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MTECC News 21.03 ||| Costs, consequences and proportionate liability – NSW Court of Appeal decision highlights strategic risks faced by plaintiffs

by admin admin

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The recent NSW Court of Appeal decision in Owners of Strata Plan No 30791 v Southern Cross Constructions (ACT) Pty Ltd (in liquidation) (No 2) [2021] NSWCA 35 provides useful guidance about the cost consequences of unsuccessfully making a claim against a party who an existing defendant asserts is a concurrent wrongdoer.

The proceeding concerned a new block of apartments constructed by Southern Cross Constructions (ACT) Pty Ltd (in liq) (Builder) in Double Bay. The Owners Corporation and Unit Owners (Appellants) occupied the adjoining property, which was damaged as a result of excavation work. Being strangers to the construction the Appellants had no direct knowledge of the involvement of the project structural engineer Hughes Trueman Pty Ltd (Hughes).

The Appellants commenced proceedings against the Builder only. The Builder asserted in its defence that Hughes was a concurrent wrongdoer and the Appellants then brought their own claim against Hughes. Claims against the Builder, the Builder’s insurer and Hughes all failed at first instance and the Appellants were ordered to pay the costs of those parties. The Appellants appealed and were successful against the Builder and Insurer on one of several grounds of appeal, however they failed in their appeal in relation to Hughes.

Unsurprisingly the Appellants contended that because the Builder had asserted that Hughes was a concurrent wrongdoer they had little alternative other than to maintain a claim against Hughes to ensure they were able to recover any share of responsibility for which Hughes may be found to be liable and that it was appropriate that the Builder and Insurer be ordered to pay the costs that the Appellants had to pay Hughes.

The Court of Appeal rejected this argument and noted that for such an order to be made the Court would need to be persuaded (citing Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 at [15]) that:

  • it was reasonable for the Appellants to have brought proceedings against Hughes; and
  • there was conduct on the part of the Builder or the Insurer that would make it fair to impose liability on them for the costs that the Appellants were ordered to pay Hughes.

Central to the Court of Appeal’s reasoning were the following matters:

  1. no effort was made on the hearing of the appeal to “demonstrate that the claims that the (Appellants) were advancing against Hughes in the appeal or that the claims that they had advanced against Hughes at first instance were in any way derived from the allegations of concurrent wrongdoing made by the Builder and Insurer”; and
  2. “while the assertion by the Builder and the Insurer that the Builder was not liable and that Hughes was may have been the catalyst for the joinder of Hughes, the allegations of concurrent wrongdoing on the part of Hughes that were made by the Builder and the Insurer were of a more general nature and less expansive than the allegations made by the (Appellants).”

The Court of Appeal therefore inferred that the Appellants appeared “… to have made a forensic decision to maintain proceedings against Hughes independently of the conduct of the Builder and the Insurer.”

The salutary lessons from this case are that:

  1. great care should be taken when pleading alleged causes of action against parties who have been named as concurrent wrongdoers by existing defendants; and
  2. it is important to explain to the Court how those alleged causes of action relate to and are derived from the allegations of concurrent wrongdoing made by those defendants.

Andrew Laird

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