Lucas

(1985) 158 CLR 661 (“Yorke’s case”). This case concerned the cause of action

for misleading or deceptive conduct, which at that time was constituted by s52 of

the Trade Practices Act 1974. Section 75B of that Act extended liability from a

corporation which has engaged in misleading or deceptive conduct to persons

who had aided, abetted, counselled or procured the contravention; induced the

contravention, whether by threats, promises or otherwise; or had “been in any

way, directly or indirectly, knowingly concerned in, or party to, the contravention”.

These provisions are now to be found in the Australian Consumer Law. The

counterpart of s52 of the Trade Practices Act is s18 of the Code.

117 Earlier High Court authority had established that a corporation which represented

to another person something which was misleading or deceptive was to be

regarded as having contravened s52 without any proof that the corporation knew

or ought to have known that what it represented was misleading or deceptive.

That is, the primary liability attaching to the corporation was absolute, in the

same way as the liability attaching to Shangri-La here – subject to the statutory

stay of proceeding – was strict and absolute in accordance with the warranties

implied by s8 of the Domestic Building Contracts Act.

118 Mr Lucas, a director of the relevant corporation, was found at trial not to be liable

as someone knowingly concerned in his company’s contravention because,

according to the summary in the joint judgment in the High Court of Mason ACJ,

Wilson, Deane and Dawson JJ:

“he [Mr Lucas] was insufficiently aware of the relevant facts for him to be

involved in the contravention within the meaning of ss75B and 82 of the

Act.” ((1985) 158 CLR 661, 665)

119 An appeal to the Full Court of the Federal Court against the dismissal of the

claim against Lucas was unsuccessful, and the matter then proceeded to the

High Court. The High Court affirmed the decisions below. According to the joint

judgment:

“A contravention of s.52 involves conduct which is misleading or

deceptive or likely to mislead or deceive and the conduct relied upon in

this case consisted of the making of false representations. Whilst Lucas

was aware of the representations – indeed they were made by him – he

had no knowledge of their falsity and could not for that reason be said to

have intentionally participated in the contravention.” ((1985) 158 CLR

661, 667−8)

120 Their Honours said later in their judgment:

“There can be no question that a person cannot be knowingly concerned

in a contravention unless he has knowledge of the essential facts

constituting the contravention.” ((1985) 158 CLR 661, 670)

121 Brennan J said:

“When the conduct constituting the contravention [of s52] is the making of

a false representation, it is immaterial that the corporation did not know

that the representation was false when it was made. The essential facts

to be established in sheeting home liability to a corporation under s.52

include the making of the representation and the falsity of the

representation but not the corporation’s knowledge of the falsity.” ((1985)

158 CLR 661, 675−6)

122 His Honour said:

“The operation of s.75B(a) in conjunction with s.52 may be incongruous,

for s.52 throws a strict liability on a corporation, but s.75B(a) does not

extend liability for a s.52 contravention to a person who procures the

corporation to engage in contravening conduct if that person is honestly

ignorant of the circumstances that give that conduct a contravening

character.” ((1985) 158 CLR 661, 677)

123 As to persons being knowingly concerned in the contravention, his Honour said

that he could not read the words “knowingly concerned in” as being the

equivalent of “unknowingly concerned in”. (Ibid)

124 Dr Wolff said in the course of his closing submission that “there were 1137 cases

decided” mentioning Yorke v Lucas “as of yesterday”: viz, 16 August 2023. He

continued:

“I have not gone through all of them, but when you read them, you always

see a reluctance by the various judicial authorities to accept something

that didn’t have some factual basis.” (T663, L26−30)

125 I have not read the 1,137 cases referred to by Dr Wolff.

….

137 The class of person who could be described as “officers” of the companies

involved in the construction of the buildings which required remediation is very

wide indeed. The Building Act “picks up” the definition of “officer” from the

Commonwealth Corporations Act. The concept of “officer” in that lengthy

definition specifically includes both company directors and secretaries as well as

persons who make “or participate in making decisions that affect the whole or a

substantial part of the business of the corporation”. It can therefore extend to

senior executives who do not hold positions on the board. We may consider that

in creating the defence established by ss(4) of s137F of the Building Act,

Parliament sought to immunise a number of obvious classes of “officers” from

liability. For instance:

(a) non-executive directors such as a building company’s solicitor or

accountant who sit on the board to bring their legal or accounting expertise

to the table;

(b) company secretaries who devote their time to office administration, keeping

or supervising accounts or accounting systems, payroll issues and so forth;

(c) executive directors or non-director executives involved in non-building

aspects of a company’s operations: for instance, a marketing manager or

someone devoted entirely to the raising of finance;

(d) executive directors or senior executives tasked to manage or supervise

particular projects which are not affected by the cladding issue.

138 There may be other obvious classes of officer whom Parliament intended to

exclude.

139 What remains when these obvious classes are excluded? The residuum, whom

on the face of it Parliament seemed to seek to subject to liability for the cladding

fiasco, would be directors and managers with building qualifications of one sort

or another, engaged in managing a building company’s building operation,

including in particular building projects where non-compliant cladding was used.

All of these “officers” could, one supposes, establish, as plausibly as Mr

Naqebullah has sought to do in this proceeding, that whilst they are and were

generally expert in building matters, they were not expert in fire engineering. The

market was using what are now seen as non-compliant combustible materials for

cladding (as testified by the figures quoted by Dr Wolff). They relied on the

expertise of fire engineers and relevant building surveyors. This line of defence

could generally be advanced, one would suppose, by the whole of this residual

class of persons, unless perhaps one or more of them was in fact a fire engineer

himself or herself.

140 The result of Dr Wolff’s proposed construction of the ss(4) defence is that officer

liability under s137F would be a mere brutum fulmen, which cannot be what

Parliament intended. A document described as “Specifications & Finishes

Schedule”, stamped by the relevant building surveyor as “APPROVED”, in the

“External” section referred at Line 1.3 to “Styro Foam Rendered” (CB 6918). On

the basis of the judgment of Flick J in Parker’s case and the considerations just

mentioned, I conclude that Mr Naqebullah’s “knowledge” of this cladding issue,

namely that RMAX was being used on the Hawthorn Road site, is sufficient to

exclude him from the benefit of the ss(4) defence. This construction of that

defence is the preferable one, because it advances the purposes of the Cladding

Safety Victoria Act 2020; whereas the construction advanced by Dr Wolff, for the

reasons explained, does not.

….

His Honour concluded that the Builder’s director “knowledge” of this cladding issue, namely that RMAX was being used on the Hawthorn Road site, is sufficient to exclude him from the benefit of the Section 137F(4) defence.

WTE Co-generation and Visy Energy Pty Ltd v RCR Energy Pty Ltd and RCR Tomlinson Ltd [2013] VSC 314

In UCI v Alex Rasmussenvar linkvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} = document.getElementById(‘link2736’);link.onclick = functionvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} (){documentvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} .location = link.getAttribute(‘href’);} &ampvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} ; Denmark NOC &SF, the Court of Arbitration for Sport wasvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} reviewing the Demark NOC and Sports Federationvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} ’s decision in favour of cyclist, Alex Rasmussen, in relation to a claimed failure to comply with location notification obligations. The WADA Rules (and the Denmark Association rules) make a combination of three missed tests and/or filing failures within 18 months constitutes an anti-doping rule violation. The Rules require athletes to provide/keep updated, their “whereabouts” for the purpose of out-of-competition testing. Rasmussen had failed to keep his whereabouts updated in in February 2010, duringvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 3^rd quarter 2010, and (this was a disputed breach) on 28 Aprilvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 2011. In relation to the 28 April 2011 filingvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} failure, the breach had not been notified by UCI to Rasmussen within 14var link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} days, as required under the IST (International Testing Standard). The Tribunal concluded that the UCI failure 2011 to notify Rasmussen within 14 days did not prevent UCI from recording it as a missed test, on a number of grounds, including that

a departure from the IST can invalidate the finding of an anti-doping rule violation only invar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} the event that the particular anti-doping rule violation had been caused by the departure itself. Thevar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} Tribunal reduced thevar linkvar link = documentvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} .getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} period of suspension form 2 years to 18 months (relating to degree of guilt), and determined that the suspension start from October 2011, when ineligibility was first imposed.

CH2M Hill v State of NSW [2012] NSWSC 963

In UCI v Alex Rasmussenvar linkvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} = document.getElementById(‘link2736’);link.onclick = functionvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} (){documentvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} .location = link.getAttribute(‘href’);} &ampvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} ; Denmark NOC &SF, the Court of Arbitration for Sport wasvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} reviewing the Demark NOC and Sports Federationvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} ’s decision in favour of cyclist, Alex Rasmussen, in relation to a claimed failure to comply with location notification obligations. The WADA Rules (and the Denmark Association rules) make a combination of three missed tests and/or filing failures within 18 months constitutes an anti-doping rule violation. The Rules require athletes to provide/keep updated, their “whereabouts” for the purpose of out-of-competition testing. Rasmussen had failed to keep his whereabouts updated in in February 2010, duringvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 3^rd quarter 2010, and (this was a disputed breach) on 28 Aprilvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 2011. In relation to the 28 April 2011 filing failure, the breach had not been notified by UCI to Rasmussen within 14var link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} days, as required under the IST (International Testing Standard). The Tribunal concluded that the UCI failure 2011 to notify Rasmussen within 14 days did not prevent UCI from recording it as a missed test, on a number of grounds, including that

Plenary Research Pty Ltd v Biosciences Research Centre Pty Ltd [2013] VSCA 217

In UCI v Alex Rasmussenvar linkvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} = document.getElementById(‘link2736’);link.onclick = function(){documentvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} .location = link.getAttribute(‘href’);} &ampvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} ; Denmark NOC &SF, the Court of Arbitration for Sport wasvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} reviewing the Demark NOC and Sports Federation’s decision in favour of cyclist, Alex Rasmussen, in relation to a claimed failure to comply with location notification obligations. The WADA Rules (and the Denmark Association rules) make a combination of three missed tests and/or filing failures within 18 months constitutes an anti-doping rule violation. The Rules require athletes to provide/keep updated, their “whereabouts” for the purpose of out-of-competition testing. Rasmussen had failed to keep his whereabouts updated in in February 2010, duringvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 3^rd quarter 2010, and (this was a disputed breach) on 28 Aprilvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 2011. In relation to the 28 April 2011 filing failure, the breach had not been notified by UCI to Rasmussen within 14var link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} days, as required under the IST (International Testing Standard). The Tribunal concluded that the UCI failure 2011 to notify Rasmussen within 14 days did not prevent UCI from recording it as a missed test, on a number of grounds, including that

Biosciences Research Centre P/L v Plenary Research P/L

In UCI v Alex Rasmussenvar linkvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} & Denmark NOC &SF, the Court of Arbitration for Sport wasvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} reviewing the Demark NOC and Sports Federation’s decision in favour of cyclist, Alex Rasmussen, in relation to a claimed failure to comply with location notification obligations. The WADA Rules (and the Denmark Association rules) make a combination of three missed tests and/or filing failures within 18 months constitutes an anti-doping rule violation. The Rules require athletes to provide/keep updated, their “whereabouts” for the purpose of out-of-competition testing. Rasmussen had failed to keep his whereabouts updated in in February 2010, duringvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 3^rd quarter 2010, and (this was a disputed breach) on 28 April 2011. In relation to the 28 April 2011 filing failure, the breach had not been notified by UCI to Rasmussen within 14var link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} days, as required under the IST (International Testing Standard). The Tribunal concluded that the UCI failure 2011 to notify Rasmussen within 14 days did not prevent UCI from recording it as a missed test, on a number of grounds, including that

a departure from the IST can invalidate the finding of an anti-doping rule violation only invar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} the event that the particular anti-doping rule violation had been caused by the departure itself. Thevar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} Tribunal reduced thevar linkvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} period of suspension form 2 years to 18 months (relating to degree of guilt), and determined that the suspension start from October 2011, when ineligibility was first imposed.

Liao Hui v. International Weightlifting Federation (IWF)

In UCI v Alex Rasmussenvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} & Denmark NOC &SF, the Court of Arbitration for Sport wasvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} reviewing the Demark NOC and Sports Federation’s decision in favour of cyclist, Alex Rasmussen, in relation to a claimed failure to comply with location notification obligations. The WADA Rules (and the Denmark Association rules) make a combination of three missed tests and/or filing failures within 18 months constitutes an anti-doping rule violation. The Rules require athletes to provide/keep updated, their “whereabouts” for the purpose of out-of-competition testing. Rasmussen had failed to keep his whereabouts updated in in February 2010, duringvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 3^rd quarter 2010, and (this was a disputed breach) on 28 April 2011. In relation to the 28 April 2011 filing failure, the breach had not been notified by UCI to Rasmussen within 14var link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} days, as required under the IST (International Testing Standard). The Tribunal concluded that the UCI failure 2011 to notify Rasmussen within 14 days did not prevent UCI from recording it as a missed test, on a number of grounds, including that

a departure from the IST can invalidate the finding of an anti-doping rule violation only invar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} the event that the particular anti-doping rule violation had been caused by the departure itself. Thevar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} Tribunal reduced thevar linkvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} period of suspension form 2 years to 18 months (relating to degree of guilt), and determined that the suspension start from October 2011, when ineligibility was first imposed.

Forrest v Australian Securities and Investments Commission [2012] HCA 39 (2 October 2012)

In UCI v Alex Rasmussenvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} & Denmark NOC &SF, the Court of Arbitration for Sport was reviewing the Demark NOC and Sports Federation’s decision in favour of cyclist, Alex Rasmussen, in relation to a claimed failure to comply with location notification obligations. The WADA Rules (and the Denmark Association rules) make a combination of three missed tests and/or filing failures within 18 months constitutes an anti-doping rule violation. The Rules require athletes to provide/keep updated, their “whereabouts” for the purpose of out-of-competition testing. Rasmussen had failed to keep his whereabouts updated in in February 2010, duringvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 3^rd quarter 2010, and (this was a disputed breach) on 28 April 2011. In relation to the 28 April 2011 filing failure, the breach had not been notified by UCI to Rasmussen within 14 days, as required under the IST (International Testing Standard). The Tribunal concluded that the UCI failure 2011 to notify Rasmussen within 14 days did not prevent UCI from recording it as a missed test, on a number of grounds, including that

500 Burwood Highway Pty Ltd v Australian Unity Limited & anor [2012] VSC 596

In UCI v Alex Rasmussenvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} & Denmark NOC &SF, the Court of Arbitration for Sport was reviewing the Demark NOC and Sports Federation’s decision in favour of cyclist, Alex Rasmussen, in relation to a claimed failure to comply with location notification obligations. The WADA Rules (and the Denmark Association rules) make a combination of three missed tests and/or filing failures within 18 months constitutes an anti-doping rule violation. The Rules require athletes to provide/keep updated, their “whereabouts” for the purpose of out-of-competition testing. Rasmussen had failed to keep his whereabouts updated in in February 2010, duringvar link = document.getElementById(‘link2736’);link.onclick = function(){document.location = link.getAttribute(‘href’);} 3^rd quarter 2010, and (this was a disputed breach) on 28 April 2011. In relation to the 28 April 2011 filing failure, the breach had not been notified by UCI to Rasmussen within 14 days, as required under the IST (International Testing Standard). The Tribunal concluded that the UCI failure 2011 to notify Rasmussen within 14 days did not prevent UCI from recording it as a missed test, on a number of grounds, including that

a departure from the IST can invalidate the finding of an anti-doping rule violation only in the event that the particular anti-doping rule violation had been caused by the departure itself. The Tribunal reduced the period of suspension form 2 years to 18 months (relating to degree of guilt), and determined that the suspension start from October 2011, when ineligibility was first imposed.

Mann v Paterson Constructions Pty Ltd [2018] VSC 119

TX Australia Pty Limited v Broadcast Australia Pty Limited [2012] NSWSC 4 (16 January 2012)

The Queen v GW [2016] HCA 6

R v Independent Broad-based Anti-corruption Commissioner [2016] HCA 8

Moreton Bay Regional Council v Mekpine Pty Ltd [2016] HCA 7

Gee Dee Nominees Pty Ltd v Ecosse Property Holdings Pty Ltd [2016] VSCA 23

Wesfarmers Ltd v Lloyd [2016] VSCA 41

W E Pickering Nominees Pty Ltd v Pickering [2016] VSC 71

Lydgate (a Pseudonym) v R (No 2) [2016] VSCA 33

Gutnick & Anor v Indian Farmers Fertiliser Cooperative Ltd & Anor [2016] VSCA 5

Re Logan [2016] FamCA 87

DPP v Vibro-Pile (Aust) Pty Ltd [2016] VSCA 55

Zaburoni v The Queen [2016] HCA 12

Commercial Industrial Construction Group Pty Ltd v King Construction Group Pty Ltd & Anor [2015] VSC 426

Facade Treatment Engineering v Brookfield Multiplex [2015] VSC 41

Lipman Pty Limited v Emergency Services Superannuation Board [2010] NSWSC 710

Dargan Financial Pty Ltd ATF the Dargan Financial Discretionary Trust (trading under “Home Loan Experts”) v Nassif Isaac [2017] NSWSC 1077

Mt Lewis Estate Pty Ltd v Metricon Homes Pty Ltd [2017] NSWSC 1121

Lance Armstrong: The next of the non-analytical positive cases?

The attached letters between USADA and Lance Armstrong’s legal team are the first formal step in the anti-doping prosecution by USADA. The process will be, potentially, the most important case to date due to the athlete involved, but equally, the most important to date “non-analytical positive” (prosecution of an anti-doping violation in the absence of a failed test).

Lance’s response to USADA’s charging letter, the initial step prior to the review board process (an athlete protection mechanism designed to require USADA to establish a sufficient basis for the process to proceed to a hearing) was generally as follows:
1. USADA fails to disclose the proposed witnesses or their evidence, Armstrong is unable to know/answer the charges made against him. USADA is treating the review board as a rubber stamp, effectively seeking to deny Armstrong the protection of that review board process.
2. USADA has obtained evidence wrongly, in trading concessions/reduced penalties, etc, (the “jailhouse snitch”argument), for evidence, and in obtaining evidence leaked from the now-discontinued grand jury process.
3. The only 2 identifiable claims against Armstrong (the Swiss lab tests from 2001 where the lab director has since denied the tests were sufficient to found a violation, and USADA providing, raw data only, no expert analysis, 2009/2010 blood test results, which show no abnormality and which were published on Armstrong’s own website at the time as proof of the opposite) have no merit.
4. Most of the material is outside the 8 year limitation period.

USADA, conversely, says that it has ten-plus witnesses, who will say that Armstrong doped, trafficked, and participated in a conspiracy.

The process is likely, in my view, to showcase the critical justice issues that are thrown up in this key area of “non-analytical positives”. The likelihood is that Lance will challenge, in the USA courts, the level of acceptable proof against an athlete charged on the basis of evidence, not including a failed test, and the USADA/Court of Arbitration for Sport regime generally.

About time.

John McMullan

Dr Bruce Malcolm Reid v Australian Football League

Doc Reid re-argues Lance’s Legal Argument – Time for the Courts to Intervene?

In Dr Bruce Malcolm Reid v Australian Football League, Supreme Court of Victoria, Proceeding No SCI 2013 04575, the universally respected Essendon Football Club doctor, Dr “Doc” Reid, is arguing for declarations and an injunction to restrain the AFL from hearing the disciplinary charges against him, and asking that such charges be heard by an independent arbiter.

The charges against Dr Reid are limited to that he:

“was part of the decision-making processes of the Club in respect of the development and implementation of a scientifically pioneering program relating to the administration of supplements to its players, knowing that:

(a) the program was to push the legal limit;

(b) the program involved innovative supplement practices and compounds;

(d) the program’s ftness strategy and use of supplements varied sharply from prior practices at the Club;

(e) the program involved injecting players with an unprecedented frequency.”
(Particulars Paragraph 3)

“made no direct inquires of ASADA in relation to whether AOD-9604 was a prohibited substance”;
(Particulars Paragraph 21(b))
was a person named in an Essendon protocol concerning the use of supplements circulated on 15 January 2012;
(Particulars Paragraph 17)
failed to take adequate steps to ensure that the Protocol was properly implemented after becoming aware that substances had been administered that had not been approved.
(Particulars Paragraph 32-35)

In Dr Reid’s case, on a careful reading of the charges, even if correct, (the charges are 100% contested), at worst it might be said that Dr Reid was not sufficiently interventionist.

There is zero suggestion in the charges (or anywhere else) that Dr Reid ever administered, or supported the use of administering, any performance enhancing drug. (In fact, Dr Reid’s letter dated 17 January 2012, and James Hird’s text message on 30 January 2012, suggest that Dr Reid positively opposed any such practice.)

Dr Reid makes the usual athlete/accused argument, ie that the sports establishment hearing structure is weighted against the athlete/accused, and that he is denied a fair hearing. The AFL runs the usual sports establishment defence, ie that it is simply a matter of contract, to which the athlete/accused previously committed, and that the sports establishment is the body best equipped to deal with such claims.

These arguments are particularly key given that Dr Reid is , like all of the category of athletes who have been charged with performing enhancing drugs charge , on the basis of evidence rather than a failed drug test (collectively called “non-analytical positives”), charged on as yet un-substantiated evidence. In their case, though the punishment in relation to the performing enhancing drug charges is no less than an athlete accused who fails a drug test, and though the mere fact of being charged will usually disrupt or end their sports career, and some instances, including Dr Reid, may have even worse consequences, the accused has none of the enduring protections of a criminal accused.

In substance, the non-analytical positive athlete/accused usually complains that they are being denied a fair hearing (in the USA, denied the Constitutional right to “due process”). There seems to be substantial strength in their complaints.

The Legal Arguments:

Dr Reid has previously made the following legal arguments to the AFL Commission in relation to the request for an independent arbiter to be appointed:

1. The AFL Commission is not a body that is equipped to provide a fair hearing, for the following reasons:

a. the complexity of the case, including (complex) legal issues;

b. the case will be of lengthy duration;

c. because of a and b, and because the Charge may affect Dr Reid’s professional reputation, the case therefore requires a full-time arbiter;

d. reduced prospect of error and appeal if heard by an appropriately qualified person;

e. less likelihood of interlocutory applications to the Supreme Court in the running of the case;

f. issues of relevance and publicity in this case require a an arbiter less likely to be affected by extrinsic factors;

g. Dr Reid’s legal case includes highly perjorative submissions about the AFL;

h. A case involving a medical professional’s reputation is in a special category;

i. Dr Reid cannot get a just hearing from the AFL Commission, after it has involved itself in the approval of the settlements with the other defendants.

2. Bias, both actual and apprehended, on the part of the AFL Commission.

In this proceeding, Dr Reid asserts that the AFL Commission cannot hear the charges against him in an unbiased manner because of:

Conflict

a. The charges raise factual matters already considered and determined by the AFL Commission.

b. The determination of the charges raises questions about conduct by the AFL.

Comments

a. “a most unfortunate matter”

b. “it might be a lonely day” (for Dr Reid);

c. “We can’t let – no matter how clever they were in disguising what they were doing, we can’t ever let a group of people take hold of a player group in the way that this group did. That must never happen again”

d. “responsibility, I think, has not been easy to assign, but I think it has been reasonably assigned”

e. “frankly, what happened [at Essendon] is probably the worst thing that has happened in a footy club”

The AFL has not yet delivered its arguments. We can guess that those arguments will include:

that athletes and support personnel sign up to the AFL rules, as a matter of contract they commit to the process set out in those rules;
that the AFL Commission is well-equipped to adjudicate on this type of matter, because of its experience and expertise in this area;
the courts are not well-equipped to deal with the particular issues relating to sports enhancing performance drugs.

USA Decisions on this Type of Claim:

These arguments were, in fact, recently re-run in the USA by perhaps our most famous non-analytical positive accused athlete, Lance Armstrong. On 23 August 2012, Judge Sam Sparks in the US District Court Western District of Texas (Austin) of the USA Federal Court, dismissed Lance Armstrong’s suit asking for an injunction to restrain USADA from proceeding against him. The Judge found:

Armstrong’s due process claims lacked merit.
The court lacked jurisdiction over Armstrong’s remaining claims, or alternatively declined to grant equitable relief.

Firstly, Judge Sparks concluded that the due process complaints lacked merit, and that Lance’s challenges were anticipating unfairness rather than Lance having been subject to actual unfairness. Lance’s specific due claims had included:

that he was not provided an adequate charging document;
that he had no guarantee of a hearing before CAS;
that he had no right cross-examine/confront witnesses against him;
that he had no right to an impartial panel;
that he had no right to disclosure of exculpatory evidence;
that he had no right to disclosure of cooperation agreements or inducements provided by USADA;
that he had no right to obtain investigative witness statements;
that he had no right to obtain full disclosure of laboratory analyses or an impartial assessment of their accuracy;
that he had no right to judicial review of the arbitrators’ decision by a US court;

Judge Sparks concluded that each of these complaints were based on speculation of bias (rather than actual bias).

Judge Sparks said:

“Like the Supreme Court, this Court declines to assume either the pool of potential arbitrators, or the ultimate arbitral panel itself, will be unwilling or unable to render conscientious decision based on the evidence before it.”

Judge Sparks reasoned that Armstrong was not in danger of irreparable harm if the USADA jurisdiction issue, itself, was to be determined by the arbitrators. Further, any finding by the arbitration panel might, itself, be overturned by CAS. “In short, any harm Armstrong might suffer is, at this point, entirely speculative.”

His Honour was further confirmed in his view in that Lance had not (as yet) exhausted the avenues open to him:

“Further, Armstrong has ample appellate avenues open to him, first to the Court of Arbitration for Sport … where he is entitled to de novo review, and then to the courts of Switzerland, if he so elects.”

Judge Sparks, however, dismissed the suit without prejudice, saying that Lance could come back if and when things developed (ie if and when he was in fact subjected to actual unfairness rather than anticipated unfairness).

Secondly, Judge Sparks concluded that the Federal Court had no jurisdiction under the USA Federal Amateur Sports Act, requiring such proceedings to be referred to arbitration. His Honour noted that the Sports Act had (“whether or not this was a good choice is, of course, debatable”) determined that sports eligibility questions would be decided through arbitration rather than federal lawsuits.

His Honour referred to the Mary Decker Slaney case, noting that the court had said there:

“… when it comes to challenging the eligibility determination of the USOC, only a very specific claim will avoid the impediment to subject matter jurisdiction that (the Sports Act) poses”.

The Mary Decker Slaney court had quoted the Tonia Harding case, where an Oregon District Court had said:

“There the court cautioned that ….

…. courts should rightly hesitate before intervening in disciplinary hearings held by private associations …. Intervention is appropriate only in the most extraordinary circumstances, where the association has clearly breached its own rules, that breach will imminently result in serious and irreparable harm to the plaintiff, and the plaintiff has exhausted all remedies.

Yet, while carving out this limited exception to the preemption created by the Amateur Sports Act, the opinion forewarned that while examining whether internal rules had been complied with, the courts ‘should not intervene in the merits of the underlying dispute.”

(emphasis added)

Finally, Judge Sparks determined that, even apart from his decision on jurisdiction, if he had found that he had such jurisdiction he would have declined an equitable remedy, firstly because, for the above reasons, Armstrong was not in danger of irreparable harm, secondly because , as a matter of international comity, the court declined to: “circumvent the longstanding system of international arbitration in Olympic sports by unilaterally enjoining that system’s operation”.

As events turned out, Lance Armstrong ultimately chose not to challenge the sports drug charges, and later again, publicly admitted that the charges were true.

Conclusions

There can be no doubt that this case is serious. Doc Reid is universally regarded as having a brilliant, long, respected, and personally loved, life in football, faces potential public shame, the potential loss of his medical licence, and an unhappy end to that long career.

Yet Doc Reid, in the legal system, must run the same legal arguments that ultimately failed Lance Armstrong.

The Supreme Court will now determine this crucially important issue.

Can’t wait.

Glenvill Projects Pty Ltd v North Melbourne Pty Ltd & Taylor [2013] VSC 717

In Glenvill Projects Pty Ltd v North Melbourne Pty Ltd & Taylor [2013] VSC 717 (Vickery J), Justice Vickery (the Judge in Charge of the Supreme Court Technology, Engineering and Construction List) was considering a challenge to a decision of an expert appointed under an expert determination clause in a residential building contract.

His Honour referred to 500 Burwood Highway v Australian Unity & Ors in which His Honour had analysed the role of a contractually appointed expert, and the basis upon which an expert determination might be invalidated following judicial intervention. His Honour had said in 500 Burwood Highway:

…. there is no procedural code for expert determination, in contradistinction to arbitration. The activities of an expert are subject to little control by the court, save as to jurisdiction or departure from the mandate given. Unless the parties specify the procedure, the expert determines how he will proceed; it is rare for what might be perceived as procedural unfairness in an arbitration to give rise to a ground for challenge to the procedure adopted by an expert ….
For these reasons, unless required by the contract in question, the parties have no entitlement to insist that the expert adopt any particular procedure; or that the appointed expert seek their approval to the proposed determination; or that they are given any hearing or facility to provide input into the process. An expert is not obliged to afford to the parties procedural fairness in the manner required of a court or arbitration in a curial context. A certifying expert is not under an obligation to provide procedural fairness or natural justice in the absence of an express contractual provision, and there is none in the present case …. How the task is undertaken is in the hands of the expert, subject to anything to the contrary in the contract pursuant to which the appointment was made.
This result is in part the product of the contract and what is to be gleaned from it as to the intention of the parties. When the parties appoint an expert, they usually do so because they agree to place reliance on the expert’s skill and judgment. They implicitly agree to accept and be bound by the determination. In the usual case, provided the decision is arrived at honestly and in good faith, the parties will not be able to re-open it and will be bound by the result.
It is also in part the product of a particular body of expert experience, learning, skill and judgment which the parties wish to apply to the problem to be dealt with. This is to be applied in a manner which is untrammelled by procedural considerations, so that the specialist skills and insights of the expert can be freely applied to the issue.
Finally, considerations of commercial utility are likely to be relevant factors. Efficiency, the production of a speedy and authoritative outcome and the elimination of the expense of a more elaborate procedure, undoubtedly play a part in parties selecting the contractual process of expert determination.
Mistake or error in the process of the determination of the appointed expert will not invalidate a decision. However, if the expert asks the wrong question or misconceives the function of the appointment, the task required to be performed by the contract will not have been fulfilled. In this event, the determination will be exposed to being set aside.
Parties to a contract who, by the terms of that contract, agree to submit a question to an independent expert, are bound by the determination of that expert acting honestly and in good faith.

His Honour reasoned further in relation to the construction of the expert engagement contract:

An expert is appointed by contract to make an expert determination in respect of specific matters which may arise during the course of a commercial relationship. An expert, in making a determination, is not obligated to abide by the rules of procedural fairness in the manner required of a court or an arbitration in a curial context. The expert’s obligations with regard to procedural fairness, or natural justice …. , are defined by the content of the express contractual agreement between the parties comprised in the Expert Engagement Contract, which in this case includes the terms of the IAMA Rules.
The manner in which the task of making the determination in question is undertaken is in the hands of the expert, subject to anything to the contrary in the contract which governs the appointment of the expert and in the IAMA Rules.
The result which is arrived at by the expert – the determination, in this case – is thus ultimately the product of the contract in the full sense of the word, as properly construed in accordance with the usual approach to the construction of commercial contracts.
The approach was recently considered in ICM Investments Pty Ltd v San Miguel Corporation & Ors [No 2]). Where it was observed that the applicable principle is often stated in terms of a necessity to construe commercial agreements so as to accord with ‘business commonsense’ or ‘commercial reality’.
As Santow J said in Spunwill Pty Ltd v BAB Pty Ltd, in construing a written document, the object is to discover and give effect to the contractual obligations that reasonable persons in the position of the parties would objectively have intended the document’s language to create.
Further, the language used in the contract is generally assigned its natural and ordinary meaning, read in the light of the contract as a whole. Where it is ambiguous, surrounding circumstances may be taken into account in assigning the constructed meaning. The surrounding circumstances include the matrix of mutually known facts, and the background, object, context and commercial purpose of the transaction, in the objective sense of what reasonable persons in the position of the parties would have had in mind.
…. The commercial context in which a reference of disputes to an expert in a commercial contract is thus most relevant. The decision to refer disputes for determination by a contractually appointed expert will usually arise because the parties desire a particular body of expert experience, learning, skill and judgment to be applied to the resolution of defined issues which may arise in the course of the relationship and need to be dealt with. This problem-solving role is usually intended to be applied in a manner which is untrammelled by overly restrictive procedural considerations, so that the specialist skills and insights of the expert can be fully applied to the issues for resolution, in an expeditious and cost effective manner which is attended with an appropriate measure of ‘finality’.
This may give rise to the parties agreeing that they will abide by a decision which in hindsight appears to be ‘wrong’. In such circumstances, mistake or error in the process of the determination of the appointed expert will not invalidate a decision, as long as it is made in accordance with the terms of the agreement.
This is not to say that there are no parameters of fairness or that the determination will be unreviewable. For example, if the expert asks the wrong question or misconceives the function of the appointment, the task required to be performed by the contract will not have been fulfilled…..

In this case, His Honour ultimately concluded that the Expert had acted within the terms of his engagement in making the procedural determinations that he did.

Sugar Australia Pty Ltd v Southern Ocean Pty Ltd & Anor [2013] VSC 535 (15 October 2013)

In Sugar Australia Pty Ltd v Southern Ocean Pty Ltd & Anor [2013] VSC 535 (Vickery J), Justice Vickery, the Supreme Court of Victoria Judge in Charge of the Technology, Engineering and Construction List was invalid. His Honour discussed, in detail, earlier decisions of the courts in relation to jurisdictional error, concluding that it was open to a court in considering an application for judicial review to consider the findings of fact made by the adjudicator as to the validity of the Payment Claims in the circumstances of this case which include allegations of misleading conduct and fraud which are pressed by the applicant for relief by way of certiorari. His Honour said, at paragraphs 113-115:

113. For the purposes of s 18 of the Victorian Act,[67] it appears to me that the elements of the section which serve to confer jurisdiction on an adjudicator to make a valid determination under s 23, on the proper construction of the Act, do not permit the adjudicator to finally determine the validity of the adjudication application.[68] If there be any challenge to the jurisdiction assumed by the adjudicator it must finally determined on the basis of facts found by the Court on judicial review, in the course of determining whether a jurisdictional error has been exposed which calls for the exercise of the Court’s discretion to grant relief in the nature of certiorari and, if necessary, mandamus. The Court may grant relief on such relevant evidence as may be adduced before it, whether or not such evidence was before the adjudicator at first instance. Further, the Court may grant such relief without regard to any determination which may have been made on the issue of jurisdiction by the adjudicator. The Court is obliged to arrive at its own conclusion as to jurisdiction based on the law and on the facts as found by it.

114. This is not to say that an adjudicator should not make any findings of fact or rulings on law if a question of jurisdiction is raised in the course of determining an adjudication application. Clearly if an adjudicator is presented with material or submissions which bring into question the jurisdiction of the adjudicator, he or she should determine the question and give reasons for the findings of fact or rulings on law. If however the adjudicator’s decision on jurisdiction is challenged in Court on judicial review, the Court may deal with the matter afresh and receive additional evidence on the matter if the additional evidence is relevant to the determination of the question.

115. To the extent that anything inconsistent with this conclusion appears in paragraphs [115]-[116] of Grocon,[69] in the light of the later reasoning of the High Court in Kirk and of the New South Wales Court of Appeal which followed it in Chase Oyster Bar, I do not follow my earlier ruling.

Jotham Property Holdings Pty Ltd v Cooperative Builders Pty Ltd & ors [2013] VSC 552

In Jotham Property Holdings Pty Ltd v Cooperative Builders Pty Ltd & ors [2013] VSC 552 (Vickery J), Justice Vickery, the Supreme Court of Victoria Judge in Charge of the Technology, Engineering and Construction List, was considering whether an adjudication determination was invalid on the grounds that the particular payment claims were served multiple times, in breach of Section 14(8). His Honour held that the payment claim, the subject of the adjudication, had been the subject of an earlier payment claim. Pursuant to Section 14(8), a further payment claim may not be made for the same [progress payment] reference date under the construction contract. His Honour rejected the claimant’s argument that, pursuant to Section 14(9), if a previous payment claim had not been made, it could be claimed afresh pursuant to Section 14(9). His Honour concluded:

On a plain reading s 14(9) provides that, if another and earlier payment claim has been made, but the amount of that earlier claim has not been paid, the unpaid amount may be included in a later and different payment claim which covers different construction work or the supply of different goods and services, calculated by reference to a different reference date under the construction contract.

His Honour preferred this interpretation on the basis that this construction was consistent with Section 14(8), whereas the the claimant’s argument would render Section 14(8) otiose, and further that this construction of Section 14(8) and 14(9) was consistent with the purpose of the Act.

His Honour concluded that the payment claim was invalid.

Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSC 437 (Vickery J)

In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd, the Judge in Charge of the Supreme Court of Victoria Technology, Engineering and Construction List (Vickery J) was considering the dispute resolution provisions under a design and construct contract for the construction of a rail freight terminal, a container paved area and a locomotive workshop together with associated facilities in Penfield, South Australia (though the Contract was governed by the law of Victoria). The General Conditions of Contract incorporated Australian Standard form of contract, AS4300-1995.

Summary Judgment:

The Contractor asked for summary judgment in respect of three unpaid payment claims, for approximately $3.13 million. The Principal claimed damages for breach of contract, and claimed a number of waivers and estoppels against the Contractor. His Honour ordered that the argument as to the principles to be applied in respect of summary judgment be argued before the Court of Appeal. His Honour then applied those principles. At paragraph 19, His Honour said:

The Court of Appeal determined the following upon the present state of authority, which I adopt and apply in these reasons:[1]

(a) the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;

(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in General Steel;

(c) it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;

(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.

Payment Claims:

His Honour then set out Clause 42.1 of the General Conditions of Contract (the standard form provision) and reviewed the facts surrounding the unpaid payment claims.

His Honour referred to a number of authorities to be followed where a progress payment certificate was not properly issued by the Superintendent under Clause 42.1. At paragraphs 29-31:

In Daysea v Pty Ld v Watpac Australia Pty Ltd (“Daysea”)[2] the Court of Appeal of the Supreme Court of Queensland considered the position under a contract which contained provisions very similar to clause 42.1 of the AS4300-1995 standard form. In that case the Superintendent failed to issue a progress payment certificate within the stipulated 14 days after receipt of a claim, but did so before the expiry of the 28 day period for payment. The Court of Appeal accepted that if the Superintendent under an AS4300-1995 failed to respond to a claim for payment under clause 42.1 within 14 days, even if it did respond shortly thereafter, the Principal was still obliged to pay the amount of the claim. Williams JA observed that a strict approach to the construction of clause 42.1 should be adopted at least with respect to the provisions for payment, set off and deductions, and this was so because of the consequences which flow from the issuing of the certificate. His Honour reasoned as follows:

Of more significance is the decision of Rolfe J in Algons Engineering Pty Ltd v Abigroup Contractors Pty Ltd (1997) 14 BCL 215. The clause in question there was in the same terms as clause 42.1 here. The learned Judge found that the certificate issued by the Principal’s Representative did not satisfy the requirements of paragraph (a) to paragraph (f) of paragraph [4]. In consequence he said that “the Payment Certificate failed to comply with various contractual obligations as to its contents and that, accordingly, it was not a valid notice”. His reasoning for so concluding is set out in the following passage:

“… the effect of a Payment Certificate is to require the recipient to pay the amount stated. Failure to do so could lead to summary judgment and there is no right to dispute the amounts payable until the dispute resolution procedures are activated. Accordingly, the recipient of the certificate is required to pay money during the course of the contract which, at the end of the day, it may be found it does not owe. The requirement to pay money may lead to financial difficulties for the payer, just as the failure to receive money during the course of the contract may cause financial difficulties to the payee. Also the payee may not be able, at the end of the day, to refund any overpayment. Considerations such as these lead me to the conclusion that a certificate must comply strictly with cl 42.1 if it is to have the consequences specified”.

That reasoning is in my view compelling. As all of the cases I have just referred to establish, the consequences of issuing a certificate are serious. The proprietor is bound to pay the amount of the certificate notwithstanding that the amount is provisional only and subsequently may be found to be incorrect. Notwithstanding such considerations the proprietor must pay the amount specified in the certificate and take the chance that any excess can be recovered subsequently. Similarly, the contractor is not entitled to payment of anything more than the amount specified in the certificate though it may well be less than the progress claim made. Even though it may ultimately be found that the contractor was entitled to more, the recovery of any such amount must await the determination of disputes at the end of the contract.

Because of the consequences which flow from the issuing of the certificate strict compliance with the provisions of clause 42.1 is required …[3]

[Emphasis added]

Daysea was applied by Byrne J in Southern Region Pty Ltd v State of Victoria (No 3) (“Southern Region”).[4]

It follows that a certificate purportedly issued under clause 42.1 which does not satisfy the formal requirements of theclause is ineffective and invalid, or as Byrne J said in Southern Region: “… it was as if no certificate had issued at all.”

(emphasis added)

His Honour then considered the principles to be adopted where the Contractor failed to support the payment claim with evidence and any information required by the Superintendent. His Honour referred to the NSW Court of Appeal decision in Brewarrina Shire Council v Beckhaus Civil Pty Ltd . In that decision, the majority concluded that under clause 42.1 of AS2124–1992 the obligation of the Superintendent to issue a payment certificate in relation to a progress claim was subject to the condition precedent that the contractor support that claim with evidence of the amount due to it and with such information as the Superintendent might reasonably require.

His Honour referred to the Victorian Court of Appeal decision in Aquatec-Maxcon Pty Ltd v Minson Nacap Pty Ltd . The Court of Appeal, in adopting Brewarrina, said:

The decision is a recent, and carefully considered, decision by the New South Wales Court of Appeal which, so far as we have been told and so far as we are aware, is the only decision which currently exists on this particular point of construction of this paragraph of the clause. The point was argued by counsel for the appellant before the trial judge, in the course of which counsel referred his Honour to evidence which showed, or suggested, that the superintendent had repeatedly been seeking substantiation for the “one line variation claims”, and submitted that where the contractor persisted – in the face of opposition and request for further information – in submitting “one line claims” there must come a point where clearly the Progress Claim as presented is entitled to be regarded by the superintendent as not a claim within the meaning of clause 42.1. His Honour requested of counsel whether he (ie counsel) was able to show to him any authority where such an approach had been adopted to a claim, ie “where the claim has been treated by the court as being invalid for noncompliance …”. Trial counsel for the appellant conceded that he was not able to refer his Honour to any authority on the point; and his Honour then indicated to trial counsel for the respondent that he would not “trouble him” about the criticisms made of the progress claims.

His Honour, noting further that Warren CJ in Kane Constructions Pty Ltd v Sopov, while expressing some reservations regarding the application of Brewarrina and Aquatec as to the timing issue in the matter before her, had concluded that she was bound by the adoption of Brewarrina in Acquatec at the very least, or to regard Brewarrina as highly persuasive, concluded:

Accordingly, pursuant to clause 42.1 of the AS4300-1995 standard form contract, a failure by the contractor to support a payment claim with evidence and any information required by the Superintendent means that the Superintendent is not be obliged to issue a payment certificate to certify the payment of a progress claim.

(emphasis added)

His Honour concluded that on the facts before him, the Principal had a “real” chance of success on the material presented in the application, and concluded that summary judgment should not be awarded to the Contractor.

Stay Application – Section 8 Commercial Arbitration Act 2011 (Vic):

His Honour then addressed a claim for a stay of the Supreme Court proceedings pursuant to Section 8 of the Commercial Arbitration Act 2011 (Vic), on the grounds that there was an arbitration clause (the provision was the standard form Clause 47 of AS4300-1995). His Honour noted the important change between the new Act and the 1984 superseded Act. At paragraphs 125-126, 143 :

The use of the imperative word “must” in s 8(1), rather than the permissive “may”, which was employed in the superseded Commercial Arbitration Act 1984, removes the court’s discretion to refuse to grant a stay, and renders the provision mandatory. The only reason a court can refuse to grant a stay is if the arbitration agreement is found to be “null, void, inoperative or incapable of being performed”.[5] This means that if the requirements of the section are met the Court has no choice but to grant a stay of the proceeding before it and refer the matter to arbitration.[6]

This may result in some inefficiencies in case management in some cases, arising from the potential for litigation on the same project being conducted before different tribunals. Nevertheless the statutory meaning is clear.[7]

……. It follows that a Court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests, not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration.

(emphasis added)

Ultimately, His Honour decided that a stay should not be ordered in respect of certain parts of the claims, on the basis that the particular dispute was not, on the basis of other provisions of the Contract excluding a right of a party to institute proceedings to enforce payment under the Contract from the arbitration clause. In respect of the balance of the claims, His Honour ordered that those claims were to be referred to arbitration and ordered a stay.

[1] Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd [2013] VSCA 158 [35].

[2] Daysea v Pty Ld v Watpac Australia Pty Ltd (2001) 17 BCL 434.

[3] Daysea Pty Ltd v Watpac Australia Pty Ltd (2001) 17 BCL 434, 439 [20]–[22].

[4] Southern Region Pty Ltd v State of Victoria (No 3 ) (2002) 18 BCL 211.

[5] D Jones, Commercial Arbitration in Australia (2^nd ed, Lawbook Co., 2013) p 108.

[6] Although in the 2009 Consultation Draft Bill the provisions vested a discretionary power in the court and more closely reflected s 53 of the Superseded Uniform Acts, following submissions from over 17 different organisations, the final Bill reflected s 8 of the Model Law. The imperative “must” replaced the permissive “may” such that granting a stay is now mandatory unless the court finds that the arbitration agreement is “null, void, inoperative or incapable of being performed”. D Jones, Commercial Arbitration in Australia (2^nd ed, Lawbook Co., 2013) p 110.

[7] It has been noted that there will be situations that arise where matters are referred to arbitration as a consequence of the word “must” that would have been more efficiently conducted in court, for example, multi-party proceedings that will require arbitrations and potentially different findings of fact. See: D Jones, Commercial Arbitration in Australia (2^nd ed, Lawbook Co., 2013) p 111.

Krstic v State Trustees Ltd [2012] VSC 344

In Krstic, Mark Stefan & Krstic, Nicholas Thomas v State Trustees Limited (ACN 064 593 148) (who is sued as the executor of the will and estate of Peter Krstic, deceased) [2012] VSC 344, the Supreme Court (McMillan J) was considering the interpretation of two clauses in a will (relating to contingent gifts). Her Honour reviewed the principles to be applied to the construction of a will:

‘A detailed and succinct summary of the principles is set out in Fell v Fell. Prima facie, the written words in the will must be given their ordinary meaning, with the Court making a determination of the issue by reference to the words used by the testator in the will, having regard to any established rules of construction and construing a ‘will as trained legal minds would do’.

XZTT and Anti-Doping Rule Violation Panel [2012] AATA 728 (23 October 2012)

In XZTT and Anti-Doping Rule Violation Panel[2012] AATA 728 (23 October 2012), the Administrative Appeals Tribunal of Australia was consideringa cyclist’s appeal against two decisions by ASADA’s Anti-Doping Rule Violation Panel (ADRVP) to make entries into the Register of Findings under the National Anti-Doping Scheme (the NAD Scheme).

In October 2010, the athlete (un-named) tested positive to benzoylecgonine (principal metabolite of cocaine) a race in China. Under the 2009 WADA Code, the use of cocaine is only prohibited in-competition, however the presence of the metabolite in a sample taken during a subsequent competition is an anti-doping violation. The amount detected in the sample was lower than the usual usual cut-off for a positive finding for cocaine. Article 7.2 of the 2009 WADA Code requires that an athlete be notified of the positive test result, and separately, given the right to have the B sample tested, “promptly “ (within 7 days). The athlete was not advised of the positive test for 4½ months. The race occurred on 23 October 2010, the UCI received the lab results on the A sample on 4 November 2010, but did not notify the athlete (who continued to compete). The athlete was first notified by the UCI, on 25 March 2011.

In the 25 March 2011 notice, the UCI:

notified the athlete of an adverse analytical finding from the A sample;
advised that he was provisionally suspended, “pending a hearing”;
giving the athlete the option to have the B sample tested.

The B sample confirmed the presence of benzoylecgonine. Two weeks later the UCI wrote to XZTT to “confirm the presence of the Cocaine and to advise that the UCI would be writing to CA (Cycling Australia) to request CA to open disciplinary proceedings.” On 30 May 2011, the General Manager, Anti-Doping Programs and Legal Services ASADA, advised that the matter would be referred to the ADRVP for consideration. The athlete was invited to make submissions in response to the notice. The athlete denied using a prohibited substance, and, further, argued that the UCI had breached its own rules considerably. Two 2 months later, the ADRVP advised the athlete that the panel had made two adverse findings against him. The Cyclist appealed to the AAT.

The Tribunal concluded:

The two decisions by the ADRVP to make an entry in the Register of Findings under the NAD Scheme were set aside.
The ADRVP decisions to make an entry in the Register of Findings were based were findings of a “possible” violation. As a matter of law, such a finding was not open to the ADRVP. For an entry placed on the Register of Findings, the ADRVP must first make a ‘finding’ as defined under clause 1.05 of the NAD Scheme, ie “a finding …. that an athlete or support person has committed an anti-doping rule violation”.
The matters were to be remitted to the ADRVP.

The Tribunal indicated, further , that in relation to the ADRVP re-consideration, certain mitigating factors might properly be taken into account by the ADRVP:

[235] Included in the factors the ADRVP may wish to take into account in mitigation are those that: (a) from 25 March 2011 until the date of the Tribunal’s decision XZTT remained subject to a provisional suspension that has prevented him from participating in all professional cycling events; (b) that despite the requirements of the WADC and the UCI Anti-Doping Rules, XZTT experienced gross breaches of his entitlement to have the allegations against him dealt with in a timely way; (c) that XZTT did not contribute to the delays in any way; (d) that XZTT entered into a commercially disadvantageous contract, which included a provision to the effect that if he were to be found to have breached anti-doping rules his contract would be terminated and which he would not have entered into but for the delay in the UCI in notifying him of his testing results; (e) that the finding of a violation on his part for ‘use’ In-Competition of cocaine has been set aside by the Tribunal; and (f) that the amount of metabolite of cocaine detected in XZTT’s samples was below the threshold normally accepted as establishing a positive finding for use of cocaine and could not have affected his performance.

Australian Football League & ESP Merchandise Pty Ltd v Hard On Sport Pty Ltd & David Sumiga

In Australian Football League & ESP Merchandise Pty Ltd v Hard On Sport Pty Ltd & David Sumiga [2012] VSC 475, the Supreme Court (Vickery J) was considering an application to set aside an Anton Piller order, relating to the open sale by the defendants of AFL football merchandise without AFL authority.

The AFL and its licensee (ESP) claimed that the defendants in selling AFL merchandise without AFL authority:

infringed the AFL’s copyright in AFL photographs;
infringed the AFL’s trade mark rights in unauthorised AFL memorabilia, including guernseys, shorts, boots, names (including “AFL”, AFL club names, club nicknames, logos, images of the AFL premiership cup, the Brownlow medal, and the Norm Smith medal), posters, cards, photographs, etc;
knowingly (or in a recklessly indifferent manner) induced AFL players to sign memorabilia without the AFL’s authorisation such that those players were breaching their contractual obligations to the AFL (and, in some instances, to ESP);
misrepresented that unauthorised AFL memorabilia was, in fact, authorised by the AFL;
were passing off unauthorised AFL memorabilia as authorised by the AFL.

No defence was made in relation to the copyright claim. (Section 10 of the Copyright Act 1968 (Cth) includes a photograph as “artistic work” whether the work is of artistic quality or not.

No defence was made in relation to the trade marks claim under Section 20 and 120 of the Trade Marks Act 1995 (Cth). The defendant, however, referred to Arsenal Football Club PLC v Reed . In that case, an unauthorised vendor sold Arsenal memorabilia outside the Arsenal ground. At trial, the court had found the vendor’s use of trade marked items as not being an indication of the origin of the goods sold, but rather, being a sign depicting club loyalty or affiliation. That decision, His Honour noted, was, however, overturned on appeal. Vickery J noted that the point remained arguable in Australia, but any defendant would face the persuasive precedent of the UK Court of Appeal.

The plaintiffs claimed that the defendants, breach of Section 18 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) misrepresented that unauthorised AFL memorabilia was, in fact, authorised by the AFL. His Honour concluded, on the evidence as it stood when the Anton Piller order was made, was “sufficiently compelling” to make the order. Similarly, His Honour concluded that case in relation to the defendants passing off unauthorised AFL memorabilia as authorised by the AFL, the evidence as it stood when the Anton Piller order was made was, also, sufficiently strong to make the order.

In relation to the inducing breach of contract claim, His Honour concluded that, in this instance, the evidence was not sufficiently strong (on this basis) to justify the issue of a search order, noting:

the gravamen of the tort of inducing breach of contract is intention;
in relation to the knowledge of the relevant contract, the question will always be whether the alleged wrongdoer had sufficient knowledge of its terms to appreciate that his conduct, if acted upon, would result in an interference with the contractual rights of the other party to the contract.

His Honour further noted that there was some argument in relation to the interpretation of the player’s obligations under the CBA in this respect.

Vickery J, in deciding whether AFL had made sufficient disclosure in obtaining the original order, reviewed the legal principles underlying the grant of Anton Piller order, noting the court’s emphasis, in Anton Piller KG v Manufacturing Processes Ltd, to the effect that such an order was at the “extremity” of the court’s powers, and that “such orders would rarely be made, and only where there was no alternative way of ensuring that justice was done to the applicant”. His Honour observed that it was “in recognition of the extraordinary nature of this remedy” that certain protections were built into the court’s Practice Note, the standard of proof, and the common law supporting the order.

His Honour reviewed the authorities in relation to the obligation on the plaintiff seeking an ex parte remedy to disclose all matters relevant to the exercise of the court’s discretion. In this instance, the defendants said that the plaintiff had not given full, frank disclosure in relation to:

the plaintiff’s examination of the defendant’s Facebook page;
the open, public, nature of the defendants’ business;
signed items (approx 120-130) by the AFL Chairman (Vickery J concluded that would be potentially relevant to the inducing breach of contract claim);
the AFL memorabilia market being widespread (approx 30-50 participants, over 20,000 items for sale on eBay);
the plaintiff’s affidavit evidence being based on information from a commercial competitor of the defendants;
arguments that (relating to inducing breach of contract claim) that there is no explicit prohibition on players signing memorabilia, and/or past players not being party to the current Collective Bargaining Agreement (Vickery J concluded that would be potentially relevant to the inducing breach of contract claim).

Ultimately, however, His Honour did not conclude that the omissions should lead to the Anton Piller order being discharged altogether, but rather, it should be discharged only in relation to those items based on the inducing breach of contract claim alone.

His Honour considered the following in relation to whether to extend the injunction and the balance of convenience:

There was a strong prima facie case in relation to the causes of action pressed by the plaintiffs.
Release of signed grand final jumpers into the market would have a devastating effect on the likely revenues to be gained from the AFL’s Premier memorabilia Program. Official AFL Memorabilia would be affected indirectly, the presence of unauthorised AFL memorabilia in the market would harm sales and revenue which ought to flow to the plaintiffs, and AFL clubs. AFL supporters buying memorabilia, knowing that funds will go back to the game and their AFL club are misled when they purchase unofficial memorabilia. Consumers do not easily recognise unauthorised AFL memorabilia. The unauthorised AFL memorabilia products would turn up on eBay, etc, sales of these products would likely be undocumented, evidence against the defendants would be lost. Accordingly, if an injunction was not granted, the plaintiffs would be at risk of serious damage that could not be compensated by damages.
On the evidence, the defendants would be likely to continue to infringe the property rights of the plaintiffs if not restrained.
Against this, the defendants would lose profits from supplying merchandise in the lead up to Christmas. Further, the defendants would be unable to compete with competitors.
The trial is set down for speedy hearing, commencing on 3 December 2012. In combination with the plaintiffs’ undertaking as to damages, the defendants would be protected.

On this basis, His Honour extended the injunction restraining the defendants from selling AFL memorabilia until further order.

470 St Kilda Road P/L (ACN 006 075 341) v Reed Constructions Australia P/L (ACN 003 340 341) & Philip Martin

n 470 St Kilda Road P/L (ACN 006 075 341) v Reed Constructions Australia P/L (ACN 003 340 341) & Philip Martin, Vickery J was reviewing an adjudication determination, where the Principal had argued that a statutory declaration provided by the Contractor was patently false. His Honour reviewed the authorities in relation to several questions, including:

The Principal argued that the Act implies a duty of “good faith” into the making of a payment claim. His Honour concluded, consistent with authority albeit seemingly contrary to other obiter statements, that there is “good faith” pre-condition to valid payment claim under the statutory regime created by the Act.
The Principal argued that compliance with the adjudication application time limits provided in s 18(3) of the Act a basic and essential condition of validity. His Honour concluded that this was a factual issue for the adjudicator, not reviewable as a “basic and essential condition”. His Honour concluded that the adjudicator’s determination on compliance with the adjudication time limit was not reviewable in the present case.
The Principal argued that the failure of the Contractor to provide a (non-false) statutory declaration had the effect that the payment claim was not valid under the Contract. His Honour concluded that the adjudicator’s assessment of the correct factual position (in this case, the Contractor’s statutory declaration was contradicted by 5 statutory declarations provided by the Principal) Whether finding by adjudicator that payment claim valid reviewable), even if an error of fact, did not constitute an error of law that was reviewable.
His Honour then considered the requirement that an adjudicator provide reasons pursuant to Section 23 of the Act, and concluded, in the present case, that the reasons, albeit brief, were sufficient.

Walton v Illawarra [2011] NSWSC 1188

http://www.austlii.edu.au/au/cases/nsw/NSWSC/2011/1188.html

Owners Corporation Strata Plan 72535 v Brookfield [2012] NSWSC 712

No Duty of Care owed by Builder to Owners Corporation

In Owners Corporation Strata Plan 72535 v Brookfield [2012] NSWSC 712, the NSW Supreme Court (McDougall J) reviewed the evolving law in relation to duty of care owed by a builder to future owners, with whom the builder has no contract. McDougall J concluded that the builder of a strata development in Terrigal did not owe a duty of care to the owners corporation in relation to defects in the common property. His Honour concluded that, on the basis that the apartments were residential building work (taken as at the time the building contract was entered into), and therefore the statutory warranties applied.

His Honour considered that Bryan v Maloney did not support a duty of care in this instance, for 3 reasons:

The Owners Corporation had the benefit of the statutory warranties. The courts should be slow to substitute its view as to the extent that a builder is to be liable to a subsequent owner, quoting the dissenting view of Brennan J in Bryan v Maloney:

It would be anomalous to have claims relating to the condition of the building by an original owner against the builder determined by the law of contract if the relief claimed by the remote purchaser against the builder would be determined by the law of tort. Such a situation would expose the builder to a liability for pure economic loss different from that which he undertook in constructing the building and would confer a corresponding right on the remote purchaser which the purchaser had not sought to acquire from the vendor (45). It would be tantamount to the imposition on the builder of a transmissible warranty of quality. In some jurisdictions, Parliament has provided such a remedy by statute. The social question whether building costs should be inflated to cover the builder’s obligation under such a transmissible warranty in an appropriate question for parliaments to consider but, in the absence of compelling legal principle or considerations of justice reflecting the enduring values of the community, the courts should not decide to extend remedies not hitherto available to remote purchasers of buildings without considering the cost to builders and the economic effect of such an extension. Those are questions which the courts are not suited to consider. The extension of remedies in that direction is properly a matter for Parliament

Proximity, important in the determination in Bryan v Maloney, was later discarded by the majority in Woolcock Street.
In Bryan v Maloney, the builder had owed a duty of care to Mrs Maloney’s predecessor.

His Honour noted that Woolcock Street had relied on “vulnerability” in relation to duty of care, and the availability of statutory warranties to the Owners Corporation. McDougall J further noted the potential cost if such a duty of care existed.

Thiess Pty Ltd & Anor v Arup Pty Ltd & Ors [2012] QSC 185

In Thiess Pty Ltd & Anor v Arup Pty Ltd & Ors [2012] QSC 185, (10 July 2012), the Queensland Supreme Court (Applegarth J) was considering the terms of a Collaborative Consultancy Agreement (CCA) in relation to the Airport Link, Northern Busway (Windsor to Kedron) and East-West Arterial Gateway Projects, between Thiess John Holland (TJH) and Parsons Brinkerhoff Australia (PBA). TJH had engaged PBA as consultants for the design of the project. His Honour was asked to resolve whether, under the CCA, certain values of multipliers specified in the CCA were values agreed between the parties or were subject to audit by the Collaborative Agreement Auditor. His Honour concluded in favour of PBA, that the values were agreed between the parties and not subject to audit by the Collaborative Agreement Auditor.

His Honour considered the interpretation principles, reasoning as follows:

The proper interpretation of the contract is not determined in this case simply by competing contentions about which interpretation is the “more commercially sensible” construction. It is determined by the words of the agreement that were chosen by the parties, and the structure of Schedule 7.

His Honour reasoned in relation to the request for rectification:

These and other authorities appear to support the following propositions:

The actual intention of each party is relevant in deciding whether they had the alleged common intention.
The actual intention must have been disclosed.
In determining whether there was the alleged common intention and the terms of the “prior consensus”, a Court is not confined to communications between the parties and their conduct from which the relevant intention may be inferred. Evidence of their subjective intention, including statements about their understanding of what was agreed, is admissible, and in some circumstances may be decisive.
Where, however, the evidence given by a party about his or her subjective intention is inconsistent with the terms of their correspondence and/or conduct it may carry little weight.
The existence or otherwise of a “common intention” (or prior consensus or prior concluded agreement) is determined on the basis of an objective assessment of the parties’ communications and conduct. Whilst evidence from a party about his or her subjective intention is admissible as to whether the alleged consensus was reached, the question of whether such a consensus existed and continued involves an objective assessment. The authorities suggest that the test is what an objective observer would have thought the intentions of the parties to be. In this regard, it is not the inward thoughts of the parties which matter but whether the alleged intention has been objectively manifested. To adopt the words of Street J, the intention on each side must be manifested “by some act or conduct from which one can see that the contractual intention of each party met and satisfied that of the other. On such facts there can be seen to exist objectively a consensual relationship between the parties.”

TJH had argued that there was a reasonable expectation that the multiplier was a genuine or reasonable estimate and that PBA had been acting in good faith in originally proposing them, and further, that it had a reasonable expectation of an auditor’s examination, and that if there was to be no such examination PBA would have disclosed this to TJH. His Honour summarised the cases:

[215] Silence or non-disclosure of information can be misleading or deceptive in various circumstances….. Whether silence constitutes misleading or deceptive conduct depends on all the relevant circumstances, and it is dangerous to essay any principle by which they might be exhaustively defined. However, “unless the circumstances are such as to give rise to the reasonable expectation that if some relevant facts exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist” …… Asking whether a reasonable expectation of disclosure exists is an aid to characterising non-disclosure as misleading or deceptive and has been described as a practical approach to the application of the prohibition in s 52.

[216] Sometimes a reasonable expectation of disclosure will not exist because parties to a commercial negotiation are not expected to disclose information which is confidential, and the starting point for their negotiations is the caveat emptor doctrine. On other occasions, a reasonable expectation of disclosure will exist because of the nature of the relationship, or because positive conduct or statements in the course of negotiations imply that a certain fact or matter exists or does not exist. A failure to qualify a statement made earlier in negotiations may be misleading or deceptive in the circumstances. Where, however, this is not the case, the reasonable expectation of disclosure of a certain fact must be found elsewhere. In this case, TJH seeks to source it by reference to the negotiation and entry into the Pre-Bid Agreement and the parties’ subsequent negotiations in relation to the commercial framework and the terms of Schedule 7, as pleaded in paragraph 85 of the second further amended defence and counterclaim. Whether conduct is misleading or deceptive or likely to mislead or deceive must be assessed on the basis of these facts and all the relevant circumstances.

Ultimately, His Honour concluded that there was no misleading and deceptive conduct in this instance, concluding that PBA should have the declaratory relief it sought.

Napolitano v State Trustees Ltd [2012] VSC 345

In Napolitano v State Trustees Ltd [2012] VSC 345, a nephew by marriage sued the executor under Part IV of the Administration and Probate Act claiming that his uncle had a responsibility to make provision under his will for his proper maintenance and support. He asks the Court to order that provision be made for him. The executor asked for summary judgment, saying that nothing in the nephew’s affidavit is capable of showing that his uncle had a responsibility (conveniently spoken of in this field of the law as a moral responsibility on a wise and just testator) to make provision for him, and therefore the jurisdictional threshold for a Court’s intervention under the Act is not met. Mukhtar J concluded that where all the evidence is in, and (as happened here) the Court had able and extensive submissions from both counsel with reference to authorities as would be expected at the trial, then on a summary judgment application the Court is performing the similitude of the trial function. It is not so much assessing the prospects, but the actual merits. In this case, the evidence of the nature, quality and elements of the relationship between Antoine and the deceased is too imprecise, and falls well short of the types of relationship as between nephews or nieces and their aunts or uncles which might be recognised as giving rise to a responsibility to make provision for maintenance and support.

“Cases in this Court where successful claims have been made by, for example, a niece from an aunt have demonstrated strong facts are needed to show that the aunt or uncle were like de facto mothers or fathers or had otherwise played a part in the life of a niece of nephew so as to give rise to a responsibility. It requires a demonstration at least that the deceased has taken, in the many ways possible in life, some responsibility for the child’s care, upbringing and development or welfare….

….The Court’s discretionary power under s 91 of the Administration and Probate Act is cast in very broad terms. But it is important to remember that Courts do not intervene just because it would have been nice or good of a testator to give a benefit. An uncle ought to be able to develop a relationship with a nephew without apprehending the law might impose a responsibility to provide for him. That is why Courts have found it convenient and useful to resort to the concept of a moral duty and a moral claim in deciding whether provision should be made to a claimant….. The test is “whether and if so what provision a wise and just testator would have thought it his moral duty to make in the interests of the claimant” having regard to community standards….”

Skilled Group Ltd v CSR Viridian Pty Ltd & Anor [2012] VSC 290

In Skilled Group Ltd v CSR Viridian Pty Ltd & Anor [2012] VSC 290 (4 July 2012), Vickery J was considering a claim by Skilled Group for monies due by way of a restitutionary quantum meruit for engineering work it performed , under a subcontract that was never executed between Skilled and Pilkington, at a glass manufacturing plant in Dandenong owned by CSR. Skilled said that no concluded subcontract had been made between Skilled and Pilkington because, the parties had never agreed on two essential terms of the proposed subcontracts, namely the dates for practical completion and the proposed milestone dates for the purposes of calculation of liquidated damages.

His Honour noted previous cases where, though no contract had been executed, by the parties proceeding to perform the work, a contract had been formed. In relation to the formation of a contract, His Honour said:

94 In any determination as to whether a binding contract exists, it is the objective intent of the parties, as revealed in the factual context, that is the paramount consideration. The fact of agreement and its content is to be determined by the communications between the parties considered objectively. It is also legitimate to consider the factual context in which the communications took place. Regard may also be had to communications between the parties subsequent to the date of the alleged contract, at least to the extent to which those communications may inform the meaning of the language used by the parties in earlier exchanges between them which evidenced the fact of agreement and its content and defined the commercial context.

95 The subjective intention of the parties, as it may be expressed, for example in internal memoranda, or statements made by individuals as to as to subjective intention in the course of giving evidence, is generally inadmissible. However, in some circumstances such expressions of intention may amount to admissions and be admissible on that basis. However, care needs to be exercised in determining the content of any such admission.

His Honour considered the so-called “fourth class” of cases discussed in Masters v Cameron, where parties are content to be bound immediately and exclusively by the terms which they had agreed upon while at the same time expecting to make a further contract in substitution for the first contract, containing, additional negotiated terms, referring to Lord Loreburn, in Love & Stewart v S Instone & Co:

It was quite lawful to make a bargain containing certain terms which one was content with, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with he full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, none the less that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain.

His Honour concluded:

In my opinion, the parties reached agreement in this case in conformity with the fourth limb of Masters v Cameron as described by the High Court in Sinclair Scott. Their conduct clearly manifested an intention to elevate their commercial relationship beyond the clutches of the third class. …. By early May 2008 the parties reached finality in arranging all the terms of their bargain and intended to be immediately bound to the performance of those terms. At the same time the parties proposed to make a further contract in substitution for the first contract, containing negotiated additional terms relating to dates for practical completion of the three Sub-contracts and agreed milestone dates, upon which it was intended that the Sub-contracts would be formally executed……. 117 The factual analysis I have described, involving as it does the application of the fourth limb of Masters v Cameron, also goes to explain the negotiations between the parties which continued from early May 2008 as to dates for practical completion and milestone dates. What the parties were not about during this period was negotiating towards a set of original binding Sub-contracts, for by early May 2008 they were already bound to a concluded, but limited suite of bargains. What they were about was the negotiation of a new set of Sub-contracts in substitution for the already binding ones. The fact that the parties continued to negotiate for an alternative regime of dates, and this continued beyond early May 2008, had no bearing on the concluded bargains which were already in place. ……

In the light of the conduct described, I find it irresistible to conclude otherwise than implied contracts on the terms of the three Sub-contracts are to be inferred from the evidence and that these implied contracts operated to govern the Skilled works on the Project from the outset of their engagement.

His Honour concluded, therefore, that concluded subcontracts had been formed. Though no longer required, His Honour further concluded that, were it not possible to imply the existence of binding agreements, Skilled would have been estopped from denying the existence of the agreements as reflected in the three subcontracts.

Ipex ITG Pty Ltd (In liquidation) & Takapana Investments Pty Ltd v State of Victoria [2012] VSCA 201

In Ipex ITG Pty Ltd (In liquidation) & Takapana Investments Pty Ltd v State of Victoria [2012] VSCA 201, the Victorian Court of Appeal was considering a claim by an unsuccessful tenderer for a contract for the provision of ‘system integration services’ for the Parliament of Victoria. An evaluation plan had been prepared but not distributed to tenderers. Ipex’s tender had been assessed as not demonstrating a good understanding of what Parliament was seeking under the project, and not representing value for money albeit that its tender price was low (Ipex’s tender price was around $2.8 million compared to the winner’s price around $7.8 million), and removed from further consideration.

The trial judge held, and on appeal it was common ground, that there was a binding contract (‘the tender process agreement’) between Ipex and the respondent the express terms of which were contained in the Request for Tender (RFT). Ipex’s primary claim was for damages for breach of that contract.

The Court of Appeal concluded:

The method of evaluation identified in the RFT was, in fact, followed by the government.
The requirement that price be kept out of the process until the “final decision point” was followed in that the price comparisons were left until the already assembled qualitative assessment and price comparisons were available to the evaluation team. (Even if this was wrong, this should be read in the context of the government not being bound to accept any tender.)
The evaluation, albeit involving subjective business judgments, had been objectively evaluated. This was not to be a “purely arithmetic exercise”.
The trial judge had correctly assessed the misleading and deceptive conduct case, being based on the dismissal of the breach of contract claims, that claim being based on the same claimed departures from the RFT case.

Abakis v Abakis [2012] VSC 437

In Abakis v Abakis [2012] VSC 437, the Supreme Court (Macaulay J) was considering a Testator’s Family Maintenance claim by a daughter of the deceased’s second marriage, where the deceased was survived by his second wife, her daughter, three children from his first marriage, and two stepchildren. The plaintiff was the only child to receive nothing under the Will (though she had earlier received a substantial land gift).

Macaulay J adopted the principles set out by Hargrave J in McCann v Ward & Burgess [2012] VSC 63:

Section 91 of the Administration and Probate Act 1958 (Vic)gives the court power to make an order for provision out of the estate where:
1. the deceased had responsibility to make provision for the proper maintenance and support of the applicant; and
2. the court is of the opinion that the will of the deceased does not make adequate provision for the proper maintenance and support of the applicant for the order.
Whether the will makes adequate provision for the proper maintenance and support of the applicant is to be assessed by “‘by a consideration of the facts existing and the eventualities which might reasonably have been foreseen at the date of the testator’s death”.
The court is to consider the matters set out in Section 91(4) (e)-(p) in considering the jurisdictional questions and the amount of any order.
In determining the questions, the court must consider: “what provision a wise and just testator would have thought it was his or her moral duty to make for the applicant”.
The testator is imputed to have been, at the time of death: “fully aware of all the relevant circumstances, including reasonably foreseeable eventualities existing at the date of death, whether or not actually known to the testator”.
Should the two jurisdictional requirements be made, the court is to assess what order for further provision should be made, by reference to the state of facts as at the hearing date.
The court should not transgress unnecessarily upon the testator’s freedom of testation but should proceed: “rather carefully and conservatively according to current community perceptions of the provision which would be made by a wise and just” testator.
However, where an order for further provision will not unduly prejudice other beneficiaries for whom the deceased had a responsibility to make provision, the court adopts a reasonably generous approach, such that any further provision: “should be sufficient to free the mind from any reasonable fear of any insufficiency as age increases and strength may gradually fail”. Further: “where the size of the estate permits and there will be no serious prejudice to the rights of other beneficiaries, the court may order further provision beyond the immediate and likely future needs of the applicant”, providing a “nest egg” to guard against unforseen events.
No inflexible approach can be taken in assessing the two jurisdictional questions or the amount of any order to be made for further provision, as each case will depend on its own facts.

In this case, His Honour concluded that the deceased did have a responsibility to make provision for the plaintiff. Ultimately, taking into account the financial resources and needs of the plaintiff, the second wife, and the other children, and the size and nature of the estate, His Honour concluded that the plaintiff was entitled to a further provision of $475,000.

Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2011] VSC 477

In Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2011] VSC 477 (23 September 2011), His Honour Mr Justice Macaulay was considering, among other things, whether documents brought into existence for the purpose of an adjudication under the Building and Construction Industry Security of Payments Act 2002 (Vic) could attract litigation privilege. His Honour considered whether the statutory adjudication process was an “Australian proceeding” for the purposes of Section 119 of the Evidence Act 2008 (Vic)., and concluded that he should prefer a wider interpretation of the words. At paragraphs 48-50:

48 I agree …… that, because an adjudicator is not bound to apply the laws of evidence, such a person does not qualify as an ’Australian court‘ on that basis. But, is an adjudicator authorised by the Security of Payment Act to ‘hear, receive and examine evidence’? In considering whether, as a matter of statutory interpretation an adjudicator meets that description I am to prefer a construction that promotes the purpose or object of the Evidence Act……… Assuming, as I do, that the regime of privilege is intended to ensure fairness between participants in the conduct of litigious processes, I would not give that expression a narrow meaning …..
49 The adjudication occurs in a patently adversarial setting. It is determined upon the basis of evidence presented in documentary form, and upon written submissions. …… Despite the fact that the adjudication may not ultimately determine the parties’ rights if, in a subsequent court proceeding, the parties’ entitlements are litigated, the adjudication result is enforceable at law and is binding upon the parties unless and until a subsequent court order changes that outcome. I think that the nature of adjudications is such that preserving the confidentiality of communications, made for the dominant purpose of enabling the provision of legal services to participants in the adjudication, would promote the object of fairness for and between those participants.
50 Bearing those matters in mind, I conclude that the provisions of the Act I have summarised above do authorise the adjudicator to ‘hear, receive and examine evidence’ as I would construe that expression. I therefore construe the definition of ‘Australian court’ to embrace an adjudicator under the Security of Payments Act and an adjudication as an ‘Australian proceeding’ within the meaning of s119 of the Evidence Act.
………

Director of Housing of State of Victoria v StructX Pty Ltd (trading as Bizibuilders) [2011] VSC 410

In Director of Housing of State of Victoria v StructX Pty Ltd (trading as Bizibuilders) [2011] VSC 410, Vickery J (the Judge in Charge of the Technology and Construction List) was considering an adjudication determination and the meaning of “in the business of building residences”.

“Structx” was a builder, constructing homes in Hamilton, for the Director of Housing of the State of Victoria. The Director sought to have the determination quashed on the grounds that :
1. the relevant contract was a domestic building contract and the Director was/is not in the business of building residences (Section 7(2)(c) of the Act);
2. the adjudicator erred in finding that there was no Payment Schedule (on the basis, contested by the Director) that the Superintendent’s Representative lacked authority to issue payment schedules;
3. the adjudicator erred in finding that the Payment Schedule had to be in the form prescribed by the contract (Section 15(2)(d) of the Act).

The Contract was an amended AS2124 General Conditions of Contract form of contract.
His Honour concluded:
1. (Referring to his earlier decision in Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No 2) ), where His Honour had said:
They [adjudicators appointed under the Act] are clothed with legal authority to make a binding determination for the purposes of the Act which affect the statutory rights or obligations of persons or individuals who are claimants for progress payments under the Act or who are respondents to such claims.
His Honour concluded, at paragraphs 17-19:
As such they are amendable to certioriari. However, an adjudicator appointed under the Act does not constitute an inferior court within the court hierarchy…..

As observed in Craig, an adjudicator is therefore exposed to fall into jurisdictional error in a broader range of circumstances than a court.

In the present case, I do not consider that the exception provided by s 7(2)(b) of the Act was intended to confer on an adjudicator the power to decide jurisdiction founded on questions of law or mixed questions of law and fact, which includes the power to decide the question wrongly, without attracting prerogative relief.

Accordingly, the adjudicator’s decision in this respect was/is open to certiorari. His Honour then went on to conclude that the Director was not “in the business of building residences” within the meaning of s 7(2)(b) of the Act, and for this reason the proviso did not operate to exempt the Construction Contract from the operation of the Act. In this respect, the adjudicator erred, and certiorari could be issued.

2. As to the adjudicator’s determination that the Superintendent’s Representative lacked authority to issue payment schedules, His Honour concluded that the purpose of the letter containing the Director’s delegation of authority (relied on by builder as not giving that authority, and accepted by the adjudicator) was to nominate a Superintendent’s Representative for the purposes of the Construction Contract, not the Act, it did not purport to limit the Director’s delegation of authority to the matters set out, nor was it evidence that the architect did not have authority to issue a payment schedule under the Act. In this respect, the adjudicator erred, and certiorari could be issued.
3. The Adjudicator also found that the payment schedule was invalid, because it was not in any prescribed form. Section 15(2)(d) of the Act provides that a payment schedule “must be in the relevant prescribed form (if any)”, however, there are no forms for payment schedules prescribed by regulation. The Adjudicator fell into further error on the face of the record, and on this ground certiorari should also issue.
4. In failing to take into account the payment schedule and the Director’s submissions founded upon it, as required by s 23(2)(d), the Adjudicator fell into further error on the face of the record, and certiorari should issue on this ground.
5. Further, in failing to take into account the payment schedule and the Director’s submissions founded upon it, the Adjudicator did not afford procedural fairness to the Director. This amounted a substantial denial of the measure of procedural fairness required under the Act. On this ground too, an order in the nature of certiorari should be made.
His Honour then considered jurisdictional error, discussed by the High Court in Craig v South Australia, and more recently in Kirk v Industrial Court (NSW). His Honour concluded that the authority of the Supreme Court to quash an adjudication determination where jurisdictional error has occurred has been reinforced by Kirk.

His Honour quashed the adjudication determination (and made the declaration sought by the Director to the effect that the Director is not in the business of building residences within the meaning of s 7(2)(b) of the Act).

Ipex ITG Pty Ltd (in liq) v State of Victoria [2010] VSC 480 (29 October 2010)

In Ipex ITG Pty Ltd (in liq) v State of Victoria [2010] VSC 480, the Supreme Court (Sifiris J) was considering a claim by an unsuccessful tenderer that the Victorian government had breached its contractual duty in relation to the evaluation of tenders for the Parleynet project in 2003. His Honour reviewed the authorities and concluded:
1. Each tender must be considered on its own facts, including the tender and/or related documents, and the relevant context and circumstances, to determine whether there is any intention to create an immediately binding contract as to process.
2. The courts have been more inclined towards finding a contract had been made in relation to the “tender process” where a timeline and detailed process, including evaluation criteria, are set out in the tender documents in a way consistent with such a promissory obligation to follow that timeline and process.
3. In this instance, the RFT was intended to be a legally binding contract as to process, including detailed evaluation criteria , rather than simply a document that provided relevant information. The RFT contained detailed evaluation criteria that Parliament said “will” or “must” be applied, suggesting a “commitment, promissory in nature, to abide by a process particularly in relation to the evaluation of tenders”.
His Honour concluded that, in this case, there had been no breach of that tender process contract.