Fibreglass Pool Works (Manufacturing) Pty Ltd v ICI Australia Pty Ltd [1997] QSC 110 (1997) 146 ALR 120; [1998] 1 Qd R 149

IN 1HE SUPREME COURT OF QUEENSlAND Brisbane ~~ ~UK nit <- DK 0 Ef( No. 1809 of 1992 P/U,5e: ~ JVCf~f'l/-fi/' e£t L<J BEIWEEN: AND: 1HE FIBREGIASS POOL w:>RKS (MANUFACIURING) PlY LID ID AUS1RAllA PlY LID REASONS FOR JUDGMENT - lVIOYNllIAN J. Judgment delivered 12 June 1997 Plaintiff Defendant CATCfI\\ORDS: Thlde Prnctices - Trade Practices Act 1972 (Cth), ss 7411, 74J - whether plaintiff can amend statement of claim with respect to claim for indemnity pmsuant to s.74H - whether s. 74H relates not only to present liabilities but to future or prospective claims - whether limitation period expired so that there is a ''statutory banier" to bringing a new cause of action - whether beyond power of 0.32 to allow amendment to take effect from date the defendant had notice of the amendment Counsel: D.M. Logan for the plaintiff P.E. Hack for the defendant Solicitors: Primrose Couper Cronin Rudkin for the plaintiff Phillips Fox for the defendant Hearing Date: 24 September 1996 -- 1 of 11 -- IN 1HE SUPREME COURT OF QUEENSIAND Brisbane BEIWEEN: AND: 1HE FIBREGIASS POOL \\ORKS (MANUFACIURING) PlY LID 10 AUS1RAIJA PlY LID REASONS FOR JUDGMENT - MOYNllIAN .1 Judgment delivered 12 June 1997 No. 1809 of 1992 Plaintiff Defendant This is an application pursuant to 0.32 r.1 (1) of the Rules of the Supreme Court for leave to amend the statement of claim delivered in this action. The action is one in which the plaintiff, a manufacturer and supplier of fibreglass pools, claims against the defendant as the manufacturer and supplier of an allegedly defective product called Ge1coat. The Ge1coat was used to seal the fibreglass laminate of pools sold and supplied by the plaintiff to various purchasers of pools and so preserve the colour of the pools. The plaintiff used the allegedly defective Ge1coat between February 1991 and November 1992 in some 1,832 pools. At the time of the application there had been 94 claims against the plaintiff by dissatisfied pool owners, 35 of which have been compromised by the plaintiff with the dissatisfied pool owner. A number of the claims (compromised and not compromised) were made against the plaintiff after the issue of the writ and more are expected. The case is presently pleaded on a number of bases. It is pleaded to the effect that the plaintiff was induced to purchase the Ge1coat in reliance on representations made by the defendant that it was a proven product and of good quality. These representations were -- 2 of 11 -- 2 alleged to have been false, misleading or deceptive, or to have been likely to mislead or deceive. Claims based on s.l7(a) of the Sale of Goods Act 1896 (Queensland) and an alleged failure to exercise reasonable care in the manufacture and testing of the Ge1coat are also pleaded. The statement of claim as it presently stands claims damages for breach of contract and breach of duty including contravention of s.52 of the Trade Practices Act 1972 (C'th) (the Act). The defendant opposes the application for leave to amend the statement of claim insofar as the amendments found a claim for indemnity pursuant to s.74H of the Act (paras.24-40 of the proposed pleading) but does not oppose other amendments sought. The relief based on s.74H is sought in terms of a declaration that- ". . the defendant is obliged to indemnify the plaintiff in respect of any damages, compensation, interest and cost which the plaintiff may be liable or become liable to an owner of certain pools manufactured by the plaintiff during the period from about February 1991 to about February 1992 particularised herein". The particulars then list pool owners to whom the plaintiff supplied pools. It is necessary to turn to consider the basis of a claim founded on s.74H of the Act. The section in effect gives the seller of defective goods (the plaintiff) to a third party (a pool owner) a right of indemnity against the manufacturer of the defective goods (the defendant) which is enforceable as though it was a right arising out of a contract of indemnity between plaintiff and defendant. The conditions precedent to the right arising are contained in paras.74H(a) and (b). For present purposes the conditions relevant are that the plaintiff is liable under a contract with a pool owner for loss and damage arising out of a breach of a warranty implied under Division 2 of the Act and the defendant is liable to compensate the pool owner under ss.74B and 74D of the Act. The Division 2 warranties, relevant for present purposes arise from s.71(1) and (2). These imply conditions of fitness for purpose and -- 3 of 11 -- 3 merchantability where goods are supplied by a corporation (the plaintiff) to a consumer (a pool owner). Sections 74B and 74D of the Act then impose liability on a manufacturer (the defendant) to compensate a consumer (pool owner) where goods are supplied by the manufacturer to an intermediate purchaser (the plaintiff) for supply to a consumer and are not reasonably fit for the particular purpose (s.74B) or are not of merchantable quality (s.74D) and the consumer thereby suffers loss or damage. In those circumstances someone in the plaintiffs position who has resold the defective goods to a consumer has a right of indemnity against someone in the position of the defendant where the plaintiff is liable to an owner for a breach of s.71(1) or (2). The defendant opposes leave to amend on the basis that what is conveniently referred to as the limitation period has expired so that there is a "statutory barrier" consequent on a Commonwealth Act introducing a new cause of action so that it is beyond the power given by the Rules to allow an amendment with effect from the date of the original writ or pleading. The defendant also objects to the pleading of a declaration in respect of potential or future, as distinct from present, liabilities. It is convenient to dispose of this point first. Paragraph 37 of the proposed statement of claim alleges that the plaintiff "is or may become liable to each of the owners in respect of . . loss and damages suffered by them". It is then pleaded that the defendant is liable to indemnifY the plaintiff in respect of "any liability" to the owners so as to found a claim for a declaration in the terms set out above. In my view the defendant's objection that s.74H does not apply to future or prospective claims is well taken. Section 74H is in terms that the plaintiff "is under a liability to another person" . A person is under a liability when they can be compelled to pay by the taking of steps necessary to obtain and enforce a judgment; Hall v. Bonnetl ; see also Wardley Australia (1956) S.A.S.R. 10 at 15 -- 4 of 11 -- 4 Ltd v. State of Westem A ustralid where it was held that a cause of action was complete at the time. of the occurrence of every fact necessary for the plaintiff to prove in order to support a right to recover its money. The provisions of s.74H may be contrasted with the provisions of s.87(1 )(A) of the Act where the cause of action accrues as soon as a person "is likely to suffer" relevant loss or damage. In the present case, a declaration of entitlement in respect of prospective or future s.74H claims could only be couched in terms of claims which are proved to satisfy the requirements of s.74H and that would be essentially meaningless. It is now necessary to turn to the more far reaching objection taken by the defendant. I did not understand it to be seriously contested that a claim for indemnity under s.74H is a new cause of action and it may be accepted that this is so; see White v. Eurocycle Pty Ltcf. The claim for indemnity under s.74H arises out of substantially the same facts (the use of the defective Gelcoat manufactured by the defendant, supplied to the plaintiff and used by it in defective pools supplied to owners) as the causes of action in which the relief already claimed arises; Whitfield Propel1ies Ltd v. Newton4; McGee v. YeomC01.f; Adcon v. Shiavon 6• Section 74J of the Act prescribes that an action founded on ss.74B or 74D (it will be recalled that such an action is a condition precedent to the plaintiffs entitlement to relief under s.74H) may be commenced within three years of the day on which the cause of action accrued. Such a cause of action accrues on the day in which the consumer (pool owner) first 2 [1992] 175 C.L.R. 514 3 (1995) 64 S.A.S.R. 461 at 465/6 (Full Court) (1971) 1 W.L.R. 862 at 880 5 (1977) 1 N.S.W.L.R. 273 6 [1985] 1 Qd.R. 1 at 8 -- 5 of 11 -- 5 became aware, or ought reasonably to have become aware, that the goods were not fit for the particular purpose or were not of merchantable quality; s.74J(2)(a)(i) and (iii). On the other hand s.74J(2)(b) provides to the effect that a cause of action under s.74H accrues on whichever is the earlier of- (i) the day, on which the seller of defective goods made a payment to the consumer in respect of, or otherwise discharged in whole or in part the liability of the seller or the consumer; and (ii) the day in which the proceedings are instituted by the consumer against the seller. The defendant submits that since the pools utilising the defective Gelcoat were supplied four or more years ago, it is "a reasonable assumption" that pool owners who have not already claimed ought reasonably to have become aware of any breaches by the plaintiff founding claims under ss.74B or 74D more than three years ago. Thus any actions by those consumers against the defendant are out of time. The defendant then submits that, since s.74H liability is dependent on there being a liability under ss.74B or 74D, a claim for indemnity based on s.74H is bound to fail with the consequence that an amendment designed to found such a claim ought not to be allowed. Tempting as it is to dispose of the point on an "all in all out" basis, I do not consider that this application should proceed on the basis of the determination that pool owners "ought reasonably have become aware" three or more years ago that a cause of action had arisen under ss.74B or 74D or that their claim based on those provisions is now out of time. It seems that the issue of when a cause of action arose in respect of a claim by a particular consumer turns on a determination of issues of fact relevant to the particular claim; c£ MagmC01 International Ply Ltd C01d Drs v. Westpac BC01king Corporation7. Questions of this (1991) 32 F.C.R. 1 -- 6 of 11 -- 6 kind ought not to be determined at an interlocutory stage save in the very clearest of cases; Wardley A ustralia Ltd v. State of Western A ustralid, Magmarr etc. This is not a case such as Saunders & Drs v. Glev Franchises Pty Ltd & DrsIO or Jekos Holdings Pty Ltd v. A ustralian Horticultural Holdings Pty Ltd I where the time at which the relevant loss was suffered was common ground and it was thus clear as a matter of calculation that the limitation period had expired. It seems to me therefore that this application must proceed on the basis that the plaintiff seeks to pursue claims for indemnity in each of a number of separate cases where the cause of action constituted by ss.74B and 74D or for that matter, s.74H mayor may not have accrued and the period specified by s.74J, mayor may not have expired. The application for leave to amend is made pursuant to 0.32 r.l which relevantly provides: "(1) The Court or a Judge may, in any cause or matter, at any stage of the proceedings, allow . . to . . . amend . . any pleadings . . on such terms as may be just. (2) Where an application to the Court or a Judge for leave to make the amendment mentioned in subrule . . (5) is made after any relevant period of limitation current at the date of the issue of the writ is expired, the Court or a Judge may nevertheless grant such leave in circumstances mentioned in that subrule if the Court or a Judge thinks it just to do so. (5) An amendment may be allowed under subrule (2) notwithstanding that the effect of the amendment will be to add .. a new cause of action if the new cause of action arises out of the same facts or substantially the 10 11 at 533 (ante) (1995) 133 A.L.R. 731 (1994) 2 Qd.R. 515 -- 7 of 11 -- 7 same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment. (6) Subject to this rule, an amendment may not be allowed under this rule notwithstanding that the effect of the amendment would be to add or substitute a cause of action arising after the issue of the writ of summons or other proceedings by which the proceedings were commenced. " In objecting to the granting of leave the defendant points to A dam v. Shiavon12 where it was held that an amendment pursuant to 0.32 r.1 took effect from the date of the writ or document which is amended and that 0.32 r.1(2) had the consequence that a right to plead the Statute of Limitations Act 1974 (Queensland) had gone. It is submitted in the present case that to allow an amendment raising a new cause of action under s.74H more than three years after it had accrued is beyond the power of the Court under 0.32 r.1. In making this submission the defendant relies essentially on Wardley A ustralia Limited v. The State of Westem A ustralia13 • It is true that in Wardley Toohey J with whom Deane J specifically agreed on the point, concluded that s.82(2) of the Act provided "a statutory barrier" to an amendment introducing a new cause of action more than three years after the date on which it had accrued (see p.562). The other members of the Court considered it unnecessary to determine the point. It was held in Jekos Holdings Ply Ltd v. A ustralian Horticultural Finance Ply Ltcf4 applying what Toohey J said in Wardley that since a claim for relief under s.87(1 )(A) of the Act was brought more than three years after the accrual of the cause of action, there was a 12 13 14 [ 198 5 J 1 Qd. R . 1 [1992J 175 C.L.R. 514 (1994) 2 Qd.R. 515 -- 8 of 11 -- 8 statutory barrier to the claim. A similar view was taken in Q.ID. C v. ANZ15 and in Kopittke & A nor v. Matheson & Ors 16 • These are single judge decisions of this Court. On the other hand the Full Court of South Australia in White v. Eurocycle 17 , was dealing with an application to amend a third party statement of claim so as to include a claim dependent on s.74H and held that s.741 was a procedural provision going to the remedy and did not go to the substance of the right. The basis of the reasoning involved a conclusion that the provisions providing for the time in which actions to enforce rights could be brought were separate from the provisions constituting the causes of action with the consequence that s.741 was "a condition of the remedy rather than the right". The Court does not appear to have considered the High Court's decision in Wardley but applied aspects of the decision of the Full Court of the Federal Court. In White the Court therefore gave leave to amend in terms having the consequence that the amendment took effect from the date of the proposed third party notice statement of claim giving notice of the s.74H claim to the other parties. Although I am inclined to favour the view of ss.74H and 741(2) taken in White, I do not think it is necessary to determine the point. On the view I have taken of the matter, if s.741 is to be construed as providing that the bringing of an action in the time specified is an element of the right constituted by s.74D rather than barring the remedy, a claim when the cause of action accrued more than three years ago must fail. That is a matter to be pleaded and determined in respect of each claim by an owner where the plaintiff claims a right to be indemnified by the defendant. The proposed amendment does not preclude a plea to the 15 16 17 unreported, Kiefel J., 16 September 1994 (1992) 16 M.V.R. 442 (1995) 64 S.A.S.R. 461 at 465/6 (Full Court) -- 9 of 11 -- 9 effect that a necessary element of the cause of action has not been established. On the other hand, on the assumption that the proposed amendment is procedural, it seems within the power conferred by the rules; the question is whether it should be allowed. The discretion is a general one, Adam v. Shiavon18 • Order 32 r.1 allows the imposition of such terms as may be just. In White v. EurocycleJ9 , as I have said the court considered it just to allow the amendment on terms that it took effect from the date of the delivery of the draft third party statement of claim giving notice of the claim. In Commomvealth of Australia v. International A ir Aid Pty Ltd & ado leave to amend was given in circumstances where it was strongly arguable that the limitation period in respect of additional causes of action had expired before notice was given to the respondents of the proposed amendments, but it was not possible to make a defInitive fmding on the question. Leave to amend was given conditional upon the applicant acknowledging the proceedings, insofar as the out of time causes of action were concerned, commenced on the date of giving of notice thus allowing the other party to plead and rely on the expiration of limitation periods applicable to those causes of action. I do not consider the rules applied in those cases relevantly differed to those applicable in this. The justice in the present case is to my mind satisfIed by giving leave to deliver the proposed amended statement of claim, omitting any plea in respect of prospective or future claims as the subject of a claim for indemnity and to take effect from the date of the defendant having been given notice of the amendment raising the s.74D claim with the defendant at liberty to plead the expiration of the limitation period based on that date. That, 18 19 20 [1985] 1 Qd.R. 1 at 8 (supra) unreported, Neaves J., Federal Court, 2 September 1994 -- 10 of 11 -- 10 of course, may be in the alternative to a plea to the effect that the expiration of the period tenninated the right rather than barred the remedy. -- 11 of 11 --