SUPREME COURT OF QUEENSLAND

CITATION:	Mirvac Queensland Pty Ltd & Anor v Shamrock Civil Engineering Pty Ltd & Ors [2015] QSC 271	
PARTIES:	MIRVAC QUEENSLAND PTY LTD
(ACN 060 411 207)
(first plaintiff)
and
MIRVAC CONSTRUCTIONS (QLD) PTY LTD
(ACN 088 536 476)
(second plaintiff)
v
SHAMROCK CIVIL ENGINEERING PTY LTD
(ACN 066 655 856)
(first defendant)
and
MPN CONSULTING PTY LTD 
(ACN 062 191 799)
(second defendant/first third party)
and
ROCLA PTY LTD 
(ACN 000 032 191)
(second third party)	
FILE NO:	BS No 5113 of 2013	
DIVISION:	Trial Division	
PROCEEDING:	Application	
ORIGINATING COURT:	Supreme Court at Brisbane	
DELIVERED ON:	22 September 2015	
DELIVERED AT:	Brisbane	
HEARING DATE:	17 September 2015	
JUDGE:	Douglas J	
ORDER:	1.	Strike out paras 26F, 33(i), 38(i) and 43(i) of the second further amended statement of claim 
2.	Leave is granted to the plaintiffs to re-plead 
3.	Direct that the plaintiffs deliver a draft third further amended statement of claim by 4:00PM on Friday 25 September 2015
4.	The plaintiffs pay the first and second defendants’ and second third parties’ costs of the application	
CATCHWORDS:	PROCEDURE –  SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS – PLEADING – STATEMENT OF CLAIM – where the first plaintiff was required by the Brisbane City Council to provide a stormwater harvesting system in a park now owned by the Council in order to comply with development approval conditions – where the first defendant was engaged to construct and install the system – where the second defendant was engaged to aid in the design and documentation of the system – where the stormwater harvesting system installed subsequently failed and was abandoned – where the first plaintiff  was relieved from complying with the development approval conditions by the Council insofar as they included a requirement to provide a stormwater harvesting system in the park now owned once again by the Council – where the first defendant was sued for breach of contract and for damages for negligence and the second defendant was sued in tort – whether the first plaintiff properly pleaded the claims for damages 

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54, cited
LBS Holdings Pty Ltd v The Body Corporate for Condor Community Title Scheme 13200 [2004] QSC 229, cited
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377; [1951] HCA 79, cited
Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2004] QSC 457, cited
UI International Pty Ltd v Interworks Architects Pty Ltd [2008] 2 Qd R 158; [2007] QCA 402, cited
	
COUNSEL:	P A Hastie QC for the plaintiffs
D P O’Brien QC with P J McCafferty for the first defendant
J B Sweeney for the second defendant and first third party
D J Pyle for the second third party	
SOLICITORS:	Minter Ellison for the plaintiffs
TressCox Lawyers for the first defendant
Carter Newell Lawyers for the second defendant and first third party
Clayton Utz for the second third party	

[1]	These are applications to strike out particular paragraphs of a second further amended statement of claim.  The action has been set down for a two week trial due to commence on 2 November 2015.  

Background
[2]	The issue is whether the plaintiffs have properly pleaded claims for damages arising out of the failure of the construction of a stormwater harvesting system for a landscaped area for a project known as “Waterfront Newstead”.  The stormwater harvesting system was intended to be placed in a public park which has since been called Waterfront Park.  It is now on land owned by the Brisbane City Council which had also been owned by the Council originally but which was transferred to the first plaintiff as part of the development site in about May 2008.  It was then delivered by the first plaintiff to the Council in about September 2012, title having been transferred in March 2011.  
[3]	The stormwater harvesting system was proposed by the plaintiffs as part of the development application process which was approved by the Council.  Paragraph 7A of the second further amended statement of claim alleges that it was included in the development as an “environmentally sustainable design [initiative] … for a landscaped area … which was to become … a public park …”.
[4]	The first defendant was engaged to construct and install the system.  It engaged the second defendant to aid in the design and documentation of the system.  The pleading alleges that the installation, including the installation of some tanks as part of the system, failed from about December 2009 as a consequence of differential movement in the soils and lack of support provided by the soils beside the tanks that had been installed under the park. By about April 2012 there was significant damage to the tanks and a partial collapse of one of them, destroying their structural integrity.
[5]	The pleading continues by alleging that rectification would have required the removal of fill placed over and around the tanks, the removal of the tanks and related stormwater harvesting system, the manufacture and supply of new tanks, the excavation of the trench and the placement of new tanks, fill and commissioning which would have exceeded the cost of their original installation.  
[6]	Paragraph 26D of the pleading then goes on to allege that, “in order to mitigate its loss” the plaintiffs, with the approval of the Council, had the tanks filled and abandoned the stormwater harvesting system.  Then, on or about 14 September 2012, the first plaintiff handed the park back to the Council.
[7]	A critical paragraph of the pleading is para 26F which reads as follows:
“In consequence of the failure of the stormwater harvesting system the plaintiffs lost the benefit and use of the stormwater harvesting system in Waterfront Park.
Particulars
The best particulars the plaintiffs can provide of the benefit of the stormwater harvesting system is the cost it agreed to and did pay the first defendant … in the sum of $1,511,627 plus variations unrelated to the rectification works in the sum of $231,834.40 and the cost it paid to SSI in the sum of $84,461.60.”
[8]	That paragraph of the pleading is one of the challenged allegations.  The relevant paragraphs sought to be struck out by the first defendant are paras 26F, 33(i) and 38(i).  It is sued for breach of contract and for damages for negligence.  The second defendant, which is sued only in tort, not contract, seeks to strike out para 43(i).  
[9]	It is apparent that the first plaintiff has since been relieved from complying with the development approval conditions by the Council insofar as they include a requirement to provide a stormwater harvesting system in the park now owned once again by the Council.  Nor has the Council sought to be reimbursed for any loss it may have suffered from not now having such a system in its park.  There is no pleading at present that the value of the plaintiffs’ development, which covers a number of buildings around the park, was affected by the failure to commission the stormwater harvesting system.
[10]	Paragraphs 33(i) and 38(i) read as follows:
“33.	The first plaintiff has suffered loss and damage as a result of the first defendant’s breaches pleaded in paragraphs 27, 28, 30, 31 and 32 as follows:
Particulars
	(i)	expenses incurred under the Shamrock Subcontract Variation (and variations thereto) in the construction and installation and attempted rectification of the failed stormwater harvesting and treatment system - $2,281,014.00 …
…
38.	The first plaintiff has suffered loss and damage as a result of the first defendant’s breach pleaded in paragraph 37 above, that loss being a reasonably foreseeable consequence of the defendant’s breach of duty as follows:
Particulars
	(i)	construction and installation the loss of the benefit and use of the failed stormwater harvesting and treatment system – calculated by reference to the capital cost of the system in the sum of $2,281,014.00 $1,827,923.00 …”
[11]	The second defendant similarly attacks para 43(i) of the pleading.  It reads as follows:
“43.	The first plaintiff has suffered loss and damage as a result of the second defendant’s breach pleaded in paragraph 42 above, that loss being a reasonably foreseeable consequence of the defendant’s breach of duty as follows:
Particulars
	(i)	construction and installation the loss of the benefit and use of the failed stormwater harvesting and treatment system and of the moneys paid for that system – $2,281,014.00 calculated by reference to the capital cost of the system in the sum of $1,827,923.00 …”

[12]	The challenge by the defendants relates only to the “capital cost” claim of $1,827,923, not to the claim for rectification costs.
Submissions and consideration
[13]	The first defendant’s argument that paras 26F, 33(i) and 38(i) should be struck out is based on several premises.  
[14]	The first argument is that the first plaintiff was never intended to benefit from or otherwise use the stormwater harvesting system.  Rather that was intended to be for the benefit of the Council on land which reverted to it.  
[15]	As the pleading stands, having regard to the uncontroverted fact that the Council now owns the land, there is no factual basis in the pleading to conclude that the plaintiffs have lost the benefit and use of the stormwater harvesting system.  Mr Hastie QC for the plaintiffs indicated that the plaintiffs perceived at least a marketing advantage in being able to promote the development as one which included environmentally sustainable design initiatives, as alleged in para 7A of the pleading, but there are no further facts pleaded or particularised to make that point or show how it would benefit the plaintiffs financially or otherwise.  He conceded that para 26F could be better particularised to allege in what respects the plaintiffs had lost the benefit and use of the stormwater harvesting system.  At present, however, the pleading does not disclose any particular benefit or use of the stormwater harvesting system available to the plaintiffs that has been lost.
[16]	The second argument for the first defendant was that, where it is alleged that building or construction work is defective, the appropriate measure of damages will be either the rectification costs or, failing that, that measure which reflects the diminished value of an asset.  Mr O’Brien QC submitted that, where rectification cannot be carried out, as here, and where the value of the asset is not diminished, there is simply no loss for which the plaintiffs should be compensated.  
[17]	The third argument for the first defendant was that the only benefit to the first plaintiff of its installation and payment for the stormwater harvesting system was its entitlement to pursue the development, on the basis that it was never intended to receive any particular benefit from the installation other than the development approval.  Once the parkland had been transferred back to the Council, which agreed to the course that had been adopted of filling the tanks and abandoning the system, the first plaintiff had suffered no loss compensable on the normal principles for the award of damages for breach of contract or in tort.  The first plaintiff was in precisely the same position as it would have been had the contract been performed or if any alleged negligence with respect to the design and installation of the system had not occurred.  
[18]	The fourth argument advanced for the first defendant was that, if the position advanced by the plaintiffs was correct, then the first plaintiff would, if successful, receive a windfall such that it would be put in a better position than it would have been in had the contract been performed.  The rationale for that submission was that it was always the position that the first plaintiff was obliged to spend money on the system for the sole benefit of the Council and for which the first plaintiff was not to be reimbursed.  It received the benefit of undertaking its proposed development under the development approval in attempting to install the system, but the fact that the system was not successfully completed was of no consequence to it.  In other words, the funds applied towards the design and installation of the system needed to be spent in order to comply with the conditions and to permit the first plaintiff to recover the costs of the system would be to sanction double recovery.
[19]	Reliance was placed on the decision of the High Court in Commonwealth of Australia v Amann Aviation Pty Ltd.  There Mason CJ and Dawson J said:
“Thus, if a plaintiff’s expenditure would not have been fully recouped had the contract been performed, then full compensation for the wasted expenditure would not be awarded.  A plaintiff is only entitled to damages for an amount equivalent to that which would have been earned had the contract been fully performed.  In this way, the award of damages assessed by reference to a plaintiff’s expenditure is in complete conformity with the principle that an award of damages for breach of contract should place a plaintiff in the same position as if the contract had been performed.” (emphasis added) 
[20]	Similarly, reliance was placed on the following passage from Deane J’s judgment:
“It should be apparent from what has been said above that an award of reliance damages does not represent the direct recovery of the wasted net expenditure.  The basis of an award of reliance damages is the ordinary one in an action for repudiation or breach, namely that the plaintiff is, so far as money can do it, to be placed in the same situation with respect to damages as if the repudiation or breach had not occurred.  Such an award represents the recovery of the wasted net expenditure only in the indirect sense that, in the assessment of damages, the net benefits which would have been derived but for the repudiation or breach are quantified in monetary terms by reference to the presumption that their value would have at least equalled that wasted expenditure.  In other words, the wasted expenditure represents ‘an alternative measure of gains prevented’.”  (emphasis added) 
[21]	It was submitted that those passages support the proposition that the plaintiffs can only recover wasted expenditure to the extent to which the alleged breaches by the first defendant prevented them from achieving the gains they sought to obtain from performance by the first defendant.  In the circumstances of this case, the plaintiffs have not been prevented from obtaining any gain.  Further it was argued that, to recover wasted expenditure, the plaintiffs would have to plead as a material fact that, but for the breach, they would have recovered the expenditure they outlaid.  
[22]	Similar considerations affected the claim in negligence with the point being made that the plaintiffs have not pleaded any material facts as to the position they would have been in if there had been no negligence by either the first defendant or the second defendant in installing the system.  The argument was that such material facts must be pleaded so that a proper causal link can be seen between the alleged negligence and the loss claimed.  
[23]	That submission was also made on behalf of the second defendant in its criticism of para 43(i) of the pleading.  It, through Mr Sweeney, criticised the pleading’s assertion that the first plaintiff suffered loss and damage “as a result of” the second defendant’s breach, described as the loss of the benefit and use of the stormwater harvesting and treatment system and of the moneys paid for that system calculated by reference to the capital cost of the system.  He submitted that such a form of pleading, alleging a causative relationship without pleading the material facts said to give rise to the causal connection, was impermissible.
[24]	The argument for the plaintiffs sought to draw comfort from passages in McRae v Commonwealth Disposals Commission and other statements in Commonwealth v Amann Aviation Pty Ltd.  They dealt with the situation where the plaintiff maintains that it is not possible to determine what position it would have been in had the contract been fully performed, in which case, if that is established, as McHugh J said:
“[I]t is only fair that the defendant should reimburse the plaintiff for expenditure which it has wasted as the result of the breach.”
[25]	The case pleaded, however, does not seek to establish what different position the plaintiffs would have been in had the contract been fully performed.  Nor does the pleading allege that, for example, the first defendant’s breach has made it impossible to ascertain whether or not it would have made a profit from the performance of the contract.  It may be, as Mr Hastie submitted, that the pleading could be re-pleaded or better particularised to make such allegations.  At present, however, it does not.
Conclusion and orders
[26]	In those circumstances, therefore, I have concluded that it is appropriate to strike out paras 26F, 33(i), 38(i) and 43(i).  Because of the submissions that Mr Hastie made, however, it is appropriate to grant leave to re-plead.  Considering that the case is scheduled to commence in early November, it will be necessary to deliver such a fresh pleading speedily and I shall make directions to assist that to be achieved. 
[27]	After hearing the parties as to further directions and costs, I made the following further orders:
1.	Direct that the plaintiffs deliver a draft third further amended statement of claim by 4:00PM on Friday 25 September 2015.
2.	The plaintiffs pay the first and second defendants’ and second third parties’ costs of the application.