Allied Constructions Pty Limited v Hyder Consulting - [2004] NSWSC 808 - NSWSC 2004 case summary — Zoe

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Allied Constructions Pty Limited v Hyder Consulting

[2004] NSWSC 808

Supreme Court of NSW|2004-09-03|Before: Einstein J, Mr P

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Source facts

Court

Supreme Court of NSW

Decision date

2004-09-03

Before

Einstein J, Mr P

Source

Original judgment source is linked above.

Judgment (99 paragraphs)

[1]

CITATION : Allied Constructions Pty Limited v Hyder Consulting (Australia) Pty Limited & Ors [2004] NSWSC 808 HEARING DATE(S) : 31/08/04 JUDGMENT DATE : 3 September 2004

[2]

JURISDICTION: Equity Division Technology and Construction JUDGMENT OF : Einstein J DECISION : Report to be adopted

[3]

CATCHWORDS : Practice and Procedure - Part 72 reference - Application to adopt Referee's Report - Application to set aside sections of the Report - Principles applicable LEGISLATION CITED : Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth) ABB Engineering Construction Pty Limited v Abigroup Contractors Pty Limited [2003] NSWSC 665 Abigroup Contractors Pty Limited v Peninsula Balmain Pty Limited [2001] NSWSC 752 Franks v Berem Constructions Pty Ltd (Court of Appeal of New South Wales, 2 December 1998, unreported) BC9806367 Henville v Walker (2001) 206 CLR 459 Homebush Abattoir Corporation v Bermria Pty Limited (1991) 22 NSWLR 605 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 CASES CITED : James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 159 ALR 268 Jarvan Pty Ltd (in liq) formerly John R Carr & Associates Pty Ltd v Seery (Court of Appeal of New South Wales, 1 December 1998, unreported) BC9806365 Jukes v Hudson (Supreme Court of New South Wales, 13 August 2003, unreported) Leighton Contractors Pty Ltd v C E Heath Underwriting & Agency Services Ltd & Kinhill Engineers Pty Ltd (1995) 8 ANZ Ins Cas 61-231 Multiplex Constructions Pty Ltd v HSH Hotels (Australia) Ltd [2003] NSWSC 1069 Peabody Resources Ltd v Allco Constructions Pty Ltd (Supreme Court of New South Wales, 14 March 1994, unreported) Super Pty Ltd v SJP Formwork (Aust) Pty Limited (1992) 29 NSWLR 549 Allied Constructions Pty Limited (Plaintiff) Hyder Consulting (Australia) Pty Limited (First Defendant and Cross Claimant to First, Second and Third Cross Claim) Alfred Neilson (Second Defendant) PARTIES : Craig Burrell (Third Defendant) Mark Easton (Fourth Defendant) Corkjoint (Australia) Pty Limited (Cross Defendant to First and Third Cross Claim) James Henry Gately (Cross Defendant to Second and Third Cross Claim) Mercantile Mutual Insurance (Australia) Pty Limited (Cross Defendant to Third Cross Claim) FILE NUMBER(S) : SC 55044/00 Mr I Faulkner SC (First Defendant and Cross Claimant to First, Second and Third Cross Claim) COUNSEL : Mr D Ronzani (Corkjoint (Australia) Pty Limited and James Henry Gately) Mr P Braham (Mercantile Mutual Insurance (Australia) Limited) Minter Ellison (First Defendant and Cross Claimant to First, Second and Third Cross Claim) SOLICITORS : Pigott Stinson Ratner & Thom (Corkjoint (Australia) Pty Limited and James Henry Gately) Hickson Lawyers (Mercantile Mutual Insurance (Australia) Limited)

[17]

General observations 13 Before turning to deal with the notices of motion it may be convenient to make some general observations. The subject product 14 The proceedings concerned a product called " Hydrotite" being the brand-name for a type of waterstop based on the technology of hydrophilics, being a material which expands in the presence of moisture and would create a pressure seal within a joint. The technology made use of what was described as "a first" in the development of co-extrusion of hydrophilics and neoprene rubber so as to direct most of the expansion across the joint for maximum seal. 15 Hence Hydrotite was promoted as a dependable and reliable system for sealing joints in concrete. 16 All such products share the characteristic of expanding upon contact with water. In the key joints of the SBR the designers conceived that upon contact with water, the hydrophilic would expand, creating a pressure seal within the concrete and preventing the passage of water through the joints. Design philosophy fundamentally flawed 17 The first matter to note is that the Referee held "that the design philosophy for waterproofing tanks adopted by Hyder was fundamentally flawed"(at [21] on page 31). This was because surface sealant would require replacement as part of the on-going maintenance cycle of the basins. The need in this SBR for periodic emptying out of the tanks meant that there would be occasions when there would be no water at all in contact with any hydrophylic. 18 No hydrophilic could make the key joints of the SBR watertight for the simple reason that they take time (measured in days) to fully expand, during which time no watertight seal exists and the SBR will leak. In the context of a sewerage treatment plant such leakage is, of course, unacceptable. In those circumstances a hydrophilic would not provide an acceptable waterstop. 19 Importantly the Referee found that there had been no advice given by Mr Gately that Hydrotite CJ0725-3K was a suitable product for the purpose of ensuring that the SBR was and remained a watertight structure in all circumstances (at [41]) 20 The matter was summarised by the Referee as follows:

[23]

49 That concept relied on the surface sealant as the primary water seal and where effective deprived the secondary hydrophilic waterstop of the supply of moisture necessary to retain its character as an effective water barrier. There is no evidence that the design concept was explained to Gately by Easton or that he was asked to comment on whether Hydrotite would be suitable for use in those circumstances . [emphasis added] The distinction between the cracking of the floors and the wall leakage 21 The Referee found that the cracking of the floors was caused by the positioning of the Hydrotite and that the wall leakage was simply caused by the fact that an entirely inappropriate type of product, namely a hydrophilic, was used and could never have worked. Reasons why the walls leaked 22 As will appear from what follows, the Referee found that the reasons why the walls leaked was that the design incorporated as a waterstop, a hydrophilic product. The material representation-preferred placement location 23 The only material representation by Corkjoint held to constitute a breach of TPA section 52 was as to the recommendation that Hydrotite should be placed on the lower sloping faces of key joints which was made in error, was made without any engineering or scientific basis and was not supported by the manufacturer as an appropriate location for the product. That recommendation was in relation to the preferred placement location for the Hydrotite found to be a future matter, Corkjoint not having established that it had reasonable grounds for making that recommendation. The Hyder motion Paragraph 4 of the motion - Litigation against Mr Gately 24 The gravaman of the submissions put by Hyder concern: · the manner in which the litigation was pressed against Mr Gately; · the contention that the Referee failed to explicitly recognise or deal with a cause of action pleaded against Mr Gately; · the contention that this Court is presently able to discern from what was decided [as found in the reasons of the Referee] that the cause of action against Mr Gately was established. 25 Hyder originally sought [but no longer seeks] an order varying the final sentence of paragraph 49 and substituting in its place the following finding:

[42]

At Report, page 33, the Referee then made the relevant findings as follows: "33. I find that the allocation of the total cost of about $3 million to Hyder (and Corkjoint) as contained in the individual entries in the summary prepared by Robinson, where derived from actual costs is reliable evidence of the damages incurred under those separate cost categories in a total amount of damages for which Hyder was liable to Allied. 34. In order to assess the contribution for which Corkjoint is liable on the facts found, I have accepted as a fact that the extent of Hyder's liability was to pay Allied an amount of $3 million (excluding costs). 35. I have accepted that the total of $3,058,890 compiled from the costs in each category and allocated to Hyder (and Corkjoint) by Robinson, is reliable evidence of the cost components comprising the quantum of the liability of Hyder to Allied. I have used the amounts which sum to that total allocated by Robinson in the relevant cost categories of the claim as a starting point to determine the contribution due by Corkjoint for those matters where I have assessed that Corkjoint has some liability to Hyder." 36 The proposition is that the Referee: · erred in summarising the claim from Gately as "a contribution" and in failing to assess the claim, in that context, as a claim for FTA damages; · erred in stating that Hyder had not sought to prove its total liability to Allied, other than by reliance upon the consent judgment. 37 Hyder had earlier in its submissions contended that: · before the Referee, it had adduced evidence which clearly established its liability to Allied, independently of the judgment; · Hyder had tendered the evidence of Mr Maher, which was a substantial statement, and the exhibited exhibited folders of documents; · counsel for Corkjoint/Gately did not require Mr Maher for cross-examination; · Hyder had also tendered quantum evidence from Mr Bendeich. He also was not required for cross-examination; · the evidence of Mr Maher and Mr Bendeich had in fact been Allied's evidence against Hyder in the principal proceedings.; · after settlement with Allied, Hyder adduced that evidence in its Cross-Claims against Corkjoint and Gately. Dealing with those submissions 38 It seems to me that there is substance in the responsive submissions put by Corkjoint which I adopt. 39 As to the submission by Hyder that there was evidence before the Referee "independently" of the judgment, which proved Hyder's liability to Allied on all quantum issues as against Gately, it is necessary to recall that the Referee made certain findings with respect to the experts' opinions relied upon by Hyder (paragraphs 29 to 35 (inclusive), Report pages 32 and 33). However his findings at paragraphs 33, 34 and 35, Report page 33, do not go as far as Hyder's case against Gately requires in order for it to succeed against him personally. 40 The Referee as against Corkjoint (not Gately) determined that because it could not go behind the judgment (whereas Gately could), Hyder had adduced sufficient evidence to prove part of its case on liability and on quantum by merely relying upon Mr Robinson's opinions.

[44]

"This Report is not to be understood to accept that any individual item has been proved by Hyder to a loss sustained by it. Scerri's comments and analysis have been produced subject to Hyder proving each and every claim ." (page 436). [emphasis added] 42 The Referee determined that while the Robinson approach to quantum satisfied him that there was "reliable evidence" to support the reasonableness of the settlement (paragraph 31, Report page 32), the cost components allowed by Robinson were only the "starting point" (paragraph 35, Report page 33). The Referee did not wholly accept the opinions given by Mr Robinson on quantum. While Mr Robinson supported a claim against Corkjoint for $1,293,836 (Volume 3, page 438) (plus interest and costs), the Referee only allowed $186,875 plus interest. Hyder had proved that the settlement amount was reasonable given the claims against it by Allied: cf the reference given in footnote 184 of the Report paragraph 6.1(2) to James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 159 ALR 268 at [41]. 43 To my mind the reasons given by the Referee, where referring to the fact that the cost components allowed by Robinson were only the 'starting point", require to be interpreted as a statement that the Referee had commenced from the viewpoint of simply accepting matters put in the judgment which Corkjoint could not gainsay and proceeding to move on from that base. Importantly the Referee was not making a finding that he was satisfied as against Mr Gately that the evidence adduced during the reference amounted to sufficient proof of quantum or loss. 44 In the result the Referee is not shown to have erred in grounding his reasons for not considering the claim against Mr Gately upon the proposition that Hyder had not as against him, proven liability to Allied. Onus of proof 45 It is apparent that the Referee at least in part relied upon the recommendation by Corkjoint in relation to the preferred placement location for the Hydrotite as a future matter where the onus of proving that it had reasonable grounds for making the recommendation was upon Corkjoint being a Corporation. That of course could not have been the approach to be taken to the FTA cause of action against Mr Gately 46 During the application the subject of this judgment senior counsel for Hyder submitted, as I understood him, that the Referee had been satisfied that Hyder, without any need to rely upon the reversal of the onus of proof, had proven as a matter of fact that Corkjoint had not had reasonable grounds for making the recommendation in relation to the preferred placement location for the Hydrotite. 47 It does not seem to me that this submission can be accepted. 48 I accept that whether the Referee approached the matter in terms of: · being satisfied by some evidence which travelled a certain distance in pointing to partial proof that no such reasonable grounds for making that recommendation had been held, as well as; · filling in any gaps in that proof by relying upon the reversal of the onus of proof; is not easy to discern from the reasons. However where the Referee explicitly utilised the reversal of the onus of proof, it is appropriate for the Court presently to regard him as having relied upon that matter as an important parameter in his approach to this critical issue. Paragraph 2 of the motion - wall joint leakages 49 The issue raised by Hyder is contentious. The matter is addressed by Hyder as follows: