Built Development (Manly) Pty Ltd v Northern Beaches Council

By an Amended Notice of Motion filed on 21 May 2018, the plaintiffs seek to strike out certain paragraphs of the Commercial List Response (CLR) to the Amended Commercial List Statement (ACLS) pursuant to the inherent power of the Court.

In order to explain the issues raised by the motion, it is necessary to say something about the history of the proceedings.

As originally pleaded, the first plaintiff, Built Development (Manly) Pty Ltd (Built Manly), and the second plaintiff, (Athas Holdings Pty Ltd) (Athas) (together, the Developer) sought to recover damages from the defendant, the Northern Beaches Council, as the successor to the assets, rights and liabilities of the Manly Council, for what is said to be the wrongful repudiation of a Development Deed (the Deed) entered into on 27 April 2016 between Manly Council and the Developer relating to the redevelopment of a site occupied by the Whistler Street carpark and Manly Library (the Project). It will be convenient in this judgment to refer to the Manly Council and to the defendant, as its successor, as “the Council”.

By its Commercial List Response filed on 29 November 2017, the Council raised a number of defences to the Developer’s claim, one of which (pleaded in para 20) was that the Deed was invalid because:

In response to that defence, the plaintiffs filed the ACLS joining Built Group as the third plaintiff and pleading a case that the Council engaged in misleading and deceptive conduct in contravention of s 18 of the Australian Consumer Law. That case has two limbs. First, the plaintiffs plead that by certain conduct, the Council represented to the Developer that each of the Council’s conduct of the tender process, entry into the Deed and the granting of an extension “was authorised, was within power and was done in accordance with all applicable laws”.

Second, the plaintiffs contend that:

Paragraph 107 refers to invalidity “for any of the reasons alleged in the Commercial List Response”. The plaintiffs accept that those reasons are set out in para 20 (and not elsewhere). Consequently, the case that the Council engaged in misleading and deceptive conduct by silence is a case that the Council engaged in misleading and deceptive conduct by failing to inform the plaintiffs of the matters pleaded in para 20. Similarly, although not clear from the ACLS, the plaintiffs accept that the pleaded representation was misleading and deceptive by reason of the matters pleaded in para 20, and that it was by reason of that conduct that the plaintiffs suffered loss and damage.

The Council raises a number of defences to the case based on misleading and deceptive conduct. It is one of those defences that the plaintiffs seek to strike out. That defence occupies approximately 25 pages of the CLR. Its structure is to identify a broad range of matters which it is said Built Group and the Developer knew or ought to have known, and to plead (in para 232) that by reason of those matters:

The broad range of matters include the following:

The plaintiffs object to this pleading on two broad grounds. First, they submit that the allegation that the plaintiffs knew or ought to have known of various matters and a number of other allegations are inadequately particularised. More fundamentally, they submit that there is no logical connection between the broad range of facts which it is said the plaintiffs knew or ought to have known and the allegation in CLR para 232. Consequently, to allow the response to stand in its current form will greatly widen the factual issues in the case for no apparent benefit.

I accept that the allegations of knowledge are inadequately particularised. The plaintiffs are entitled to know who is alleged to have known the pleaded facts. They are also entitled to know by reason of what facts, matters and circumstances it is alleged that the plaintiffs ought to have known of the pleaded facts. A number of other allegations are also inadequately particularised. A clear example is the allegation in CLR para 167a). However, I do not think that that is a reason for striking out the pleading. The problem could be adequately addressed by a request for particulars and a response and an order for further and better particulars if that proved to be necessary.

On the other hand, in my opinion, the plaintiffs are right in relation to their second ground. The paragraphs in question raise a broad-ranging factual enquiry about the conduct of the Council in relation to the Project. However, there is no logical connection between those facts and the misleading and deceptive conduct relied on by the plaintiffs. If the conduct complained of is found to be misleading and deceptive, that must be because the Deed was invalid for one or more of the reasons pleaded in para 20 of the CLR and the Council failed to inform the plaintiffs of that fact. But none of the matters pleaded in the paragraphs to which objection is taken can shed any light on whether the plaintiffs were misled or deceived concerning the invalidity of the Deed for the reasons set out in para 20, whether they relied on the views they formed on that question for doing what they did or whether it was reasonable for them to rely on the views they formed on those questions (because, for example, it was obvious that those views were incorrect).

The defence that it appears the Council wishes to raise is a defence that, whatever the position in relation to the CLR para 20 grounds for invalidity, it must have been obvious to the plaintiffs that there was such opposition to the Project and such controversy about how approval of it was obtained from the Council that the Project would not have proceeded in any event, so that the plaintiffs could not have relied on any view they formed on the para 20 grounds for invalidity in deciding to proceed with the Project, or at least it was not reasonable for them to have done so.

However, that is not what is currently pleaded. Moreover, to the extent that that defence is concerned with actual reliance rather than reasonable reliance, it is difficult to see how it could be made out. The fact is that the Developer did enter into the Deed. It is difficult to see why it would have done so if it believed that doing so was a waste of time because, for one reason or another, the Project would not proceed. That is, it is difficult to see how it could be said that the plaintiffs did not rely on the (allegedly misleading and deceptive) conduct in relation to the CLR para 20 grounds of invalidity because they realised that the Project would not proceed in any event when the Developer entered into the Deed and the plaintiffs proceeded on the basis that it was enforceable.

On the other hand, it may be possible for the Council to plead an arguable case that any reasonable developer in the position of the plaintiffs would have appreciated that there was little prospect of the Project proceeding because of the opposition to it and the conduct of the Council, and that for that reason the plaintiffs could not reasonably have relied on the allegedly misleading and deceptive conduct in doing what they did. One difficulty that case may face is that none of the additional matters relating to the opposition to the Project and the conduct of the Council is pleaded as matters affecting the validity of the Deed. Consequently, if the Deed were valid but for the CLR para 20 grounds of invalidity, it is not apparent why a reasonable developer in the position of the plaintiffs would nonetheless take the view that it would never receive the benefit of it and therefore would not have entered into it.

Despite that, in my opinion, the Council should be given an opportunity if it wants to see whether it can remedy the defects with the existing CLR. It seems to me the most sensible way forward is to strike out the paragraphs of the CLR to which objection is taken and to give the Council leave to file an Amended Commercial List Response within 21 days of today’s date.

Therefore, the orders of the Court are:

I will hear the parties in relation to costs.