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Actron Investments Queensland Pty Limited v D.D.S Project Management Pty Ltd QSC 306
SUPREME COURT OF QUEENSLAND
Actron Investments Queensland Pty Limited v D.D.S Project Management Pty Ltd & Ors  QSC 306
ACTRON INVESTMENTS QUEENSLAND PTY LIMITED ACN 124 426 455
D.D.S PROJECT MANAGEMENT PTY LTD
ACN 074 814 725
DEQ CONSULTING PTY LTD ACN 065 711 248
A1 EXPRESS PLAN APPROVAL SERVICES PTY LIMITED ACN 082 452 499
BS2188 of 2012
22 December 2016
3-6, 9-11 May and 24 June 2016
TORTS – NEGLIGENCE – STATUTES, REGULATIONS, ETC – APPLICABILITY AND EFFECT IN ACTIONS FOR NEGLIGENCE – GENERALLY – where plaintiff purchased a newly constructed industrial building where the floor was a slab on ground – where site contained marine clays that consolidated and caused the slab to settle – where defendant engineer designed the slab on ground and certified the slab complied with the Standard Building Regulation 1993 (Qld) – where plaintiff’s use of the building as a warehouse was affected by the uneven slab settlement – whether defendant owed plaintiff a duty of care in designing and certifying the slab
TORTS – NEGLIGENCE – ESSENTIALS OF ACTION FOR NEGLIGENCE – DUTY OF CARE – WHERE ECONOMIC OR FINANCIAL LOSS – CARELESS ACTS OR OMISSIONS – where plaintiff suffered economic loss caused by replacing the floor of the industrial building – where plaintiff was the subsequent purchaser of building – whether plaintiff vulnerable in the sense described in Brookfield and Woolcock – whether a duty of care should be imposed on the defendant in designing the floor
Trade Practices Act 1974 (Cth), s 52, s 75B
Building Act 1975 (Qld), s 14, s 45
Building Regulation 2006 (Qld), s 17, s 18, s 46, s 48, s 56
Standard Building Regulation 1993 (Qld), s 23
Bamford v Albert Shire Council  2 Qd R 125;  QCA 462, considered
Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185;  HCA 36, considered
Bryan v Maloney (1995) 182 CLR 609;  HCA 17, considered
Chan v Acres  NSWSC 1885, considered
Moorabool Shire Council v Taitapanui (2006) 14 VR 55;  VSCA 30, considered
Western Districts Developments Pty Ltd v Baulkham Hills Shire Council (2009) 75 NSWLR 706;  NSWCA 283, considered
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515;  HCA 16, considered
A F Fernon for the plaintiff
A M Musgrave for the second and third defendants
Low Doherty & Stratford Lawyers for the plaintiff
HBM Lawyers for the second and third defendants
- The plaintiff is in a group of companies involved in the business of the design, manufacture, sale, installation and service of residential and commercial air-conditioning units. It purchased the property situated at 119 Benjamin Place, Lytton described as Lot 10 on SP174502 under contract dated 22 March 2007 (the contract) from Efstathis Property Developments Pty Ltd (Efstathis) of which Mr Efstathis was a director. The purchase was completed on 16 April 2007. The property is in a community title scheme known as “Portlink” that was developed by Pradella Constructions which sold the property as vacant land to Efstathis in late 2004.
- The first defendant (DDS) and Efstathis had been involved in many commercial property development projects where DDS would build for Efstathis under a Design and Construct Contract. Mr McFadden who is the director of DDS and a licensed builder was involved with Efstathis in doing the preliminary investigations for the development of the subject property from around 2004. The development approval for use of the property for industry and warehouse was obtained by Efstathis on 25 May 2006. Efstathis entered into a Design and Construct Contract with DDS by or about August 2006 (the D&C Contract) for the construction of a commercial warehouse building on the property. Clause 1.7 of the D&C Contract provided that neither party may assign that contract without the written consent of the other. (In fact, Mr McFadden made it clear in his evidence that he would never have consented to the assignment by Efstathis of its rights under the D&C Contract to the purchaser of the property.)
- The second defendant (DEQ) carried on the business of consultant civil, structural and geotechnical engineers and had been first approached in about February 2005 by DDS to quote for engineering fees on preliminary drawings for an industrial warehouse building on the property, incorporating a concrete slab on ground. The quote covered the structural and civil engineering works and inspections during construction. The third defendant Mr Henry was at all material times a director of DEQ and a registered engineer with experience in the structural, geotechnical and civil areas. DEQ was then retained by DDS to do the structural drawings in about May 2006. The structural drawings S01 to S12 (the S drawings) were prepared in June 2006 and issued on 5 July 2006 to DDS.
- Mr Henry on behalf of DEQ carried out a site investigation of the property and provided DDS with a report dated 21 July 2006 (the first report) which Mr McFadden had requested be the “bare minimum” to obtain building approval. The contractor engaged by DDS to do the piling on site for the perimeter provided DDS with a geotechnical report for a nearby site (about 200m away) referred to as Lots 29 to 31 undertaken in March 2006. Mr Gillroy of DDS passed that geotechnical report onto DEQ and Mr Henry on 24 August 2006. As a result DEQ provided a further report (the second report) in the form of a letter dated 25 August 2006 (exhibit 34) to DDS. There had been an issue between DDS and DEQ, as to whether that report was sent by DEQ or received by DDS. The evidence adduced by Mr Henry and Ms Reese and through Telstra employee Mr Miller was such that DEQ and Mr Henry discharged the onus of proving the report was sent by DEQ to DDS and received by DDS on 25 August 2006. Following the second report, drawing S02 was amended to provide for the piling of that part of the slab that supported the mezzanine office area.
- Mr Henry on behalf of DEQ issued the Form 15 Compliance Certificate – Design for the property. The date on which it was originally issued is unclear, but consistent with the metadata for the document (exhibit 43), it is likely it was issued on 18 August 2006. It was re-issued on 22 April 2007. The Form 15 was issued when the Standard Building Regulation 1993 (Qld) (SBR) was in force. It certified that the structural elements detailed on DEQ’s drawings 06 0603 S01 to S12 P1, if installed and carried out in accordance with the information contained in the certificate would comply with the SBR. The following standards were listed as the basis of certification:
“AS1170.1 – Dead & Live Loads, AS1170.2 – Wind Loads, AS1170.4 – Earthquake Loads,
AS3600 – Concrete Structures Code, AS3700 – Masonry Code, AS1684 – Timber Framing Code,
AS4100 – Steel Structures Code, BCA – Building Code of Australia Clause C1.11
AS2870 – Residential Slabs & Footings-Construction.”
- DDS got oral approval from the fifth defendant in August 2006 to commence the building works as a fast-track project, in anticipation of lodging with the fourth defendant all engineering and architectural drawings for the project required to obtain the necessary building approval.
- Mr Henry on behalf of DEQ issued the Form 16 Compliance Certificate - Construction which purported to be under the SBR for the building constructed on the property, certifying that the specified components had been built generally in accordance with the development approval, DEQ’s drawings 060603 S01 to S12 Rev P and the SBR. The certificate was originally dated 1 March 2007, but was re-issued with the correct description of the property on 22 April 2007. (While the Form 16 was not in the approved form under the Building Regulation 2006 (Qld) (the Regulation), it contained sufficient information to assist the building certifier approve the building development and nothing turns on the use of the wrong form.)
- The written approval with conditions in respect of the application for building works on the subject site was issued by the fourth defendant on 2 March 2007 for a building with the classification of class 8.
- A certificate of classification dated 4 April 2007 was issued for the ground and first floors of the building constructed on the property. They were shown as class 8. The building description was described as “industry”. The building certifier was the fifth defendant on behalf of the fourth defendant.
- Mr Henry admits that he was a competent person within the meaning of the SBR and the Regulation appointed to assist the building certifier by certifying works as described in the Forms 15 and 16. The parties agree that s 56 of the Regulation provides that a properly made building development application that has been made, but not yet determined, before 1 September 2006 must still be resolved under the SBR, but as in this matter a properly made application was not made until December 2006, it is the Regulation that applies.
- The property was marketed on behalf of Efstathis for sale or lease and described as “architecturally designed, single free-standing corporate headquarters/warehouse” (exhibit 6). The marketing material provided to the plaintiff prior to entering into the contract includes some of the George Group architectural drawings and a document entitled “Lot 10 Benjamin Place, Lytton Schedule of Finishes”. Under the heading “Floors”, it was noted:
“Warehouse floor has been designed for loading of 6 Ton rubber tyred forklift.
Refer to engineering design drawings for pallet racking requirements/ loadings.”
- The contract between the plaintiff and Efstathis is in the standard form contract for Commercial Lots in a Community Title Scheme (first edition) with some amendments. Relevantly, the standard clause 4 which made the contract conditional on building and pest inspection reports was shown in the reference schedule as not applicable. The property had been advertised for sale at a price of $3.3m (plus GST), but the plaintiff offered to purchase for cash for $3.175m (plus GST) (exhibit 4) and that was the purchase price in the contract.
- Special condition 2 of the contract dealt with completion of the improvements on the property as contemplated by the plans in schedule 1 to the contract and the specifications in schedule 2 to the contract. Clause 2.3 provided:
“During the Defects Liability Period the Buyer may on behalf of the Seller notify the Builder in accordance with the Building Contract as to any defects in the construction of the Improvements.”
- The term Defects Liability Period was defined in the special conditions as six calendar months from the issue of the certificate of classification. The plaintiff’s solicitors sought a letter from DDS acknowledging its obligations in relation to the defects liability period.
- A letter dated 20 March 2007 from DDS addressed to the purchaser of Lot 10 was provided to the plaintiff’s solicitors that identified that DDS was the “contract builders of the building works” on Lot 10 and was in these terms:
“There is a defects liability period of 6 calendar months from the date of issue of the Certificate of Classification.
We acknowledge that we will be liable to any future purchaser to rectify any defects in the building works notified to us during the defects liability period in accordance with the attached clauses from the building contract.”
- Clause 2.4 of the special conditions of the contract provided:
“On completion the Seller assigns to the Buyer any rights of enforcement that the Seller may have against the Builder. The Buyer:-
- May in the name of the Seller institute proceedings against the Builder; and
- Require the Seller not to release any retention
subject in both cases to appropriate indemnities and security for costs as are reasonably required by the Seller being provided by the Buyer and the Buyer executing a deed of indemnity in favour of the Seller in such form as the Seller shall reasonably require.”
- The plaintiff did not take any steps prior to or at settlement to perfect the assignment provided for in clause 2.4. The plaintiff did not use the procedure provided for in clause 2.4 for pursuing any claim to enforce the D&C Contract against DDS.
- Clause 2.5 of the special conditions provided:
“Save as provided by this Special Condition the Seller does not warrant that the Improvements have been constructed in a good and workmanlike manner or are otherwise fit for any particular purpose.”
- Under clause 4.1 of the special conditions the date of completion of the contract was the later of 16 April 2007 or seven days after the seller provided the buyer with a copy of the certificate of classification.
- Clause 5.1 of the special conditions provided:
“If the Certificate of Classification shall not have issued by the Termination Date either party may terminate this Contract and Standard Condition 2.3(3) shall apply.”
- The termination date was defined in the special conditions to mean 30 September 2007. On 16 April 2007 Efstathis sent a letter to the plaintiff accompanying a folder that contained copies of the certificate of classification, the Forms 15 and 16, the engineering drawings for job number 06-0603 S01 to S12 which were all version P1, except for drawings S02 and S07 which were version P2, the schedule of colours and finishes and other drawings. Efstathis did not send the two DEQ soil reports dated 21 July and 25 August 2006. By letter dated 26 April 2007, Efstathis sent the plaintiff copies of the amended Forms 15 and 16 signed by Mr Henry and dated 22 April 2007. Apart from the date of signing the forms, the only amendment in these forms related to the description of the property, changing the suburb from Tingalpa to Lytton.
- After the plaintiff acquired the property, it installed pallet racking in about May/June 2007. The racking was up to four levels high, except the one bay which was six levels high. The plaintiff then used the property as a warehouse for the storage of air-conditioning units and parts, pending their sale and installation.
- Issues arose with respect to the failure of the concrete slab of the building. Investigations as to the cause of the subsiding slab commenced in 2009. As a result of obtaining the results of a geotechnical investigation of the slab, the plaintiff commenced this proceeding on 9 March 2012 to pursue claims for pure economic loss arising from the failure of the floating slab on which the warehouse was built on the property.
- In late 2013 the plaintiff relocated the warehousing part of its business to leased premises at 142-150 Benjamin Place by pulling down the racking, storing some racking in the carpark of the subject property, and reinstalling some racking at the temporary premises, so that rectification works in respect of the concrete slab could be carried out. This involved removing the floating slab and replacing it with a slab on piles. The plaintiff then re-installed the pallet racking and was able to resume conducting its business fully from the property. As a result of the rectification works undertaken by the plaintiff, the building classification for the ground floor of the property changed on 6 February 2014 from class 8 to class 7b.
- The plaintiff settled its claim against the fourth and fifth defendants for $100,000. On the fifth day of the trial the plaintiff settled its claim against the first defendant on a confidential basis.
- The plaintiff sues DEQ and Mr Henry for damages for breach of the duty of care owed in tort for the design of the slab and the issue of the Form 15 and/or Form 16 and for damages for misleading and deceptive conduct (in reliance on s 52 and s 75B respectively of the Trade Practices Act 1974 (Cth)) (TPA) in respect of the issue of the Form 15 and/or Form 16. On 13 July 2016 the parties provided a further amended agreed statement of issues (which will become exhibit 54).
- By the end of the trial, the list of what was truly in issue had reduced significantly. That meant that some of the matters that were explored in evidence, such as whether there should have been compaction of the existing fill on site before construction of the slab, became irrelevant to the resolution of the claims. For that reason, I have endeavoured to limit the recitation of the evidence to what is necessary to determine the outstanding issues. As Mr Fernon of counsel for the plaintiff acknowledged during submissions (Transcript 8-8), the ultimate issue is whether DEQ and Mr Henry should have designed a floating slab at all, having regard to the range of potential uses for the structure, or whether the design should take account of the owner’s subjective requirements and instructions.
- The plaintiff’s claim against DEQ and Mr Henry based on representations was originally based on the representation alleged to be implicit in the Form 16. It was alleged in paragraph 45 of the statement of claim that the Form 16 represented that the building works had been built generally in accordance with the development approval, the various drawings prepared by DEQ and the SBR. The nature of the case based on representations was expanded to include in paragraph 44A of the statement of claim the representation implicit in the issue of the Form 15 that DEQ and Mr Henry represented that if the building works described in the S drawings were installed and carried out in accordance with the information contained in the Form 15, including any referenced documentation, it would comply with the SBR. By the end of the trial, the representation case was effectively limited to the Form 15 which was linked with the allegation in tort against DEQ and Mr Henry that the design of a slab on ground for the subject building could never comply with the Building Code of Australia (BCA).
- The principal issues to be decided are:
- identification of the standards that applied to the design of the concrete floor slab;
- whether there was a breach by DEQ and Mr Henry of relevant design standards;
- whether the issuing of the Form 15 constituted a breach of the SBR or Regulation;
- whether the plaintiff was vulnerable in any relevant sense to any want of reasonable care by DEQ or Mr Henry in the design and/or certification of the concrete slab;
- whether the representation that was implicit by the issue of the Form 15 amounted to misleading or deceptive conduct.
- When Mr McFadden was undertaking preliminary discussions with Mr Efstathis about the proposed development, Mr Efstathis provided him with a copy of the report from engineers Weathered Howe Pty Ltd to Pradella Developments in respect of Lot 23 of the Portlink Development, Lytton dated 28 June 2005 (exhibit 13) which dealt with the placement and compaction of fill on Lots 22 and 23 from which Mr McFadden inferred there had been no filling carried out on Lot 10, as the developer would have been obliged pursuant to condition 13(c) of the development application to inform Efstathis of any compaction testing results, if there had been filling on Lot 10. Mr Efstathis also provided Mr McFadden with a copy of a report prepared by Soil Surveys dated 16 October 2002 prepared for Pradella Constructions in respect of the proposed industrial subdivision at Lytton Road (Lot 1 on RP108559 and Lot 33 on S151833) (exhibit 14). Mr Efstathis proposed to Mr McFadden a construction cost on a per square metre basis which gave Mr McFadden some guidance for calculating the building contract lump sum. Mr McFadden explained that at the end of any project he did with Mr Efstathis, they would share the savings, if the project came in under budget, but that arrangement was not incorporated into the formal building contract. It was an arrangement that applied to the subject building.
- The D&C Contract is in the form of Decon 2-1998 produced by the Master Builders. The Principal’s Project Requirements for the Works were limited to the architectural drawings from the George Group being 2666/01 to 2666/09 set out in schedule 3. There is a definition of “Contractor’s Design Deliverables” as “the design documents and other documents prepared by the Contractor for the execution of the Project which are listed in Schedule 4”. The only documents listed in schedule 4 is the schedule of finishes which was incorporated into the D&C Contract. The contract sum was set out in schedule 6 as $1,515,249 (inclusive of GST). A provisional sum of $85,000 was allowed for piling for the perimeter wall on the basis that it was anticipated that subsurface and site conditions might cause additional expense for piling of the perimeter, as piles were charged for by the metre and not by the number.
- Clause 7.1.1 provides for the items of work in schedule 12 to be “expressly excluded from the Works”. Schedule 12 refers to the schedule of finishes. In the section of the schedule of finishes that is headed “Floors”, the following is noted:
“Warehouse floor has been designed for loading of 6 Ton rubber tired forklift.
No allowance has been made for pallet racking or punching, for further details please refers (sic) to engineering design drawings.”
- The schedule of finishes in the marketing material for the property was obviously based on the schedule of finishes in the D&C Contract, but omitted the express reference to “no allowance has been made for pallet racking or punching”, while still making it clear that reference should be made to engineering design drawings for pallet racking requirements/loadings.
- Mr McFadden described the building as constructed as comprising the tilt slab walls, the roof and the steel framing structure which were all supported on deep piled foundations as one element and the free floating floor slab that was constructed and moved independently as the second element of the building.
- For the purpose of this proceeding, Mr Henry prepared a design for a fully piled slab (exhibit 15) which Mr McFadden costed using 2006 figures which resulted in an estimated additional cost of $400,812.20 (including a profit margin of $52,279.85 calculated at the rate applied to the project, but exclusive of GST) to construct a fully piled slab (exhibit 16).
- After the plaintiff’s purchase, Mr McFadden was engaged by the plaintiff to fit out the office area in the building. He noticed at the same time that some pallet racking was delivered and he spoke to a person he described as one of the plaintiff’s employees in relation to the pallet racking, observing “You need to make sure you’ve got the right feet on there. Have you checked the engineering on the job? It’s a floating floor. There’s going to be some movement.” Mr McFadden could not remember the name of the employee to whom he spoke, but said it was an Italian sounding name and assumed from the documents he read in connection with the proceeding that it must have been Mr Aldo Borazio (Transcript 3-8).
- Mr Borazio was the national sales and marketing manager of the plaintiff in 2007 and was involved in locating the subject building for purchase by the plaintiff. He has no recollection whatsoever of the conversation which Mr McFadden suggested in his evidence he had with Mr Borazio (Transcript 7-5).
- It was clearly supposition on Mr McFadden’s part that it was Mr Borazio with whom he had the conversation. In light of his senior position within the plaintiff’s organisation and his sporadic visits to Queensland, I do not accept Mr McFadden’s evidence that he had that conversation with Mr Borazio or with any person with relevant authority in the plaintiff’s organisation without such a conversation being reported to the plaintiff’s chief executive officer which did not occur.
Drawings and reports prepared by DEQ
- Before Mr Henry did the fee proposal for DDS for the proposed development, he had been told by Mr McFadden that he wanted him to design an industrial building with a slab on grade floor. (The expression “slab on grade” was used by Mr Henry interchangeably with “slab on ground”.) Mr Henry was aware that Mr McFadden had knowledge of the ground conditions in the area, particularly that the area had settlement issues and that there were fill and marine clays on site. Mr Henry was also familiar with the area, anticipating the site conditions would be imported fill over marine clays. Mr McFadden conveyed to Mr Henry the requirements of Efstathis that the building have six metres of storage and that the portal frame accommodate a five tonne gantry frame.
- The engineering drawings included in the trial bundle (exhibit 1, Tab 44) are those the subject of the building approval and stamped by the fourth defendant.
- Drawing S01 contains the general notes for the proposed industrial building. Under the heading “General”, there is a note to the effect that the structural work shown on the drawings has been designed for a live load of 15 kPa in respect of the warehouse floor.
- There is the following note in the box headed “Floor Slabs”:
“The slabs have been designed as a floating slab. Hence movement in the subgrade will result in vertical & curvature movements in the slab along with some minor cracking. Expected movement to be in the range of ? 40-70mm.”
- The following note is found on drawing S01 under the heading “Concrete”:
“Concrete slab surface tolerance for internal slabs shall be the most stringent of the following
- ‐ as required by the applied surface finish.
- ‐ 3mm over a 3000 straight edge.”
- Mr Henry was cross-examined on whether that reference to “3mm over a 3000 straight edge” was a reference to the standard set by the Cement and Concrete Association of Australia’s “Industrial Floors and Pavements Guidelines for Design Construction and Specification” known as T48. Mr Henry explained that it was not a reference to T48, but instead it was a reference to construction installation tolerances and 3 mm in 3 metres is the best practice that can be achieved with hand trowelling (Transcript 5-109). Mr Henry did not use T48, but used the British version in designing concrete floors (Transcript 6-14).
- Another version of the S drawings (exhibit 20) shows that “40-70mm” was preceded by plus and minus signs. Evidence was given that these drawings were sent electronically and that sometimes when they were printed out, the designation of the plus and minus signs together was shown by a different symbol such as “?”. Mr Henry’s evidence was that the difference arises, because some printers do not recognise different symbols in the different versions of the Computer Aided Design software that are used. The fact that, on the same page of the approved drawings where a question mark precedes “40-70mm”, there is another dimension that is preceded by plus and minus signs that are printed out as such does not preclude my acceptance of Mr Henry’s evidence based on his experience in working with this software that the note was incorporated by him on the drawing with the plus and minus signs preceding “40-70mm”, as shown in exhibit 20. This is supported by Mr McFadden’s evidence who remembered seeing “a plus or minus” on the plan (Transcript 3-72).
- One of the reasons that Mr Henry referenced AS 2870 even though it applies to residential slabs, as it is the only code that describes seasonal surface movement and Mr Henry had selected the H classification which applies to movement of 40 to 70mm.
- Drawing S02 which was the slab footing plan contained these notes under the heading “Floor Design Loads For Slab”:
“(a)Uniformly distribute loading of 2.0 kPa per m height applied evenly to slab.
- 6 Tonne front axle load of solid rubber tyre fork lift trucks with single wheel axles. ”
In calculating the live load of 15 kPa for the warehouse floor, Mr Henry used a height of 7.5m for the building at the “knee” where the roof meets the vertical member which supports it.
- There is another note on this drawing in these terms:
“The slab has been designed as a floating slab. Thus the floor will under go surface movement that occurs. The floor may also experience settlement due to consolidation at compressible marine clays on site. Differential settlement may occur.”
This note communicated the potential for the floor to undergo two types of movement, namely the surface movement from the clays shrinking and swelling of 40 to 70mm and settlement due to the consolidation of compressible marine clays.
- DDS was aware that DEQ had only a small rig for the purpose of doing a geotechnical investigation where the auger could go to a maximum depth of only 4.5 metres. Five boreholes were made and tested on Lot 10 on 13 June 2006 by an employee of DEQ and the results were included in appendix A to the first report. Although the first report is dated after the S drawings were first issued, Mr Henry had the results of borehole tests and knowledge of the matters disclosed in the first report at the time he prepared these S drawings.
- The scope of the site investigation that was undertaken for the first report is set out in paragraph 1.0 as to determine the soil parameters for design purposes for the proposed development, namely:
“(a)Identification of the soil profile.
- Shrink/swell potential of the subsoils.
- Allowable bearing capacity of the subsoils and identification of suitable footing systems.”
- It was expressly noted that the site investigation did not include analysis of consolidation of marine clays. As Mr Henry explained in his evidence, that service could not be provided because of the limitation of the depth to which DEQ could drill with its equipment. Paragraph 4.0 set out the extent of the site investigation as comprising five boreholes with depths of up to 4.5m and the results of the boreholes were set out in appendix A to the first report. It was recorded in paragraph 5.0 that filling operations had taken place at the borehole locations and the subsoil profile encountered at the boreholes consisted of fill overlaying clays to the depth of the boreholes. A description of the fill was provided. Paragraph 7.1 of the first report noted that one shrink/swell test was conducted from one of the samples and the test result was recorded. It was noted that “the clayey fills encountered have a moderate potential for seasonal movement” and that, due to the variability of the fill, the opinion was expressed “that the site surface movement of the order of 40-70mm be used with regard to seasonal surface movement” and that “this value does not include the effects of consolidation of the marine clays which would be in addition to these values”.
- Mr Henry clarified in his evidence (Transcript 5-6) that 40 to 70mm is the range of movement from the condition of the surface when it is first measured and it is not a movement from a fixed datum point as such. If the conditions are wet when measured, then the movement can be downwards 40 to 70mm, but if the conditions are dry when measured, then the movement can be 40 to 70mm upwards.
- In the conclusions and recommendations in paragraph 8.1 of the first report relating to the foundations, the limitation that there was no investigation of the properties and depth of the marine clays was repeated. It was pointed out that marine clays when loaded can undergo consolidation which results in settlement of the surface. It was then stated:
“More advanced investigations in these areas have calculated typical surface settlement of over 100mm could be expected to sites that have not been preloaded. The magnitude of the settlement is dependent on loadings, depth of marine clay and whether any preloading has been applied to the site to cause consolidation prior to building construction. Loadings include any filling, applied live loads and building weight. Typical differential settlements are of the order of 50% of the total deflection.”
- Mr Henry explained that his reference to more advanced investigations was to projects where such advanced investigations were undertaken in the vicinity of the subject land by himself or a fellow director. Mr Henry explained that he described the magnitude of this settlement in the first report as “over 100mm” as that would be a “red flag” to “someone doing a due diligence review of these drawings”.
- It was then noted that floor design was dependent on the proposed use of the building and the sensitivity to floor movement and also construction budget, and the proposed use of the building was unknown.
- Three structural options were canvassed, one of which was the free floating slab on ground option (option 1). Option 2 was partial floating slab on ground with relieving slabs to perimeter and option 3 was suspended slab supported on piles. It was noted that as options 1 and 2 have the floor constructed on the ground, the floor is subject to the settlement of the subsoils. There was advice on methods for managing this movement by either or a combination of two specified methods. The drawback associated with these methods that had the lowest construction cost was noted as “settlements and associated damage, floor cracking and floor curvatures would be high, resulting in higher maintenance costs for the buildings”. Option 3 was noted as the most expensive option with respect to construction cost.
- This section of the report then concluded:
“The client should be fully informed of the above scenarios and made aware of the cost implications of the different methods of construction and expectations of the building performance associated with each floor design option.
Where settlements of the floor can be tolerated, options 1 & 2 may be the most economic in construction, however, the client and/or future owners and tenants must be made aware of the increased maintenance costs associated with this type of construction.
If the warehouse slab settlements cannot be tolerated, or increased maintenance costs and potential damage associated with the slab settlements and movements are unacceptable, then Option 3 should be the preferred method of construction.
Where settlement can be accommodated a floor live load of 15 kPa could be used in the existing fill.”
- Paragraph 8.2 of the first report set out recommendations for limiting effects of reactive clays due to the high potential for movement with moisture content fluctuations. One recommendation was:
“Internal slabs should be kept independent of the main structure and be allowed to float with surface movement. Floating pavements are the most economical pavement system for expansive clay sites. It should be noted however that the levelness of the pavement will not be maintained due to the surface movement. The end user of the building should be advised that movement of the pavement could occur.”
- In the second report, DEQ used the Soil Surveys soil report dated March 2006 to quantify the possible settlement that could occur due to the compressible material encountered on site. The relevant conclusions in the second report were:
“We refer you to Section 4.4 Settlement Behaviours of the soil report. The report advises that settlement figures of between 150 and 200mm could be expected for a loading of 20 kPa. A loading of 20 kPa is applicable for a building of this height. Another 50mm of secondary creep could also occur.
Your client should be made aware that the slab-on-ground as presently designed will experience similar magnitude movements. This magnitude of movement may severely restrict the possible usage of the building. Relevelling of the floor can be expected to be required in heavily loaded zones of floor throughout the life of the building.
Your client should be made aware also that the use of a floating slab-on-ground is a minimum construction cost option and the construction saving made should be weighed against the possible economic costs with regard to future maintenance costs and lack of compatibility with building use of future purchasers.”
- Mr Henry was cross-examined on his statement that “A loading of 20 kPa is applicable for a building of this height” on the basis he was asserting that the subject building had been designed for a load of 20 kPa. Mr Henry explained that he wrote the second report in light of the content of the Soil Surveys report that had been forwarded by DDS. That report in section 4.4 referred to a slab loading of 20 kPa and he just adopted that figure for the subject building without referring back to his drawings (Transcript 6-8). It is apparent from the urgency with which the second report was provided that it was likely that was the case. The loose reference by Mr Henry to 20 kPa as applicable for the subject building did not alter what was, in fact, the relevant loading of 15 kPa disclosed in the S drawings and the advice given in the second report was not affected by the error which he made in recording the relevant loading as 20 kPa instead of 15 kPa. (I reject the plaintiff’s submission that Mr Henry’s explanation was that the loading for the building was 20 kPa.)
- Mr Henry explained that the reference to “relevelling” was to undertake maintenance to make the floor level by replacement or grout injection. As a result of his consideration of the Soil Surveys soil report dated March 2006, Mr Henry considered that an office fit-out on the mezzanine floor would not handle the movement of a floating slab and recommended replacing the flooring of the mezzanine level with a product called Hebel. It is at this time Mr Henry produced the P2 version of drawing S02 and the P2 version of drawing S07.
- Mr Henry explained (Transcript 5-9) that the S drawings did not include a schematic diagram that provided for the floor design loads for the slab where pallet racking was to be installed. He produced DEQ’s standard details for a floor that shows the locations where the slab is capable of resisting the punching load form pallet racking feet (exhibit 33). It was Mr Henry’s experience that if a slab on ground had been designed for racking, he would have expected to see such a schematic diagram in the engineering drawings.
- Mr Henry accepted that the anticipated design life of the building was 40 years (Transcript 5-60). He also anticipated that the expected settlement of the slab throughout the life of the building would require it to be replaced as least once (Transcript 5-91). He made the point that his client was happy to have a warehouse with a floor that settled and, he was designing to meet his client’s expectations (Transcript 5-109). Although DEQ was retained by DDS, I infer that Mr Henry’s reference to client was to Efstathis, as Mr Henry knew that DDS who had contracted with DEQ was building for Efstathis.
- Mr Henry was cross-examined on the application of clause 16.2.1 of AS 3600-2001 which gives additional design considerations for in situ concrete slabs cast on the ground and extending to industrial, commercial and residential usage. Clause 16.2.1 provides:
“The foundation shall be investigated and suitably modified, where necessary, to ensure that the sustained and any intermittent service loads, can be resisted by the slab without undue differential or uniform settlement.”
- Mr Henry’s response to the proposition that an anticipated settlement over time of over 100mm was "undue" for the purpose of clause 16.2.1 was that it depended on what the client wanted, as the slab is designed for what the client wanted (Transcript 6-23).
- For the purpose of the trial Mr Henry inspected and obtained copies of plans for other constructions in the vicinity of the subject building which showed that none of these industrial buildings had been built with a piled slab. These included the building on the adjoining Lot 9 Benjamin Place (exhibit 21), the warehouse at 114 Benjamin Place (exhibit 22), the building at Lot 11 Lytton Road, Hemmant (exhibit 23), the warehouse at 130 Benjamin Place (exhibit 24), the warehouse at Lot 12 Benjamin Place (exhibit 25), the building at Lot 2 Canberra Street, Hemmant (exhibit 26), and the industrial building at 43 Export Drive, Lytton (exhibit 40). Mr Henry expressed the opinion it was likely the warehouse at 30 Anton Road, Hemmant (exhibit 39) was a slab on ground.
- Mr Henry identified that the warehouse inspected at 10 Anton Road, Hemmant (exhibit 38) was a suspended concrete slab which was explained by its use as a coldroom warehouse.
The plaintiff’s purchase of the property
- The plaintiff’s head office was in New South Wales where its chief executive officer and director Mr Mundy was and is based. Prior to purchasing the property, the plaintiff’s business in Queensland operated from leased premises at Morningside and used a third party to distribute its product. The plaintiff decided that the Queensland business should operate like the business in New South Wales and undertake its own distribution. The subject property was located. Mr Mundy inspected the building before it was completed. The plaintiff did not engage an engineer to assist in its purchase.
- The plaintiff did not attempt to inspect any engineering drawings for the building prior to completion of the purchase and did not organise for any building inspection by a builder or engineer or undertake any inquiries about the suitability of premises for the plaintiff’s proposed use.
- Mr Mundy was aware that pallet racking on which air-conditioning units were stored placed a downward force on the concrete slab but did not consider it necessary to inquire about the engineering specifications for the concrete slab, because he assumed that the building would be built to “the proper design” and he had never encountered a problem before with racking in buildings (Transcript 1-57).
- The plaintiff obtained a quote from Elbowroom (Aust) Pty Ltd dated 26 April 2007 for the supply, delivery and installation of racking and shelving to the building (exhibit 9). Elbowroom used the product Colby shelving. The quote dealt with floor strength and differential settlement in these terms:
“Colby fixing standards assume that the racks are directly fixed to concrete floors with a minimum strength of 25 MPa. It is recommended to use 32 MPa or higher concrete strength if floors are subjected to medium to heavy pneumatic-tyred traffic.
Differential settlement is the condition encountered in a warehouse where one part of the floor slab settles relative to another. While the floor slab may have been level when it was initially constructed, the occurrence of differential settlement will result in an out-of-level floor. From the point of view of rack performance, the impact of floor slab differential settlement is that the non-verticality of the rack may be increased to the point where it exceeds the tolerances specified in AS 4084-1993.
Please be aware of these limits and the effect of differential settlement. The typical settlement encountered in most warehouses is span/360 over a 6 m x 6 m grid. This would normally be acceptable for most manually served racks up to 6 m high.
Please consult your engineer to confirm suitability of your floor for the above installation.”
- The plaintiff did not consult any engineer about the suitability of the floor of the building for the installation of the racks and shelving by Elbowroom.
- The set out of the racks that were installed is shown in exhibit 5.
Problems experienced with the slab
- Mr Poole was employed by the plaintiff between May 2007 and October 2012 as the warehouse logistics coordinator. The plaintiff commenced operating out of the subject property within two or three weeks of the start of Mr Poole’s employment with the plaintiff. There were two forklifts in use, an electric high reach forklift which was the main forklift used that reached the high levels of the racking and a gas forklift used for bulkier items and low level operations from the ground. Mr Poole first noticed an issue with the slab within about one year of the commencement of his employment when the forklift exited through the roller doors to the carpark area and it would get stuck in certain areas of the ramp exit. Mr Poole noticed uniform falls across the exit to the carpark area and then along the back wall of the warehouse. It worsened over the few months following his first observations. Between 12 to 18 months after first noticing the problem, the stabilisers on the bottom of the electric high reach forklift were getting stuck mainly on the joins in the concrete at the back of the warehouse. Mr Poole also observed the racking on the back wall leaning forward towards the roller doors and there was also a problem with racks D and E where shims had to be placed under them to address the lean. By the time Mr Poole left the plaintiff in October 2012, he considered the state of the slab to be “absolutely totally unsafe”.
- Mr Poole recalled that the smaller to mid-range air-conditioning units weighed between 160 and 230 kilograms per unit and four of the 160 kilogram units could fit on each level per bay. The larger units were 230 to 240 kilograms per unit and would be packed three units on each level per bay. Smaller indoor units that weighed about 60 kilograms per unit would be packed 12 units per level per bay.
- Mr McKinnon commenced employment with the plaintiff in September 2012 and took over as warehouse manager from Mr Poole. He observed the expansion joints in the warehouse were lifting and in one spot the slab had dropped up to 200mm. It got to the stage where the electric forklift could not be driven over any of the expansion joints, whether loaded or unloaded. Some of the racking was leaning out of plumb and had to be packed up by at least 50mm with metal shims. It got to the point where five or six bays of racking (out of 40 or 50 bays) had to be taped off, as they were not useable.
- Mr McKinnon explained that two standard sized Chep pallets fit into each bay and the loading for the racking is two tonne per bay, ie 2,000 kilograms per bay, but on average they did not go over 1,020 kilograms per bay which comprised two of the heaviest units at 510 kilograms per unit. The units that were heavier than 510 kilograms were not stored on the racking, but on the floor.
- Mr Craig Loughlin was employed by the plaintiff as Queensland sales manager between August 2010 and August 2015. The state of the floor of the warehouse was of concern from the time Mr Loughlin commenced his duties. He observed severe cracking and chunks taken out of the concrete from the forklifts. There was a severe lean on the racking at the rear of the warehouse. There was a massive movement in the slab after the 2011 floods.
- Mr Loughlin had to respond to an incident report in 2011, as a result of the lean on the racking. Elbowroom was engaged to repeg the legs on the racking. This was undertaken in February/March 2011.
- Mr Gillroy of DDS sent a facsimile to Ms Melissa Soldatos of the plaintiff on 30 January 2008 which included a copy of the DEQ drawing S02(P2) and part of the note on drawing S01 including the section on “Floor Slabs”. The coversheet merely stated “Following find Copy of Plan with Notes as Discussed”.
- Mr Mundy first became aware in the middle of 2009 there was a problem with the concrete slab, when the Queensland manager reported that the supports on the side of one of the forklifts were hitting the concrete (Transcript 1-32).
- The plaintiff’s solicitors sent a letter to Mr Efstathis dated 13 October 2011 advising the plaintiff had encountered difficulties with the slab of the building and requesting a copy of the building contract and development approval and whether any instructions were given directly to DEQ by the builder. By letter dated 28 October 2011 the plaintiff’s solicitors advised Efstathis’ solicitors that the plaintiff was relying on the assignment under the purchase contract in its favour of any rights that the seller may have had against the builder, in view of the problems with the concrete slab in the warehouse. In response, Efstathis’ solicitors submitted a deed of indemnity for the plaintiff’s signature, as contemplated by the contract. The deed included a provision that the plaintiff would indemnify Efstathis from all or any liabilities, costs or expenses that Efstathis may incur or be liable for in respect of any proceedings and/or demand made upon the builder. It does not appear that the deed was ever signed by the plaintiff.
- A contour survey of the concrete slab was undertaken by surveyor RPS on 6 June 2013.
Relevant statutory provisions
- It was common ground that at the relevant time the Building Act 1975 (Qld) required building assessment work to be carried out by reference to the BCA. Under s 14(2) of the Building Act, building work complies with the BCA only if it complies with the relevant performance requirements under the BCA. It was also common ground that the 2006 version of the BCA was the applicable version for the purpose of considering whether the subject building complied with the BCA. Section 45 of the Building Act provides generally for building assessment work to be carried out by a building certifier.
- Section 23(1) of the SBR was in force when the Form 15 was originally issued. There is no material difference between that regulation and the equivalent provisions under the Regulation.
- Section 17 of the Regulation provided:
“(1)Subject to section 18, a building certifier may decide an individual—
- is, or has from a particular day been, competent to perform functions that help (design/specification help) the certifier perform building certifying functions for building design or specification; or
- is, from the making of the decision, competent to perform functions that help (inspection help) the certifier perform building certifying functions for the inspection of assessable building work.
- The decision may be that the individual may give the building certifier—
- design/specification help or inspection help generally; or
- help limited to a particular aspect of design/specification help or inspection help; or
- design/specification help or inspection help only for particular assessable building work.
- An individual the subject of a decision under subsection (1) is a competent person.
- A competent person decided under subsection (1)(a) is a competent person (design/specification).
- A competent person decided under subsection (1)(b) is a competent person (inspections).
- A person may be decided to be a competent person (design/specification) and a competent person (inspections) at the same time or for the same matter.”
- Section 18 of the Regulation required that if a relevant law required the individual to be licensed or registered give the help to the building certifier, then the individual must be so licensed or registered. It was common ground that Mr Henry had the appropriate registration to be qualified as a competent person to give both design/specification help and inspection help to the builder and certifier.
- In order for a competent person to give a certificate that a building design or specification will (if installed or carried out under the certificate) comply with the building assessment provisions, s 46 of the Regulation required the certificate to comply with s 48 which provides:
“A certificate by a competent person must—
- be in the approved form; and
- be signed by the competent person; and
- state in detail—
- the basis for giving the certificate; and
- the extent to which the person has relied on tests, specifications, rules, standards, codes of practice or other publications.”
Building Code of Australia
- The structure of the BCA is set out in clause A0.3. Each part comprises objectives, functional statements, performance requirements with which all building solutions must comply and the building solutions. Under clause A0.4 a building solution will comply with the BCA if it satisfies the performance requirements. Clause A0.6 provides the objectives and functional statements may be used as an aid to interpretation.
- Part B1 covers structural provisions. The objective of Part B1 is set out in clause BO1:
“(a)safeguard people from injury caused by structural failure; and
- safeguard people from loss of amenity caused by structural behaviour; and
- protect other property from physical damage caused by structural failure; and
- safeguard people from injury that may be caused by failure of, or impact with, glazing.”
- The relevant functional statement is found in clause BF1.1:
“A building or structure is to withstand the combination of loads and other actions to which it may be reasonably subjected.”
- The performance requirement is then set out in clause BP1.1(a) in these terms:
“A building or structure, to the degree necessary, must-
- remain stable and not collapse; and
- prevent progressive collapse; and
- minimise local damage and loss of amenity through excessive deformation, vibration or degradation; and
- avoid causing damage to other properties, by resisting the actions to which it may reasonably be subjected.”
- Under clause BP1.1, a list of actions to be considered to satisfy paragraph (a) are then set out including imposed actions (live loads from occupancy and use), differential movement, time dependent effects (including creep and shrinkage) and ground movement caused by swelling, or shrinkage of the subsoil.
- Clause BP1.2 then provides:
“The structural resistance of materials and forms of construction must be determined using five percentile characteristic material properties with appropriate allowance for-
- known construction activities; and
- type of material; and
- characteristics of the site; and
- the degree of accuracy inherent in the methods used to assess the structural behaviour; and
- action effects arising from the differential settlement of foundations, and from restrained dimensional changes due to temperature, moisture shrinkage, creep and similar effects.”
- The specific conditions of the fourth defendant’s development application decision notice showed that DEQ’s Form 15 certifying compliance with Parts B1.1, B1.2, B1.3, B1.4 and C1.11 had been relied upon.
Expert structural engineering evidence
- The plaintiff engaged structural and civil engineer Mr Stephen Healey of New South Wales based Eclipse Consulting Engineers Pty Ltd to provide a number of expert reports for the proceeding. These reports are dated 1 August 2013, 20 November 2014 and 6 May 2016 (exhibit 45). DEQ and Mr Henry engaged structural and geotechnical engineer Mr Peter Wright of Hughes, Beal & Wright Pty Ltd as their expert engineer for the purpose of the proceeding. Mr Wright’s reports are dated 11 July 2013, 17 November 2013, 28 November 2013 (exhibit 46), 23 March 2015 and 10 June 2015 (exhibit 47). Mr Healey and Mr Wright prepared a joint report dated 26 March 2014 and a supplementary joint report dated 17 April 2015. They gave evidence concurrently.
- By the time the joint report was prepared, there was much common ground. Both engineers proceed on the basis that DEQ had general knowledge of the site conditions of “a thickness of marine clay overlying stronger strata” and was not aware of the intended use of the building, when designing the slab. Mr Healey is of the view that a floating slab was not appropriate due to the anticipated total and differential settlements. Mr Wright considers that the decision to use a floating slab was made by others, in light of the warnings issued by DEQ regarding settlement and differential settlement, and that DEQ’s actions were that of a competent engineering practice. Whereas Mr Wright considers that it was competent engineering practice to inform the client of the risks associated with the floating slab option, as well as offering more robust and stable options, Mr Healey considers that DEQ should have insisted that the floating slab design was not suitable due to the lack of tolerance to vertical movement. In the supplementary joint report Mr Healey considers that the magnitude of the differential settlements nominated meant that both options 1 and 2 in the first report could not result in compliance with the BCA. Both experts agree that DEQ did everything that was reasonable to advise the client of the risks associated with the floating slab design.
- The experts agree that the slab settlement was due to consolidation of the underlying marine clays. They also agree that compaction, or the lack of compaction, if any fill were placed on the site, was largely irrelevant to the settlement.
- One issue on which these experts disagree is whether there has been compliance with the BCA for the design of the building. Mr Healey is of the view that the lack of piling to the floor slab and allowing it to settle and move demonstrates a lack of compliance with the BCA.
- Mr Healey starts in part B1 of the BCA with the objective, functional statement and performance requirements that applied generally to a building or structure. Mr Wright agrees with Mr Healey’s views about these statements reminding a structural engineer of the overall aim in relation to safeguarding people and property from injury caused by structural failure, but that the guidance in implementing the aims of the BCA is obtained from the Australian standards.
- Both experts agree that the BCA provided for reference to the loading code of AS 1170.1 and the requirements of this standard were complied with.
- Both experts agree that AS 3600-2001 relating to concrete structures applied to the project. Mr Wright notes that that standard makes no reference to T48 and that DEQ was not bound to follow the recommendations in T48, but Mr Healey considers that, if the design method in accordance with T48 were not used, the engineer would need to demonstrate that Australian Standard and BCA compliance could be achieved without following the T48 recommendations. His view is that, due to the excess settlement predicted on this site, the structural design of the slab would not have been possible using T48, so that the only appropriate slab design would be a suspended slab supported by piles founded in the deep stable material.
- Mr Healey relies on the introductory comments in T48:
“Many industrial pavement projects are part of a property-development package the designer of which often having little or no knowledge of future tenants and their operating requirements. Selecting the lowest-initial-cost solution may provide short-term performance and meet normal operating requirements in the first few years. However, a change of tenancy and the introduction of mechanical equipment may cause sufficient distress to disrupt the use of the building until repairs have been completed. It is recommended that the designer considers the life-cycle cost of the pavement, including initial construction costs, maintenance and disruption costs to the business, when selecting the payment system.
The designer should always ask to be made aware of the pavement operating requirement and state this on the pavement layout drawing. Also, the designer will need to consider construction loading, and that the pavement may be subjected to semi-trailers and fork lift trucks during and after the completion of the building.”
- Mr Healey considers that a structural engineer provides expert advice and guides the client in the direction that it needs to go to find an appropriate structural solution (Transcript 6-105). By way of contrast, Mr Wright explains that the structural engineer gives the client sensible options, but that it is ultimately the client who decides, because he is the one “with the purse strings” and has to make a decision as to low cost construction with high maintenance or high cost construction with low maintenance (Transcript 6-105). In fact Mr Wright’s comments are consistent with the dichotomy contemplated in the introductory comments to T48 between lower construction costs and higher maintenance costs on the one hand and higher construction costs that may accommodate a variety of uses and have lower maintenance costs on the other hand.
- Mr Wright and Mr Healey also differ on whether section 2 of AS 3600-2001 applied to the design of a floating slab on ground. Clause 2.1.1 sets out the aim of structural design, namely to provide a structure that is “durable, serviceable and has adequate strength whilst serving its intended function and that satisfies other relevant requirements such as robustness, ease of construction and economy”. Clause 2.4.1 then states that the structure and its component members shall be designed for serviceability by controlling or limiting the deflection, lateral drift, cracking and vibration in accordance with the requirements of clauses 2.4.2 to 2.4.5. Mr Healey considers that table 2.4.2 which sets out limits for calculated deflection of beams and slabs had some general relevance to the design of a slab on ground, although he concedes that the table applies to suspended members and was not strictly applicable to slabs on ground. Mr Healey considers that, by reference to serviceability, the slab in this building failed (Transcript 6-95). Mr Wright considers that a slab on ground is not part of the structure as such and table 2.4.2 does not set deflection requirements for a slab on ground.
- Both Mr Wright and Mr Healey agree that clause 16.2.1 was the most relevant clause of AS 3600 for the design of the slab on ground. They differ, however, on how they interpret clause 16.2.1 in its application to the design of a slab on ground. Mr Healey is of the view that the designer must take into account a variety of possible uses for the slab over the life of the building. Mr Wright considers the designer is bound to act on the instructions of the owner, as to the performance of the slab. Mr Wright considers that if the owner deems the amount of settlement as acceptable to the owner, then the designer will have satisfied the obligations under section 16 (Transcript 6-86). Mr Healey did concede that the owner’s requirement in the form of budgetary constraint would not be irrelevant, but the engineer would still need to make decisions based on the BCA as to what type of floor system would be suitable to be constructed (Transcript 6-88).
- Consistent with Mr Healey’s view that the slab of the building should be designed for the different uses of the building over its life, his view is that the engineer would take into account a variety of racking layouts in designing the slab (Transcript 6-121). For that reason he would not have expected a schematic diagram such as exhibit 33 to be included in the engineering drawings. When challenged on that, he explains (Transcript 6-122) that he expected the purchaser would make inquiries as to whether the slab could take the loads required for their racking “and that would be typically nominated on the structural drawings provided with the sale documents, I assume”.
- Mr Wright attended the site on 8 November 2013 to witness the boring of a 150mm diameter core hole through the floor slab near a column in the back right hand corner of the building. Mr Wright formed the view from that inspection that void formers were not provided beneath the slab where it sat above the pile headstock at this column, as required on drawing S03. Mr Wright subsequently resiled from that opinion, when he saw remnants of void formers when the slab was removed which are shown in the photographs he took (exhibit 18). Mr Wright in his report dated 17 November 2013 recorded his observation at the location at which the hole was bored that:
“The floor slab at this location is distorted in a manner similar to a number of locations around the building, namely at the base of each column. The slab is ‘hung up’ on the pile headstocks. By ‘hung up’ I mean the slab over the headstocks has not been allowed to settle to the same degree as the slab supported on the ground surface.”
- Mr Wright explains (Transcript 6-116) that there were localised high spots on the back wall and on the left hand wall where the slab was hung up on the pile caps and the bulk of the rest of the slab was reasonably flat. Mr Healey and Mr Wright agree that the void formers failed to perform their function and that in the process of casting the slab, concrete was allowed to flow down behind the plastic membrane and reach the gap between the top of the pile cap and the underside of the slab (Transcript 6-117).
- The valuer Mr Craig Ehlers was briefed by DEQ and Mr Henry to investigate sales of comparable industrial buildings similar to the subject property to ascertain whether there was any demonstrable difference in values for buildings with varying floor types. For the purpose of his report (exhibit 48), he researched all sales of industrial buildings in the suburbs of Hemmant and Lytton between January 2006 and January 2008. Mr Ehlers noted that the plaintiff’s purchase of the property was at a value of $1,677 per square metre of the building area which was at the lower end of values for modern industrial buildings in the locality during that period.
- Mr Ehlers relied on input from Mr Henry as to the nature of the slab construction for the industrial buildings which he selected as the most comparable to the subject property for type and size of building. Mr Ehlers concluded that there is little or no difference in the per square metre value of properties with buildings of varying floor types, such as slab on ground, supported slab floors, or buildings with piered floors. During cross-examination Mr Ehlers conceded that there was limited sales evidence of constructions other than slab on ground on which to base his conclusion, but he was satisfied that, on the sales evidence, if two industrial buildings looked the same, but one had a suspended slab and the other a slab on ground, that was unlikely to result in a different market price, as his research showed the market price was based on the floor area.
Expert geotechnical evidence
- The plaintiff engaged geotechnical engineer Mr Michael Riley of Morrison Geotechnic Pty Ltd to give evidence on a number of aspects relevant to the settlement of the concrete slab. Mr Riley’s reports are dated 8 July 2013, 27 August 2013 and 28 April 2016 (exhibit 50). Geotechnical engineer Dr Philip Shaw of Shaw Urquhart Pty Ltd prepared a report dated 5 December 2013 for DEQ and Mr Henry. Mr Riley and Dr Shaw prepared a joint report dated 1 April 2014 and gave evidence concurrently.
- The experts agree that the site is located on the Brisbane floodplain in an area known to be underlain by deep alluvial deposits which may be sufficiently soft and compressible to settle under the expected development loads.
- These experts agree that the actual measured floor slab settlement of 160mm is more than the settlement of 100mm advised in the first report, but is less than the settlement of 250mm advised in the second report.
Expert evidence on the role of the building certifier
- Three witnesses gave concurrent evidence relevant to the role undertaken by the building certifier. Mr Wright gave evidence again. The plaintiff called Mr Michael Moran, an accredited building certifier, whose report was dated 2 August 2013. The third witness was Mr Mark Catchpole whose report dated 13 December 2013 (exhibit 51) had been prepared when he was engaged by the solicitors acting for the fourth and fifth defendants. Mr Catchpole was called in the trial by DEQ and Mr Henry. The three witnesses had also prepared a joint report dated 27 March 2014. Mr Catchpole and Mr Moran had also prepared a joint report dated 27 March 2014 (exhibit 52).
- Mr Moran and Mr Catchpole agree that the development application decision notice dated 2 March 2007 was an approval for the proposed use of a commercial warehouse building in class 8 which is for an industry/factory type usage, rather than a warehouse which is class 7B (Transcript 7-65). The approval did not extend to fit out works and Mr Moran and Mr Catchpole agree that a further building development approval would have been required to fit out the building with racking, office layout or internal partitions (Transcript 7-69).
- Mr Catchpole notes that a class 8 factory type building would typically have work benches and places for assembling or processing things, rather than storing equipment stacked seven or eight metres high. That is in contrast to a warehouse building where the expectation is for use for storage. Mr Moran is of the opinion that, from the certifier’s perspective, there is a design for the building which the certifier accepts and approves the application on the basis of that design and it does not necessarily follow from the fact that a building will be classified as class 8 that the slab will not be able to bear significant loads. Mr Wright agrees that a class 8 building does not define a specified live load, but if the floor was to bear very heavy machinery, that would be a matter for the engineer to take into account in designing the building.
The standards applicable to the design of the slab
- Before evaluating whether a duty of care was owed by DEQ and Mr Henry to avoid economic loss to the subsequent purchaser of the building arising out of the design of the slab on ground, it is necessary to consider the nature of the design flaw alleged by the plaintiff which is otherwise expressed as whether a slab on ground should ever have been considered as a feasible option for this building. I proceed on the basis of the expert evidence of Mr Wright and Mr Healey that the settlement of the slab was due to consolidation of the underlying marine clays.
- This is a curious building case. As was submitted by Mr Musgrave, this is not a case where the slab was not constructed in accordance with the drawings. It was also not a case where the design fault alleged by the plaintiff resulted in failure of the building structure, apart from the problems arising from the settlement of the slab. The plaintiff’s problems with the building were confined to the uneven levels of the floor slab and consequent chipping and cracking of the concrete. As designed, the slab on ground was intended to move independently of the walls of the building which were on piles. The settlement of the concrete slab was unsatisfactory for the plaintiff’s use of the building, but that does not answer the question whether the design of the slab as a slab on ground failed to conform with the applicable standards.
- In undertaking the structural design, DEQ and Mr Henry had to comply with the BCA and the codes that were incorporated which relevantly included AS 1170.1 and AS 3600-2001. (Although T48 may be in common use and is an industry standard, it is not mandated by AS 3600-2001 and other references, such as the British version of T48 used by Mr Henry, are also in use in designing concrete floors. In any case T48 addresses surface finishes and not ground movement issues due to consolidation.)
- An industrial building can be contrasted with a house which has one use. An industrial building may have many uses, as canvassed in the evidence of Mr Healey and Mr Wright. Sometimes an industrial building may be purpose built for a use that requires a performance outcome that may not be necessary for other uses, such as a floor that will support a coldroom (exhibit 38).
- The plaintiff sought to make much in the cross-examination of Mr Henry and submissions of the use of the term “warehouse” to describe the subject building such as in DEQ’s fee proposal, the description of the slab in the Form 16 and the development application decision notice. The use of such term, however, is not definitive of the quality of the construction or the range of uses for which the building was designed. This is illustrated by the fact that development application decision notice was for building work for “industry/warehouse” that had been assessed with building classification class 8. Table 3.1 in AS 1170.1 sets out different imposed actions appropriate to the type of activity or occupancy for which the floor area will be used. A class 8 building includes factories, workshops and similar buildings (general industrial) and Table 3.1 provides for a reference value of 5.0 kPa, whereas the use of a class 7b building for warehousing and storage areas with areas subject to accumulation of goods attracts in Table 3.1 the reference value of imposed actions of 2.4 kPa for each metre of storage height.
- Mr Healey’s approach to what is required of an engineer in designing a concrete slab for an industrial building would result in a building built for all possible industry or warehouse purposes, irrespective of the anticipated use or the owner’s requirements. I accept that, if the owner’s requirements were so ridiculous that the building as constructed would not comply with the BCA for the least intensive use appropriate for that type of building within the relevant BCA classification, the engineer could not rely on the owner’s requirements to absolve the engineer from exercising the professional skill and judgment in designing the building to comply with the BCA. Mr Fernon’s submission that Mr Henry’s evidence that in this case the client could have the slab on ground, if that was what it wanted after the advice given by Mr Henry, amounts to the client rather than the BCA or the statutory requirements dictating the design overstates the effect of Mr Henry’s evidence which was given in the context of the circumstances of DEQ’s design of the slab on ground for the subject building.
- There must be some scope for what amounts to “undue … settlement” for the purpose of clause 16.2.1 of AS 3600-2001, as the description “undue” is itself not one of precision. Mr Healey’s strict view that the magnitude of the anticipated settlements and differential settlements precluded DEQ’s options 1 and 2 in the first report from demonstrating compliance with the BCA is difficult to reconcile with the evidence of numerous other industrial buildings in the vicinity also being slab on ground constructions. I am persuaded by Mr Wright’s evidence which supports Mr Henry that, in the circumstances in which Mr Henry designed the slab on ground, including the warnings in the first and second reports, the design was of a slab, “without undue differential or uniform settlement” and therefore compliant with the BCA.
- It follows from this conclusion that there was no breach by DEQ and Mr Henry of relevant design standards in designing the slab for the subject building as a slab on ground. That conclusion has the consequence that the issuing of the Form 15 was not a breach of either the SBR or the Regulation.
Did DEQ and/or Mr Henry owe any duty of care to the plaintiff in respect of the design and/or certification of the floor slab?
- If DEQ and Mr Henry were shown to have designed a slab which was not consistent with the standard of skill reasonably expected of a professional engineer, the submissions in the trial focussed on the issue of whether any duty of care was imposed on DEQ and/or Mr Henry and owed to the plaintiff in respect of the design and/ or certification of the concrete floor slab. This raises the issue of whether the plaintiff was affected by vulnerability in the sense referred to in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 and Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185.
- Woolcock concerned whether a subsequent purchaser of a warehouse and office complex had a cause of action in negligence against the engineers who designed the foundations, when it was discovered by the purchaser that the building suffered substantial structural distress due to settlement of the foundations. The purchaser alleged the engineers owed it a duty to take reasonable care in designing the foundations for the building. A case had been stated for the Court of Appeal on the basis of agreed facts to determine as a substantive question of law whether the statement of claim disclosed a cause of action in negligence against the respondents. It was held by the majority in the High Court that the engineers did not owe to the purchaser a duty to take reasonable care on the facts alleged in the statement of claim and agreed in the case stated. The damage which the appellant alleged it had suffered was pure economic loss. The concept of vulnerability was explained by the plurality at :
“Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed. ‘Vulnerability’, in this context, is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken. Rather, ‘vulnerability’ is to be understood as a reference to the plaintiff's inability to protect itself from the consequences of a defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant.” (footnotes omitted)
- In Woolcock, the original owner of the land refused to pay for geotechnical investigations, so that it was noted at  that the relationship was one “in which the original owner asserted control over the investigations which the engineer undertook for the purposes of performing its work”, at  that “the appellant did not allege that the relationship between the respondents and the original owner was characterised by that assumption of responsibility by the respondents, and known reliance by the original owner on the respondents, which is referred to in the joint reasons in Bryan v Maloney”, and at  that the anterior step of demonstrating that the respondents owed a duty of care to the original owner was not made out. The plurality also noted at  that the terms of the contract between the original owner and the respondents “is not an irrelevant circumstance” in considering what duty the engineers owed others.
- The plurality made the following observations on the issue of vulnerability at :
“Neither the facts alleged in the statement of claim nor those set out in the Case Stated show that the appellant was, in any relevant sense, vulnerable to the economic consequences of any negligence of the respondents in their design of the foundations for the building. Those facts do not show that the appellant could not have protected itself against the economic loss it alleges it has suffered. It is agreed that no warranty of freedom from defect was included in the contract by which the appellant bought the land, and that there was no assignment to the appellant of any rights which the vendor may have had against third parties in respect of any claim for defects in the building. Those facts describe what did happen. They say nothing about what could have been done to cast on the respondents the burden of the economic consequences of any negligence by the respondents. The appellant’s pleading and the facts set out in the Case Stated are silent about whether the appellant could have sought and obtained the benefit of terms of that kind in the contract.”
- This issue of vulnerability was revisited by the High Court in Brookfield. The appellant builder had constructed a 22 storey building under a design and construct contract with an owner/developer for a contract price of more than $57 million. There was provision in the contract for a defects liability period of 52 weeks which commenced upon practical completion. Under the contract, a final certificate was evidence that the works had been completed in accordance with the contract, subject to an exception in cl 42.6(b) of the contract that applied to any defect in the works that was not apparent at the end of the defects liability period or which would not have been disclosed upon reasonable inspection at the time of the issue of the final certificate. A strata scheme was registered in respect of levels one to nine which comprised serviced apartments. The developer entered into a master agreement with an operator pursuant to which the apartments were leased to the operator to be operated collectively as a serviced apartment hotel. The developer onsold the strata-titled apartments to purchasers who were investors, using a standard form contract annexed to the design and construct contract, and those purchases were subject to the lease to the operator. Under the relevant legislation for strata schemes, the first respondent as the body corporate held the common property as agent for the owners of the individual lots as tenants in common in shares proportional to the unit entitlements of the respective lots. The first respondent sued the appellant for the cost of rectifying latent defects in the common property, on the basis the appellant owed a duty to take reasonable care to avoid a reasonably foreseeable economic loss to the first respondent in having to repair the consequences of the latent defects caused by the defective design and/or construction. These defects were not alleged to have caused any damage to person or property, but the first respondent’s claim was for damages for pure economic loss. The issue on appeal was whether the appellant owed the first respondent a duty of care. Woolcock was applied by the High Court and there was found to be no duty of care owed by the appellant to the first respondent.
- Relevant conditions of the standard form contract were summarised at -, including that the developer had to cause the property and the common property to be finished in accordance with the schedule of finishes and in a proper and workmanlike manner, the developer was obliged to repair defects in the common property due to faulty materials or workmanship of which written notice was served on it by the first respondent within seven months after the date of the registration of the strata plan. There was also provision for a purchaser of a lot to serve a notice of special faults which were structural or required urgent attention or might cause danger to persons in the property or make the property uninhabitable.
- French CJ observed in Brookfield at  that in the context of determining the existence of a duty of care for pure economic loss, the notion of vulnerability refers to “the plaintiff’s incapacity or limited capacity to take steps to protect itself from economic loss arising out of the defendant’s conduct”. According to French CJ at , the determination of the appeal required consideration of the relationship between the first respondent and the appellant, including whether the appellant owed the developer a relevant duty of care and whether the first respondent was vulnerable.
- After noting at  that the purchasers of lots from the developer were “effectively investors in a hotel venture under standard form contracts which were an integral part of the overall contractual arrangements”, French CJ stated:
“The standard form contract contained specific provisions relating to the construction of the building and [the developer’s] obligations to undertake repairs. Those provisions have already been mentioned. This is not a case in which, for the purposes of the subsistence of a duty of care, the subsequent owners could be regarded as vulnerable. Nor, therefore, could the Corporation as their statutory ‘agent’. The position of the subsequent owners and the interaction of the contractual and statutory frameworks are antithetical to the proposition that Brookfield owed the Corporation the duty of care found to exist by the Court of Appeal.”
- French CJ concluded at  that the relationship between the appellant and the first respondent was not analogous to the relationship in Bryan v Maloney (1995) 182 CLR 609, but analogous, although not identical to the position of the purchase of the complex in Woolcock.
- Hayne and Kiefel JJ at  noted that reliance of the purchasers of the lots and the first respondent on the appellant doing its work properly may be a necessary element in demonstrating vulnerability, but it is not a sufficient element, and expressed that “vulnerability is concerned with a plaintiff’s inability to protect itself from the defendant’s want of reasonable care, either entirely or at least in a way which would cast the consequences of loss on the defendant”. Hayne and Kiefel JJ concluded at :
“It is neither necessary nor profitable to attempt to define what would or would not constitute vulnerability. It is enough to observe that both the developer and the original purchasers made contracts, including the standard contracts, which gave rights to have remedied defects in the common property vested in the [first respondent]. The making of contracts which expressly provided for what quality of work was promised demonstrates the ability of the parties to protect against, and denies their vulnerability to, any lack of care by the builder in performance of its contractual obligations. It was not suggested that the parties could not protect their own interests. The builder did not owe the [first respondent] a duty of care.” (footnote omitted)
- Crennan, Bell and Keane JJ also emphasised at  that it was of critical importance to the success of the appellant on the appeal that the first respondent’s claim was “based on the failure of the purchasers of the apartments to get value for money from the developer rather than on the appellant’s causing damage to the [first] respondent’s property”.
- They stated at :
“This Court's decision in Bryan v Maloney does not sustain the proposition that a builder that breaches its contractual obligations to the first owner of a building is to be held responsible for the consequences of what is really a bad bargain made by subsequent purchasers of the building. To impose upon a defendant builder a greater liability to a disappointed purchaser than to the party for whom the building was made and by whom the defendant was paid for its work would reduce the common law to incoherence. Moreover, to hold that a subsequent purchaser of a building is vulnerable to the builder so far as the risk of making an unfavourable bargain for its acquisition is concerned would involve a departure from what was held by this Court in Woolcock Street Investments.” (footnotes omitted)
- Crennan, Bell and Keane JJ explained in Brookfield at :
“Vulnerability, in this field of discourse, is concerned not only with the reasonable foreseeability of loss if reasonable care is not taken by the defendant, but also, and importantly, with the inability of the plaintiff to take steps to protect itself from the risk of the loss.”
- After quoting passages from  and  in Woolcock, they further explained at :
“These passages accord with the primacy of the law of contract in the protection afforded by the common law against unintended harm to economic interests where the particular harm consists of disappointed expectations under a contract. The common law has not developed with a view to altering the allocation of economic risks between parties to a contract by supplementing or supplanting the terms of the contract by duties imposed by the law of tort.” (footnote omitted)
- The remaining member of the court in Brookfield, Gageler J explained at  the rationale for not imposing a duty of care in tort on a builder in carrying out building work to a subsequent purchaser for defective building in these terms:
“Absent any application that Bryan v Maloney should be overruled, and absent data which might permit the making of a value judgment different from that made in Woolcock Street Investments, the view expressed by McHugh J in Woolcock Street Investments should in my opinion be accepted. The continuing authority of Bryan v Maloney should be confined to a category of case in which the building is a dwelling house and in which the subsequent owner can be shown by evidence to fall within a class of persons incapable of protecting themselves from the consequences of the builder's want of reasonable care. Outside that category of case, it should now be acknowledged that a builder has no duty in tort to exercise reasonable care, in the execution of building work, to avoid a subsequent owner incurring the cost of repairing latent defects in the building. That is because, by virtue of the freedom they have to choose the price and non-price terms on which they are prepared to contract to purchase, there is no reason to consider that subsequent owners cannot ordinarily be expected to be able to protect themselves against incurring economic loss of that nature.”
- The plaintiff relies on the fulfilment of a statutory function by Mr Henry in issuing the Form 15 as relevant to the issue of vulnerability of the plaintiff in the circumstances. In particular, the plaintiff relies on the series of cases of Bamford v Albert Shire Council  2 Qd R 125, Moorabool Shire Council v Taitapanui (2006) 14 VR 55, and Western Districts Developments Pty Ltd v Baulkham Hills Shire Council (2009) 75 NSWLR 706.
- In Bamford, the Court of Appeal at 126-127 and 131 applied Sutherland Shire Council v Heyman (1985) 157 CLR 434 to hold that a local authority in exercising its statutory function of considering whether or not to grant approval of an application for a subdivision of land owed a duty of care to a subsequent purchaser of one of the subdivided lots not to carry out that function negligently.
- One of the considerations for the council’s exercise of its statutory function was whether the subject land was fit for residential purposes. When the council approved the subdivision, there was a risk of land slipping on the lot in question. The house that the purchaser built on the land became uninhabitable and valueless because of movement of earth and rock on the lot. The council’s appeal against the finding of liability on its part was unsuccessful. One of the members of the court, McPherson JA, noted at 126:
“The effect of exercising its power of approving an application for subdivision is to create a series of new allotments that would otherwise not be available for purchase and use by members of the public for residential purposes.”
- Bamford was therefore concerned with the council’s exercise of the statutory function that was an integral step in the creation of the lot that was then available for purchase for the purpose of constructing a house for which it was not suitable. Once the stock of land was available through subdivision for sale, there was no opportunity for a purchaser of the subdivided lot to propose any conditions for the contract pursuant to which the subdivided lot was purchased that could protect the purchaser against the risk that eventuated. The subject matter of Bamford was a residential property where the purchasers fell within the category of having no capacity to protect themselves against the risk that would have been addressed, if the council had not been negligent in exercising its statutory function, making the approach in Bryan v Maloney applicable.
- Moorabool concerned whether a building surveyor who was employed by Moorabool Shire Council, authorised by the relevant legislation, and permitted by his employer (for which the employer was remunerated) to act as a private building surveyor in other council areas to issue building permits owed a duty of care to Mr and Mrs Taitapanui as subsequent purchasers of a house built pursuant to a building permit granted by him outside the Moorabool Shire Council area. It was subsequently ascertained, after Mr and Mrs Taitapanui purchased the property, that there were serious structural deficiencies with the house. The wrong type of footing system was specified on the plans submitted to the building surveyor with the application for the building permit. It was found that the building permit should never have issued on the basis of the plans and other documents lodged with the building surveyor (at ).
- The court held that the building surveyor and his employer owed a duty of care to Mr and Mrs Taitapanui and were liable for pure economic loss. Maxwell P largely agreed with the joint judgment of Ormiston and Ashley JJA, but also gave additional reasons.
- Mr and Mrs Taitapanui were held to be vulnerable, in the sense described in the judgment of the plurality in Woolcock. The relevant law was summarised in the joint judgment of Ormiston and Ashley JJA as follows:
" Over the past 30 years, there has been recurrent, intensive, consideration – at the highest judicial levels in Australia and elsewhere – of the circumstances in which a duty of care will arise to avoid causing pure economic loss. No occasion arises in this appeal to rehearse at any length the chain of case law through which the principles have been developed and refined. It is sufficient for present purposes if we identify what appear to us to be pertinent considerations, as the law now stands in Australia.
 The categories of case in which a duty of care with respect to pure economic loss is to be found are properly to be seen as special. Foreseeability of loss, and an unbroken chain of causation, are necessary elements, but by themselves are not sufficient. An additional element which must be present has been variously described as involving one or more of known reliance or dependence of the plaintiff; the assumption of responsibility by the defendant; or the control exercised, or exercisable, by the defendant over the circumstances affecting the plaintiff’s interests. What ultimately determines whether a duty of care arises is the character of the relationship between the plaintiff and the defendant. Matters such as those which we have just mentioned, and others, bear upon the resolution of that question in the particular circumstances of particular cases; though not all of those matters will be at the forefront in every case. The question to be answered is whether, having regard to the salient features of the particular case, the connection between the parties is sufficiently close – though not necessarily physically close – as to give rise to a duty of care. When the defendant’s acts or omissions arise in connection with the discharge of statutory duties or the performance of statutory functions, the statutory framework is itself a salient feature to which consideration must be given.
 To those considerations should be added the following: Three policy considerations are pertinent in every case. First, that the effect of a decision should not lay a defendant open to claims which are indeterminate as to the class or number of potential claimants, time or amount. Second, that the effect of a decision should not be to unduly hinder ordinary commercial transactions (or, be inconsistent with normal business standards). Third, that a decision should not have the effect of intruding into another area of the law.”
- The Victorian legislative scheme in relation to building permits, including a permit register that was able to be searched by a purchaser and a requirement that the vendor of a residential property must before the purchaser signs the contract give the purchaser a statement particularising any building permit in the preceding seven years in relation to the property, was relevant to the determination by Ormiston and Ashley JJA of the purchaser’s vulnerability to the negligence of the building surveyor in issuing the permit for the subject house that had the effect of conveying that the building work would comply with the relevant building legislation and regulations. The relevance was also noted at  that “for most people the purchase of a home is a major personal decision, that the structural soundness of the home is of first importance, and that homes are often enough the subject of resale”.
- The position of Mr and Mrs Taitapanui as subsequent purchasers of a residential home is very different to the position of the plaintiff in purchasing a building for the purpose of conducting its commercial enterprise.
- Western Districts also concerned the exercise by a local council of a statutory power as the principal certifying authority appointed by the developer under s 109E of the Environmental Planning and Assessment Act 1979 (NSW) (EPA). It was held that a duty of care was owed by the council to a purchaser of an allotment from the subdivision of land that was created, as a result of the issue of the subdivision certificate by the council that authorised the registration of the plan of subdivision.
- In exercising the power to issue the subdivision certificate, s 109J of the EPA precluded the issue of the certificate unless the certifying authority was satisfied of each of the specified matters, including that the applicant had complied with all conditions of the development consent which were required to be complied with before the subdivision certificate may be issued in relation to the plan of subdivision and, where the land was within a water supply authority’s area of operations, that the applicant had obtained a certificate of compliance from the water supply authority with respect to the subdivision of the land. The developer had not applied for a certificate of compliance from the relevant water supply authority. Notwithstanding that failure, the council issued a subdivision certificate for the subdivision. After the purchaser completed the purchase, it was ascertained that $47,511 was owed to the relevant water supply authority which the purchaser had to pay to that authority.
- Preston CJ of LEC, with whom the other members of the court agreed, observed:
“84There is also an anterior problem. Prospective purchasers are entitled to assume that if the principal certifying authority exercises the statutory power to issue a subdivision certificate, it has satisfied itself that all of the applicable requirements in s 109J(1) and (2) have in fact been complied with. Prospective purchasers ought not be required to assume that the principal certifying authority has exercised the statutory power improperly or to make inquiries to ascertain whether it has exercised the statutory power properly or improperly.
85Prospective purchasers who have entered a conditional contract to purchase an allotment to be created by the subdivision, such as the applicants in this case, cannot withhold from purchasing the subdivided allotment once the plan of subdivision has been registered if they discover that the principal certifying authority issued the subdivision certificate without being satisfied that each of the applicable requirements in s 109J(1) and (2) had in fact been met. They are obliged to complete the contract upon registration of the plan of subdivision. They cannot renegotiate the price or the terms of the contract.
86It is also not reasonable to expect that prospective purchasers should protect themselves, before the principal certifying authority exercises the statutory power to issue a subdivision certificate, against the consequences of any potential misexercise of the power.”
- Preston CJ of LEC noted that theoretically a prospective purchaser could seek protection against misexercise of the statutory power by the principal certifying authority by negotiating a provision in the contract entitling the purchaser to decline to complete the contract or to be compensated by the vendor, if there were such a misexercise of the statutory power. Preston CJ of LEC considered at - that such a contractual provision would not provide adequate protection against economic loss for the prospective purchaser and the burden of loss remained either on the purchaser or the vendor of the lot and therefore concluded that at  that in that case the purchasers were vulnerable.
- Western Districts can be distinguished on the facts, as it was concerned with the negligence of the principal certifying authority that preceded the creation of the subdivided lot which produced the subject matter of the contract.
- Mr Fernon relies on the distinction drawn by McDougall J in Chan v Acres  NSWSC 1885 between the position of the engineers MHE (which prepared the structural drawings for extensions to a dwelling house and carried out inspections of the structural work) and the local council that issued the occupation certificate for the dwelling house. The plaintiff had purchased the dwelling house from the owner builder who did the extensions. The council was the principal certifying authority of the building work under the EPA. There was no problem with the design of the extensions to the dwelling house, but the contractors who carried out the relevant building work failed to comply with the design and that was not detected on the inspections by MHE’s employed engineer.
- Applying Woolcock and Brookfield, McDougall J weighed up the factors relevant to imposing a duty of care on the engineers and concluded, at , that taken together they were insufficient to justify the imposition of the duty of care. The conclusion was otherwise in relation to the council. McDougall J stated at :
“In the case of the Council, and quite unlike the case of MHE, it is in my view clear that there was both the expectation of reliance (i.e., the Council, through the certifier, knew or understood that prospective purchasers would rely on the occupation certificate) and actual reliance. I do not understand it to have been submitted that the reliance of which [the purchaser] gave evidence was unreasonable. It is plain from the evidence of the certifier that the Council knew of the likelihood of that reliance. In those circumstances, it is easy to infer, and I do, that the Council, knowing that intending purchasers would rely on its work as summarised in occupation certificates, assumed the responsibility of certifying accurately. One might well ask, accordingly, why should it not also bear the consequences of certifying inaccurately?”
- The plaintiff submits that the fact that Mr Henry was fulfilling a statutory function in issuing the Form 15 and/or Form 16 was of particular significance on the issue of vulnerability. The plaintiff did not actually plead in the statement of claim the matters of fact relied on to allege that the plaintiff was affected by vulnerability that gave rise to the duty of care alleged to be owed by DEQ and Mr Henry to the plaintiff. At least DEQ and Mr Henry in paragraph 19 of the defence pleaded the factual matters on which they rely to show that the plaintiff was in a position to protect itself prior to, and at the time of, its entry into the contract and therefore to preclude the imposition of such a duty of care and these factual matters were largely established by the evidence as follows.
- The plaintiff knew what its intended use was of the building, including the installation of racking to store air-conditioning units which would exert a downward force on the concrete slab, and yet the plaintiff made no inquiries before entering into the contract, when exhibit 6 alerted the plaintiff to the fact that “No allowance has been made for pallet racking or punching”. Not only did the plaintiff not engage an engineer to inspect the building and the engineering drawings to ascertain whether the building was suitable for the plaintiff’s intended commercial use (for which maintaining a level floor was important) prior to entering into the contract, the plaintiff agreed to the deletion of the standard clause 4 which would have otherwise made the contract conditional on a building report. It is submitted on behalf of the plaintiff that a building inspection prior to completion would not have disclosed the design issues in respect of the slab. This overlooks the fact that any inspection done in conjunction with inspecting the S drawings, would have revealed the nature of the construction of the concrete slab, the floor design loads for the slab, and the express qualifications about anticipated settlement.
- Subject to clause 2.3 of the special conditions of the contract that permitted the plaintiff during the defects liability period under the D&C Contract to notify DDS on behalf of Efstathis as to any defects in the construction of the improvements and the assignment of rights of enforcement in clause 2.4 of the special conditions, the plaintiff entered into a contract under which Efstathis expressly did not warrant that the improvements had been constructed in a good and workmanlike manner or were otherwise fit for any particular purpose. It is not irrelevant that despite clause 2.4 of the special conditions, the plaintiff did not seek to perfect the assignment of Efstathis’ rights against DDS at the same time as the completion of the purchase. It is not to the point that DDS would never have consented to the assignment by Efstathis of its rights under the D&C Contract to the plaintiff, but the plaintiff’s failure to pursue its rights under clause 2.4 of the special conditions meant that the position in respect of being able to pursue DDS for any defects in the building works discovered after the expiry of the defects liability period was not resolved before completion of the purchase.
- In addition, the imperative consideration for the plaintiff in its negotiations with Efstathis prior to entering the contract was achieving a discount in the purchase price, rather than taking all steps that would have otherwise been available to ensure that the building was of a suitable construction for its intended use. The submission is well made by Mr Musgrave of counsel on behalf of DEQ and Mr Henry that there were many opportunities for this plaintiff to protect itself from the risk of settlement of the slab that it did not take, so that it could not be found to be vulnerable in the sense described in Woolcock and Brookfield.
- Another important consideration is that neither DDS nor Efstathis would have been able to take action against DEQ and Mr Henry for designing a slab on ground, when that was what DDS contracted DEQ to do and what I infer was Efstathis’ requirement in minimising the construction costs to maximise the profit on the sale of the building. As explained in Brookfield at  and , the coherence of the common law would be undermined if a duty of care in tort were imposed on a party in respect of the performance of an obligation under contract for which that party had no liability to the other contracting party.
- The plaintiff emphasises the statutory role that DEQ and Mr Henry had in issuing the Form 15 and the Form 16. The submission that they should be characterised as equivalent to the prescribed certifying authority under the EPA in New South Wales is not accurate. Under the Regulation their role was to help the building certifier in their area of professional skill to enable the building certifier to carry out its role. Issuing the Form 15 was incidental to the role of DEQ and Mr Henry in designing the slab on ground for which DEQ was paid by DDS and has no significant effect on the characterisation of the role of DEQ and Mr Henry as designing the slab. The plaintiff had advanced an alternative argument in respect of the application of vulnerability on the basis that the presence of a statutory function on the part of DEQ and Mr Henry dispensed with the requirement of vulnerability as an essential condition for founding a duty of care. Apart from the fact that argument is inconsistent with the approach in Woolcock and Brookfield, there is no foundation for it in the light of the true nature of the role of Mr Henry on behalf of DEQ as a competent person under the Regulation.
- If there had been negligence by DEQ and Mr Henry in designing the slab as a slab on ground, the plaintiff has failed to establish vulnerability in the sense explained in Woolcock and Brookfield to permit the imposition of a duty of care owed by DEQ and Mr Henry in respect of the design and/or certification of the slab for the subject building.
- In view of my conclusion that there was no breach of the design standards under the BCA in respect of the design of the slab, it follows that the claims based on misleading and deceptive conduct in respect of the issuing of the Forms 15 and 16 cannot succeed.
- The manner in which the claims are currently formulated against DEQ and Mr Henry in tort and under the TPA first appeared in the statement of claim in the version that was filed on 30 July 2014. No leave of the court was obtained for these amendments. DEQ and Mr Henry plead that the conduct alleged to comprise the breach of duty occurred before January 2008 and the loss or damage the subject matter of the claim was evident no later than January 2008 and therefore plead the limitation period as a defence against the plaintiff. If necessary, the plaintiff applies for leave under r 376 of the Uniform Civil Procedure Rules 1999 (Qld) in respect of the amendments that include new causes of action after the expiry of the relevant limitation period. In view of my conclusion on the question of liability, it is not necessary to deal with the application for leave or the limitation defence.
- I observe, however, that the preponderance of evidence indicates the loss or damage was evident in a relevant sense later than January 2008. The mere fact that one of the plaintiff’s employees had requested DDS provide a copy of the engineering drawings that dealt with the floor slab in late January 2008 without any further evidence about the circumstances is not enough to enable a finding to be made that the damage was sustained by January 2008. It would also be inconsistent with Mr Poole’s observations.
- It is unnecessary to consider other issues raised on the pleadings of contributory negligence and proportionate liability.
Quantum of damages
- It is also not necessary to consider the issue of quantum.
- The plaintiff claims damages in the sum of $1,067,203.50 as the cost of the rectification work to replace the floating slab and associated costs. The plaintiff submits that it was not unreasonable for the plaintiff to replace the slab rather than undertake slab jacking. It is argued that slab jacking was temporary and with repeated treatments is likely to result in similar costs to the replacement of the slab and, in addition, slab jacking would not fix the other slab problems of cracking and gouging.
- If DEQ and Mr Henry were liable to the plaintiff, they dispute the quantum of damages on the basis that the plaintiff failed to mitigate its damages and also on the basis that the plaintiff’s method of rectification resulted in the plaintiff obtaining a benefit, namely a warehouse floor of greater load bearing capacity and longer useful life than that which the plaintiff contracted to purchase. On the basis of Mr McFadden’s estimate that the additional costs of constructing the building as a piled slab construction would have been $400,812.20 (excluding GST), the benefit is calculated on the basis of the difference between the actual purchase price of $3.175m and the total of the purchase price that was sought by Efstathis of $3.3m plus $400,812.20. The benefit is therefore calculated as $505,809.
- Alternatively, it is submitted by DEQ and Mr Henry that the plaintiff should be limited to the rectification costs necessitated by reason of the negligence, if damages are calculated on the basis of slab jacking which DEQ calculates to be $505,809.
- There is substance in the betterment argument. Either basis for calculating damages results in much the same figure. It is academic to decide the point.
- On the publication of these reasons, I will give the parties an opportunity to agree on an appropriate order for costs or, failing an agreement, on a timetable for submissions on what costs order should be made in the proceeding. In the meantime, I will adjourn the question of costs to a date to be fixed to accommodate the parties either agreeing on the costs order or agreeing on the timetable for costs submissions.
- In the meantime, I will make the following orders:
- The proceeding against the second and third defendants is dismissed.
- The question of the costs of the proceeding is adjourned to a date to be fixed.
- Published Case Name:
Actron Investments Queensland Pty Limited v D.D.S Project Management Pty Ltd & Ors
- Shortened Case Name:
Actron Investments Queensland Pty Limited v D.D.S Project Management Pty Ltd
 QSC 306
22 Dec 2016
- White Star Case:
|Event||Citation or File||Date||Notes|
|Primary Judgment|| QSC 306||22 Dec 2016||Proceeding against the second and third defendants dismissed: Mullins J.|
|Primary Judgment|| QSC 104||24 Apr 2019||Application for Mullins J to recuse herself on remitter from appeal refused: Mullins J.|
|Appeal Determined (QCA)|| QCA 147||29 Jun 2018||Appeal from  QSC 306 allowed; order made 22 December 2016 set aside; matter remitted to trial division for further consideration: Fraser and Morrison JA and Atkinson J.|