AIM Partnership v Rathchime [2010] NSWSC 860 (30 July 2010)

Last Updated: 6 August 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
AIM Partnership v Rathchime [2010] NSWSC 860


JURISDICTION:
Equity Division
Technology & Construction List

FILE NUMBER(S):
2010/64167

HEARING DATE(S):
30 July 2010


EX TEMPORE DATE:
30 July 2010

PARTIES:
AIM Partnership Pty Limited (Plaintiff)
Ratchime Pty Limited (Defendant)

JUDGMENT OF:
McDougall J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
S A Wells (Plaintiff)
J P Knackstredt (Defendant)

SOLICITORS:
Christopher C Freeman & Co (Plaintiff)
McLachlan Thorpe Partners (Defendant)


CATCHWORDS:
PROCEDURE – application to join director of defendant in proceedings – whether case against director must fail – whether real question as to whether director gave personal guarantee – whether real question as to whether guarantee was given without consideration – whether real question as to whether director’s signature was affixed only in capacity as director or in personal capacity as well – application successful.
COSTS – application for costs incurred in application for transfer of proceedings – where proceedings commenced in Consumer, Trader and Tenancy Tribunal – where alleged that claim was not within jurisdiction of Tribunal as it was not a ‘building claim’ – meaning of ‘building claim’ – where alleged that cross-claim based on rescission for innocent misrepresentation could not have been determined by Tribunal – merits of cross-claim unknown – application for costs dismissed.

LEGISLATION CITED:
Consumer, Trader and Tenancy Tribunal Act 2001 (NSW)
Home Building Act 1989 (NSW)
Uniform Civil Procedure Rules

CATEGORY:
Procedural and other rulings

CASES CITED:
Collings Homes v Head [2002] NSWSC 1219
Grygiel v Baine [2005] NSWCA 218
Provincial Homes v Doyle [2004] NSWSC 624
Woolfe v Alexander Sussman [2001] NSWSC 702

TEXTS CITED:


DECISION:
Application to join defendant succeeds. Order for costs of transfer application refused.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY & CONSTRUCTION LIST


McDOUGALL J

30 July 2010 (ex tempore – revised 30 July 2010)

2010/64167 AIM PARTNERSHIP PTY LIMITED v RATHCHIME PTY LIMITED

JUDGMENT

1 HIS HONOUR: The defendant (Rathchime) is the proprietor of land at 80 and 88 Arabella Street, Longueville. The plaintiff (AIM) performs building work or supplies related services. AIM says that on about 16 August 2007, it contracted with Rathchime for the carrying out of certain work described in a letter of that date. It sues to recover the cost of performing that work.

2 AIM, by notice of motion filed on 4 June 2010, seeks to join as a defendant in these proceedings a director of Rathchime, Mr Michael Wren. (The notice of motion also sought the joinder of Ms Deirdre Wren, but that application is not pursued.) Mr Wren opposes the joinder, on the basis that the case propounded against him must fail.

3 The proceedings were commenced in the Consumer, Trader and Tenancy Tribunal (the Tribunal). By order made on 24 February 2010, the Tribunal, on the application of Rathchime, but ultimately by consent, transferred the proceedings to this Court. It ordered that "the costs incurred in the Consumer, Trader and Tenancy Tribunal be costs in the cause".

4 Rathchime, also by notice of motion filed on 4 June 2010, seeks an order that AIM pay its costs of the application for transfer. As I understand it, that application assumes that the costs of the application for transfer were specifically reserved to this Court.

5 It is convenient to deal first with the application for joinder. The case propounded by AIM is that the contract between it and Rathchime is constituted, or evidenced, by a letter of 16 August 2007 addressed by it to Rathchime. That letter described the works that were to be carried out. It contained "terms of engagement" which stated, among other things, that commencement of the works could be "achieved in the short term by authorising a copy of this correspondence where noted". The letter stated, in bold print:

All fees and expenses incurred by AIM in connection with the services as defined are personally guaranteed by Mr Michael and Mrs Deirdre Wren, their successors or executors.

6 The acceptance of that letter was signed by Mr Wren on 16 August 2007. Above his signature (which is not expressly qualified in words such as "for or on behalf of" or as "director" of Rathchime) the following words appear:

I, Michael Wren, being a director of Rathchime Pty Ltd, do hereby authorise AIM Partnership Pty Ltd to commence the services, all in accordance with this correspondence dated 16th August, 2007.

7 There is a dispute as to whether, before Mr Wren signed and returned that document, there was a conversation between him and a Mr Cunliffe of AIM in which Mr Cunliffe pointed out the necessity for a personal guarantee and Mr Wren agreed. Of course, that dispute cannot be resolved on the hearing of this application.

8 The essential submission put for Mr Wren, in opposition to the application for joinder, is that the case against him must fail. It is submitted firstly that there was no acceptance by Mr Wren in his personal capacity of the proposal that he guarantee, and secondly that his alleged promise to guarantee was given without consideration.

9 Thus, it is said, the case must fail and to join Mr Wren would be futile.

10 I do not accept that the case is one that can be said to be without any prospect of success; or to be one that, if pleaded originally, would be summarily dismissed. The question of the proper meaning to be given to Mr Wren's undoubted signature on the letter of 16 August 2007 is something that requires illumination from all relevant background circumstances, or factual matrix. As was conceded in the course of argument, one relevant matter to consider would be whether there was some conversation, as apparently alleged by Mr Cunliffe, in which the necessity for the personal guarantee was pointed out and accepted; or whether, as alleged by Mr Wren, there was an express repudiation of any undertaking of guarantee obligations.

11 Further, when one looks at the words appearing over Mr Wren's signature, it is at least arguable that the words "being a director of Rathchime Pty Ltd" were inserted not to limit the capacity in which Mr Wren signed but, rather, to confirm that he had authority to bind Rathchime to the agreement. It could also be argued that the words "all in accordance with this correspondence dated 16th August, 2007" are capable of calling up everything in the letter, including the requirement for a personal guarantee pointed out in the terms set out above.

12 Thus, it seems to me, there is a real question as to whether Mr Wren's signature should be taken to have been affixed only in his capacity as a director of Rathchime, so as to bind it to the contract, or in his personal capacity as well. As I have said already, the resolution of that question would be assisted by an analysis of the factual matrix.

13 For those reasons, I think that the case to be propounded against Mr Wren is not hopeless and that the application to join him should succeed.

14 I turn to the application for costs. The application was founded on two bases. One was that the claim was not within the jurisdiction of the Tribunal, because it was not, in the language of s 48A of the Home Building Act 1989 (NSW), a "building claim". The second basis was that if there were a contract, it was procured by innocent misrepresentation and thus there would be a cross-claim for rescission: something with which the Tribunal could not deal.

15 The first question draws attention to the confused and circular definitions in the relevant provisions of the Home Building Act. A building claim is, among other things, a claim for the payment of a specified sum of money that arises from a supply of building goods or services. Building goods or services include, among other things, goods or services supplied for or in connection with the carrying out of residential building work by the person who contracts to do that work. Residential building work is defined to mean, among many things, any work involved in the construction, altering or renovation of a dwelling. There seems to be little doubt - at least at this stage - that we do have a "dwelling" lying at the base of this dispute.

16 The submission for Rathchime was that the work authorised by the contract in this case was work such as demolition, sewer diversion, bulk excavation and associated works, as defined briefly in the letter of 16 August 2007. By reference to a number of authorities, it was submitted that those works have nothing to do with the "construction" of a dwelling, or (if relevant) the altering or renovation of a dwelling. That is because construction was said to mean the building process itself: See Master Malpass in Collings Homes v Head [2002] NSWSC 1219. Reliance was placed also on the decisions of Wood CJ at CL in Provincial Homes v Doyle [2004] NSWSC 624 at [43] and McClellan J in Woolfe v Alexander Sussman [2001] NSWSC 702.

17 In Provincial Homes, Wood CJ at CL said, at [43], that if the Tribunal were to have jurisdiction there must be a claim arising from a supply of building goods or services. If I may say so with respect, I agree. Further, his Honour said at [59] and [60], the mere fact that the contract included a commitment to construct a dwelling would not of itself attract jurisdiction. Jurisdiction depended upon a characterisation of the services supplied that give rise to the claim. Thus, his Honour said, even accepting the width of "for or in connection with", preliminary or ancillary work in relation to feasibility, design, approvals and such matters would not come within the Tribunal's jurisdiction.

18 I accept his Honour's analysis. However, that analysis is relevant to the services with which his Honour was concerned. The services in this case are of a different nature.

19 In Woolfe, McClellan J said at [18] that residential building work is confined to work in pursuance of the physical construction or alteration of a dwelling, and did not include matters such as feasibility studies, valuations, cash flow projections and the like. Again, I agree. But the services in this case are of a markedly different nature.

20 In Grygiel v Baine [2005] NSWCA 218, Basten JA (with whom Mason P agreed) referred at [57] and [58] to the width of the connection that could be introduced, or limited, by the words "for or in connection with". His Honour said that on one view the definition might not be limited to matters such as laying foundations or painting, but could extend to preparatory work which could have a sufficient connection with the carrying out of building work because its purpose was to give rise to building work. Were that not so, his Honour said, arbitrary distinctions might arise.

21 Thus, his Honour said, the Court should not take an unduly restrictive or arbitrary approach to the words whereby the jurisdiction of the Tribunal is conferred. In doing so, as it seems to me, his Honour expressed at least implicit disapproval of the somewhat more restrictive approach taken by Master Malpass in Collings Homes at [33] and [34].

22 The question in this case is one that requires consideration with a full understanding of the nature of the works undertaken by AIM. It does not seem to me to be possible to say, in some a priori way, that works that could be described as demolition, sewer diversion, bulk excavation and associated works are simply incapable of being residential building work. If that is so, then it cannot be said, again a priori, that the claim is not a building claim.

23 It should be noted that the letter of 16 August 2007 referred to a "document schedule". It also referred to a "project and construction management proposal". A number of architectural drawings was identified, as was a number of structural and civil drawings. The Court did not have the benefit of seeing those drawings. If, on examination, it appeared that the work described in them comprised work that could be residential building work then it might be possible to conclude that, following the statutory chain of definitions, there was in this case an underlying building claim.

24 The Tribunal did not examine those matters because the application, although initially opposed, was ultimately the subject of consent. In circumstances where the Tribunal has not reviewed the matter and made findings of fact, it seems to me that a resolution of the question would be better undertaken on the final hearing of this matter, in circumstances where the Court will be fully apprised of all relevant matters, including the contents of the drawings and other documents called up by the letter of 16 August 2007 to which I have referred.

25 Insofar as the application was based on the desire of Rathchime to cross-claim, it appears to be accepted that a cross-claim based on rescission for innocent misrepresentation was not something that the Tribunal could decide. However, the Court has no way of knowing whether that cross-claim has substance or not. In those circumstances, it seems to me that insofar as the application can be justified (as undoubtedly it can) by reference to that cross-claim, an order in relation to the costs of the transfer is more appropriate to be dealt with when the fate of that cross-claim is known.

26 The other matter to be noted is that it is by no means clear that the Tribunal did in fact expressly reserve to this Court the costs of the application for transfer. The Tribunal ordered by consent that the proceedings be transferred to this Court. It ordered, not explicitly by consent, that the costs "incurred in the...Tribunal be costs in the cause". Each party referred me to the transcript of proceedings before the Tribunal, in an attempt to show that the Tribunal had, or had not, intended that the costs of the transfer application should be dealt with separately to the other costs incurred by the parties in the Tribunal up to the date of the making of the order for transfer. It was submitted for Rathchime that this Court could make an order under the slip rule correcting the costs order made by the Tribunal so as to reflect what was clearly intended. I express no view as to whether s 23(1)(b) of the Consumer, Trader and Tenancy Tribunal Act 2001 (NSW), read in conjunction with relevant provisions of the Uniform Civil Procedure Rules, has that effect. It is sufficient to note that I am not satisfied, on a reading of the transcript, that there was any slip. On the contrary, it seems to me to be at least arguable that, there being a dispute as to the proper costs order to be made, the Tribunal considered the order to be made and made the order that it did intentionally. If that conclusion is correct (as it seems to me to be) there is no basis for correcting the costs order and thus in any event no reason for this Court to reconsider costs in the Tribunal (in circumstances where it was not submitted that the Tribunal, if it intended to order as it did, made some error reviewable by this Court).

27 In the result, there should be an order in accordance with prayer 1 of the plaintiff's notice of motion filed on 4 June 2010 but, save as to costs (on which I will hear the parties) that notice of motion should be otherwise dismissed. The defendant's notice of motion filed on 4 June 2010 should be dismissed. I will hear the parties on costs and on directions to be made to provide for the further conduct of these proceedings.

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LAST UPDATED:
5 August 2010