Kirkby & Anor v Coote & Ors [2006] QCA 61

SUPREME COURT OF QUEENSLAND

CITATION: Kirkby & Anor v Coote & Ors [2006] QCA 061

PARTIES: SYDNEY KIRKBY and JUDITH LANG (plaintiffs/respondents) v JOHN WALTER COOTE (first defendant) JOHN TITMUS (second defendant/first appellant) ROWEN MEYER & ASSOCIATES PTY LTD ACN 055 454 012 (third defendant/second appellant)

FILE NO/S: Appeal No 6134 of 2005 / SC No 4250 of 2003

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 10 March 2006

DELIVERED AT: Brisbane

HEARING DATE: 24 February 2006

JUDGES: Williams and Keane JJA and McMurdo J / Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDER: 1. Appeal dismissed****2. The appellants to pay the respondents' costs of the appeal to be assessed on the standard basis

CATCHWORDS: DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT - MEASURE OF DAMAGES - DAMAGE TO LAND AND BUILDINGS - where pole house designed by appellants was built for respondents on steeply sloping land - where some of the footings of house subsided and failed following heavy rain - where learned trial judge found the appellants negligent and awarded damages to respondents assessed on basis of reasonable cost of demolition and reconstruction of house - where appellants did not challenge finding of negligence on appeal but challenged assessment of damages - where dispute over learned trial judges' finding on the adequacy of those footings which had not failed - where dispute over the risk of failure of the remaining footings - whether the learned trial judge erred in assessing damages on the basis of the reasonable cost of demolition and reconstruction / Abalos v Australian Postal Commission (1990) 171 CLR 167, cited / Bellgrove v Eldridge (1954) 90 CLR 613, applied / J-Corp Pty Ltd v Gilmour [2005] WASCA 136; FUL 60 of 2003, 27 July 2005, cited / John Pfeiffer Pty Ltd v Canny (1981) 148 CLR 218, cited / Lyons v Jandon Constructions (a firm), unreported, Supreme Court of Western Australia, No 2328 of 1997, 20 July 1998, considered / Ruxley Electronics & Construction Limited v Forsyth [1996] AC 344, considered

COUNSEL: P H Morrison QC, with S T Farrell, for the appellants / T Matthews, with M H Hindman, for the respondents

SOLICITORS: Barry & Nilsson for the appellants / Dibbs Abbott Stillman for the respondents

WILLIAMS JA: I have had the advantage of reading the reasons for judgment of Keane JA wherein all relevant facts are set out. I agree with his reasoning and with the orders proposed, but wish to add some brief reasons for arriving at that conclusion.
The learned trial judge found that “land slips are not uncommon in the steep natural and cut slopes of the area”, and that finding was not challenged.
Murdoch carried out an extensive geological survey of the subject site before making his recommendations with respect to the type of foundations for the house proposed to be built on the site. Both Murdoch reports were given to Titmus who had been commissioned to prepare the engineering drawings required by the Local Authority for approval before building commenced.
It was not disputed on the hearing of the appeal that if the foundations had conformed to the specifications provided by Murdoch the footings would not have subsided in February 1999, and further, there would be no risk of the other footings subsiding in the future. The appellants admitted negligence in that Titmus was negligent in designing the foundations which were supplied to the builder.
The learned trial judge found as pointed out by Keane JA in his reasons that not only did Titmus not follow the Murdoch recommendations, but the builder (Coote) did not even follow the drawings prepared by Titmus. If the foundations had followed the Titmus drawings the house would have been at risk of collapse because such foundations were inadequate given the nature of the site and the sub‑soil as described by Murdoch. The foundations as erected by Coote were even more inadequate, and that meant that the house was even at greater risk of collapsing in the future.
On the hearing of the appeal Senior Counsel for the appellants placed great reliance on evidence from the engineer, Wright, particularly some passages in his report of 21 August 2000. His observations of footings after pits had been dug revealed in relation to one post that it was “founded in stiff and moist yellow and white clayey Silt” and with respect to another post that it was “founded in hard, dry red and white clayey Silt”. Then speaking of those two posts Wright said in his report:

“Regarding the two posts founded at a depth of 1400mm, the materials these posts were founded on was, in our opinion more than adequate to provide support for the imposed loads. Despite them being founded at less than the designed depth, there is little likelihood of the movement in the dwelling being the result of a bearing type failure if all posts are founded in similar stiff material.”

Passages to similar effect are to be found in the oral evidence.
The learned trial judge clearly acted on the evidence of Murdoch; as already noted he was the only person who carried out an extensive geological survey of the site. The following passages from his cross-examination clearly support the conclusions reached by the learned trial judge:

“Clay can be problematic, but it can also provide a good founding material, can’t it? - - It depends on the location. In this particular location, this particular clay would not have been a good founding material, but there are certainly other areas where what you say is correct, but not on this particular block.

And that is because if the clay gets wet, it’s subject to … ? - - Yes, you have got the slope and it’s reactive and all other things that go with it.

…

What do you mean by reactivity? - - It means that when they are subject to moisture, they can expand or move or settle.

And they expand and what effect will that have on a footing within them? - - Well, you can get movement. You can get settlement. You can also get other forms of movement.

On the one hand, can they thrust upwards if they wet? - - Yes, they can expand and they can move.

And when they are dry, they can retract? - - Yes.

And, again, you can have movement in footings? - - Yes.

Then you go on to say, “ground water tends to be absent.”? - - Yes.

“And where storm water run-off can be diverted, excavated banks will typically stand up at relatively high batter angles.” By underground water, what do you mean underground water? - - Well, you have to be careful in that geological setting where you can get water moving through the soil above the basaltic section and also in the base of the basalt and often those forms springs on the hillside and they are geological areas that are typically prone to landslip.”

Significantly the subject block was towards the crest of the slope, and just above the house site the land flattened out in a kind of plateau. Given the evidence as to the frequent heavy rainfall in the area, and the evidence of Murdoch, water seepage into the area of the house foundations could be expected. The house would provide some protection for the foundations from direct rainfall, but it would not prevent seepage into that area.
The evidence from a number of engineers, particularly Murdoch, was that when hard or firm clay became wet it did not afford a stable foundation.
Given the findings of fact made by the learned trial judge, the reasoning of Keane JA, and McMurdo J, and the matters I have emphasised above it is clear, in my opinion, that the house in question remained at risk, if not significant risk, of suffering further damage, if not collapse, because of the inadequacies of the foundations. In those circumstances it was clearly reasonable to assess damages on the basis of the reasonable cost of demolition and reconstruction of the house.
As indicated above, I agree with the orders proposed by Keane JA.
KEANE JA: The respondents are the owners of a house and land at 13 Rosewood Rise, Flaxton. The house is a three-storey timber-framed pole house on steeply sloping land. Construction of the house was completed in 1994. During the week before 9 February 1999, 1,180 mm of rain fell at the respondents' property. On that date, 11 of the footings of the house on the south-eastern slope of the land subsided causing substantial damage to the house. As a result, the respondents brought an action for damages against the first appellant, who designed the footings of the house, and his employer, the second appellant. The learned trial judge upheld the respondents' claim, and made an award of damages in favour of the respondents against the appellants in the sum of $581,200 which represents the reasonable cost of demolition and reconstruction of the house.
On appeal, the appellants do not contest the learned primary judge's findings on the issue of negligence. Rather, the appellants seek to have the damages reduced to $193,200 which represents the reasonable cost of the partial underpinning of the house in the area where the 11 footings actually failed.
Before I discuss the arguments of the parties in relation to the assessment of damages, it is necessary to refer briefly to the findings of the learned trial judge to facilitate a better appreciation of the competing contentions of the parties.

The findings of the learned trial judge

The first appellant's negligence was held to have consisted in his failure to design the footings of the house in accordance with the recommendations made by Mr Robert Murdoch, a geologist who had been engaged by the respondents to assess the site at 13 Rosewood Rise for purposes of building a pole house upon it. In a report dated May 1993, Mr Murdoch recommended that the footings should be to a depth "2000 - 3000 mm below natural, into dense basalt or onto interlocking boulders, ideally to maximum penetration of backhoe digging the footings. The holes should be inspected prior to pouring." The learned trial judge found that the first appellant was negligent in that:¹

(a) he failed to stipulate in his design plans that the footings were to be placed into dense weathered rock, or into interlocking boulders;

(b) he failed to require that the footings be inspected by a geologist before the builder poured the footings; and

The appellants do not challenge these findings.
The house was supported by 10 wooden poles and 40 steel posts. At trial, it was conceded on behalf of the appellants that, if the footings which subsided on 9 February 1999 had been founded in rock, they would not have failed.
In the course of inspections by various engineers and other experts who have visited the site since 9 February 1999, five of the footings (three poles and two posts) which failed have been exposed. Six test pits were dug, three in the south-eastern corner where the failure occurred, two in the north-western corner, and one some distance downhill from the house. Mr David Bowler, a geotechnical engineer, dug one borehole slightly uphill and on the western side of the house, and another slightly downhill and on the eastern side. The respondents called evidence from four experts in geotechnical matters. They were Messrs Murdoch, Bowler, Wright and Thorley. The appellants called Mr Fox.
It was accepted by Mr Fox that the investigations which had been carried out were sufficient to enable a reasonable assessment to be made of the subsoil conditions.
The learned primary judge concluded that the subsidence of 9 February 1999 was a landslip brought on by the heavy rain of the previous week.² The landslip, and the consequent damage to the respondents' house, resulted from the first appellant's failure to adhere to Mr Murdoch's recommendations as summarised above.³ His Honour found that if Mr Murdoch's recommendations had been followed, the house would have been built on solid foundations and the risk of subsidence would have been eliminated.⁴
His Honour concluded that there were significant inadequacies in the first appellant's design so far as the occurrence of the landslip was concerned. On the basis of the expert evidence called for the respondents, the learned primary judge found that, even if the footings had been built in accordance with the first appellant's design, they would have been inadequate.⁵ That was principally because the first appellant's design did not require that the footings were to be placed into dense weathered rock or interlocking boulders. Further, the design provided for a footing diameter of only 350 mm rather than the 450 mm recommended by Mr Murdoch.⁶

The arguments on appeal

The appellants contend, first, that the learned trial judge erred in concluding that the footings which did not fail were inadequate, and that their adequacy is established by their actual performance since 1994. Secondly, the appellants contend that the learned trial judge erred in principle in failing to conclude that the risk of failure of these footings in the future was so slight as to render complete underpinning or demolition unreasonable. It may be noted that the appellants also contended in written submissions that the learned trial judge should have concluded that even if the first appellant had adhered to Mr Murdoch's recommendations the builder would nevertheless have so constructed the house as to leave it at risk in the event of a landslip. This contention was abandoned on the hearing of the appeal.

The inadequacy of all of the foundations

The appellants' first submission is that the learned trial judge's finding, that the remainder of the footings, referred to as "the upper footings", were inadequate, was not reasonably open on the evidence.
In this regard, Mr Fox, the engineer called by the appellants, had given evidence that the house was not now more vulnerable to landslip than the house next door. The appellants emphasised that the experts called by the respondents could not say that the slope would probably slip in the future.
As I have mentioned, however, the experts called by the respondents said that there was a risk of such movement even though the degree of risk could not be quantified with any certainty. The appellants sought to contend that the evidence of Mr Thorley depended upon the need to identify a "slip plane" in the area of the upper footings, and no such "slip plane" was discovered. It is clear from Mr Thorley's evidence, however, that he regarded the complex geological situation in the area of the upper footings as apt to lead to a failure of the footings in the event that the clay in that area became saturated. There was no evidence that rainfall could not cause saturation of the clay in the area of the upper footings.
In truth, the issue turned on the resolution of the conflict of expert opinion. Although his Honour did not expressly advert to this conflict of evidence, it is apparent that the learned trial judge preferred the evidence of the experts called by the respondents. He was entitled to do so. That he did not expressly reject the evidence of Mr Fox does not matter. As McHugh J, with whom Mason CJ, Deane, Dawson and Gaudron JJ agreed, said in Abalos v Australian Postal Commission:²¹

"… where a trial judge has made a finding of fact contrary to the evidence of a witness but has made no reference to that evidence, an appellate court cannot act on that evidence to reverse the finding unless it is satisfied 'that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge's conclusion': Watt or Thomas v Thomas [1947] AC 484, at 488."

In this case, the evidence of experts called by the respondents did not conflict with any known fact. It is not inherently improbable. Mr Murdoch, in particular, was familiar with the geology of the site and the surrounding area. There is no basis identified in the appellants' argument to support the conclusion that his Honour erred in preferring to act upon the evidence of the respondents' experts rather than the evidence of Mr Fox.
The appellants' principal complaint in relation to his Honour's finding that all the foundations are more probably than not inadequate is based on the contention that not enough is known of the state of the 50 footings (other than the five which have been excavated) to make a finding to that effect. Therefore, it is submitted, the evidence of the experts called by the respondents as to the adequacy of the remaining 45 footings was mere speculation. It is argued by the appellants that to conclude that the remaining footings are inadequate on the basis of such deficient evidence is to reverse the onus of proof of the consequences of the appellants' breaches of duty. The appellants rely heavily in this regard on the performance of the footings, which did not fail on 9 February 1999 or thereafter, since the house was constructed in 1994. As the appellants summarised their submission in this regard in their written submissions in reply: "a possibility that the footings are not down to rock, in the presence of satisfactory performance over a long period of time, is not evidence of a defect giving rise to a risk of failure".
The first point to be made here in relation to the appellants' heavy emphasis on the satisfactory performance of the footings over a long period of time is that it is not as if the geotechnical experts, whose evidence the learned trial judge accepted, were not aware of the performance of the footings prior to trial. Their evidence was that there was a risk of further failure. That evidence was given notwithstanding that performance. His Honour also found that further, albeit insubstantial, movement had occurred since 9 February 1999. It is not open to this Court on appeal to ignore the findings made by the learned trial judge on the basis of the evidence which he was entitled to accept.
His Honour's finding that the footings which have not yet failed were inadequate was not based on speculation. It was based on the expert evidence of the witnesses called by the respondents that the first appellant's design was inadequate (their conclusion in this regard not being disputed), in the sense that it was not apt to produce the virtually risk-free result which, it was conceded, would have resulted if Mr Murdoch's recommendations had been followed. It was also based on the inference that the builder was unlikely to have taken pains to exceed the first appellant's design requirements. That inference by the learned trial judge was not a speculation based on the proven delinquencies of the builder. Rather, it was an inference based, as Mr Thorley's observation would suggest, on common sense, that a builder charged with executing a design will not be disposed to go out of his way to improve upon it.

The risk of further failure and the reasonableness of demolition and reconstruction

The appellants' second broad submission is that the risk of failure of the footings which have not yet failed was so slight as to make the cost of demolition and reconstruction unreasonable as a measure of damages.
In Bellgrove v Eldridge,²³ the High Court affirmed the following statement of principle:

"The measure of the damages recoverable by the building owner for the breach of a building contract is … the difference between the contract price of the work or building contracted for and the cost of making the work or building conform to the contract."

One may pause here to observe that this is a case where the building owner claims in negligence rather than breach of contract, but neither party suggested that a different approach should be adopted to the measure of damages where the negligent breach of duty has produced a result which falls short of the result which reasonable skill and diligence would have produced.
The High Court, having referred to authority for the proposition cited above, went on to say:²⁴

"In none of these cases is anything more done than that work which is required to achieve conformity and the cost of the work, whether it be necessary to replace only a small part, or a substantial part, or, indeed, the whole of the building is, subject to the qualification which we have already mentioned and to which we shall refer, together with any appropriate consequential damages, the extent of the building owner's loss.

The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.

…

As to what remedial work is both 'necessary' and 'reasonable' in any particular case is a question of fact. But the question whether demolition and re-erection is a reasonable method of remedying defects does not arise when defective foundations seriously threaten the stability of a house and when the threat can be removed only by such a course. That work, in such circumstances, is obviously reasonable and in our opinion, may be undertaken at the expense of the builder."

Both the appellants and the respondents sought, in their oral submissions, to derive support from this passage for their respective arguments. The appellants contend that the passage shows that there must be a "serious" risk of failure of the foundations to justify demolition and reconstruction as reasonable. The respondents argue that this passage supports the proposition that where the defective work is such as to give rise to a risk to the stability of a house, a real prospect of catastrophic failure, is sufficiently "serious" to obviate the need for any further inquiry as to the reasonableness of demolition and reconstruction. In my respectful opinion, the true position is to be found between these two extremes.
In Bellgrove v Eldridge,²⁵ the trial judge had found as a fact that the defendant builder's "very substantial departure from the specifications" had resulted in "grave instability in the building". The High Court spoke of demolition and re-erection as "obviously reasonable" in a case when "defective foundations seriously threaten the stability of a house and when the threat can be removed only by such a course."²⁶ In the present case, the appellants argue that the threat to the stability of the building from the footings which have not failed cannot be said to be "grave". Having regard to the findings of the learned trial judge in this case, the threat to the stability of the building may not be "grave" in the sense of obvious and immediate, but it is real.
Further, in terms of the reasons of the High Court in Bellgrove v Eldridge, it is important that, in this case, the learned trial judge was satisfied that partial underpinning would be a doubtful remedy, in the sense that it would be unlikely to remove the threat to the stability of the building posed by the footings, even though they have not yet failed. In this regard, in Bellgrove v Eldridge, the High Court said:²⁷

"Mr Ahearn did not further enlarge upon the difficulties of this process, nor upon the question whether he regarded it as a satisfactory remedy for the present serious defects, but it is clear that the learned trial judge was satisfied that under-pinning or the replacement of the existing foundations in such a manner would constitute but a doubtful remedy. Not only do we think that his Honour's conclusion was justified, but after reading the evidence and considering the submissions of counsel we are satisfied that under-pinning by the piecemeal replacement of the foundations would, at the very best, constitute but a doubtful remedy. To give to the respondent the cost of a doubtful remedy would by no means adequately compensate her, for the employment of such a remedy could not in any sense be regarded as ensuring to her the equivalent of a substantial performance by the appellant of his contractual obligations."

In speaking of the reluctance of the law to confine a plaintiff to a "doubtful remedy", the High Court was contrasting the case before it with a case where it is clear that the expenditure imposed on the defendant is disproportionate to any benefit to the plaintiff in terms of the vindication of the plaintiff's right to recover its actual loss from the defendant. In this case, the damages recovered by the respondents are not disproportionate to the benefit to the respondents in terms of respondents' entitlement to have a house structure which will be, as it should have been, free from risk to its stability so far as its foundations are concerned. It is only by this level of expenditure that the respondents can now achieve a structure which is as stable as it would have been had it not been for the negligence of the first appellant. It is only by this expenditure that the respondents can be freed of a real risk of catastrophic failure with serious consequences for life, limb and property. His Honour found that the risk identified by the respondents' witnesses was a real risk to the stability of the structure which could only be obviated, and the respondents' right to a stable house thereby vindicated, by the demolition and reconstruction of the house.
It should be noted here that the researches of counsel for both sides have been unable to identify any case in which it has been held to be unreasonable for a plaintiff to recover the costs of demolition and reconstruction where the defendant's defective work has affected the stability of a house structure. This suggests that the courts will be slow to characterise as unreasonable the position of a plaintiff who is unwilling to "live with" the risk of the serious consequences which may result from substandard work which affects the stability of a structure. There is no support in principle or authority for the proposition that a court will determine a level of risk of instability which it is "reasonable" for a plaintiff to be required to endure when the plaintiff has bargained for a level of stability which is, for all practical purposes, risk free.
The appellants' complaint as to "the reversal of the onus of proof" in this regard is without substance. The task before the learned primary judge was not to determine whether it was more probable than not that a landslip would occur in the future. His Honour did not cast the burden of disproof in that regard on the appellants. Equally, the respondents' case was not that it was more probable than not that their house would fall in the future. The respondents' case was that the negligence of the appellants had left their house affected by a degree of instability which, though not likely to be disastrous, was real. If the risk did "come home", its consequences would be disastrous. The task for his Honour was to assess an amount of money reflecting what was necessary to enable the respondents to have the stable house, free of risk of collapse, which they would have owned had the appellants not failed in their duty to them. In this regard, even if one accepts at face value Mr Murdoch's quantitative assessment of a 1:20 chance of future failure, the respondents are entitled to be compensated by an award that obviates that risk.

"It is reasonable for the plaintiffs to have a house built on proper foundations rather than to put up with a house which is patched in the manner suggested by the defendants and which, even then, may be prone to failure."³⁰

The decision of Anderson J was affirmed on appeal, where Wheeler J observed that it was "open to Anderson J to conclude that anything short of demolition and rebuilding would be a 'doubtful remedy'".³¹

The appellants referred in their written submissions to the decision of the House of Lords in Ruxley Electronics & Construction Limited v Forsyth³² where Lord Jauncey of Tullichettle said:

"Damages are designed to compensate for an established loss and not to provide a gratuitous benefit to the aggrieved party from which it follows that the reasonableness of an award of damages is to be linked directly to the loss sustained. If it is unreasonable in a particular case to award the cost of reinstatement it must be because the loss sustained does not extend to the need to reinstate. A failure to achieve the precise contractual objective does not necessarily result in the loss which is occasioned by a total failure. This was recognised by the High Court of Australia in the above cited passage in Bellgrove v Eldridge 90 CLR 613, 617 - 618, where it was stated that the cost of reinstatement work subject to the qualification of reasonableness was the extent of the loss, thereby treating reasonableness as a factor to be considered in determining what was that loss rather than, as the respondents argued, merely a factor in determining which of two alternative remedies were appropriate for a loss once established."³³

The appellants place reliance upon these observations, but it seems to me that his Lordship's dicta, when they are understood in context, are not in conflict with the approach taken by the learned trial judge in this case. Ruxley Electronics was a case in which a contract provided for the construction of a swimming pool with a diving area 7 feet 6 inches deep. On completion the pool was suitable for diving, but it was only 6 feet deep. The House of Lords held that the cost of rebuilding the pool to the specified depth was out of all proportion to the benefit to be obtained by that expenditure. Lord Jauncey, with whom Lord Keith and Lord Bridge agreed, after making the observations on which the appellants seek to rely, went on to say:³⁴

"I take the example suggested during argument by my noble and learned friend, Lord Bridge of Harwich. A man contracts for the building of a house and specifies that one of the lower courses of brick should be blue. The builder uses yellow brick instead. In all other respects the house conforms to the contractual specification. To replace the yellow bricks with blue would involve extensive demolition and reconstruction at a very large cost. It would clearly be unreasonable to award to the owner the cost of reconstructing because his loss was not the necessary cost of reconstruction of his house, which was entirely adequate for its design purpose, but merely the lack of aesthetic pleasure which he might have derived from the sight of blue bricks. Thus in the present appeal the respondent has acquired a perfectly serviceable swimming pool, albeit one lacking the specified depth. His loss is thus not the lack of a usable pool with consequent need to construct a new one. Indeed were he to receive the cost of building a new one and retain the existing one he would have recovered not compensation for loss but a very substantial gratuitous benefit, something which damages are not intended to provide."

In the present case, one is not concerned with a breach of duty which results only in aesthetic disappointment. The service negligently rendered by the appellants to the respondents has not left the respondents with a "perfectly serviceable" house. A "perfectly serviceable" house is one which is effectively free of risk of slipping. The respondent's house is a house which is affected by a degree of instability which would not have been present had the first appellant properly discharged his duty.
As the High Court emphasised in the passage from Bellgrove v Eldridge cited above, because the respondents' damages are assessed "once and for all", the law must be astute to ensure that the measure of damages accurately reflects the restoration of the respondents to the position they would have been in had the appellants not failed in their duty. The respondents should recover the amount of damages necessary to enable them to own a house free of risk so far as its stability was concerned. As McLure JA, with whom Steytler P and Wheeler JA agreed, said in J-Corp Pty Ltd v Gilmour:³⁵ "Reasonableness does not require the respondent to carry those risks."

Conclusion and orders

On the evidence before the learned trial judge, it was open to him to conclude that the damage caused by the appellants, ie the respondents' loss of the stable, risk-free house, which the appellants were duty bound to exercise reasonable skill and diligence to provide to them, could be remedied by an award of damages which reflects the cost of demolition and reconstruction. This measure of damages will not result in a windfall to the respondents because it is the least expensive method of enabling them to have a house free of risk as to its stability. The alternative course proposed by the appellants is a "doubtful remedy" which should not be foist on the respondents.
The grounds of appeal are not made out. The appeal should be dismissed. The appellants should pay the respondents' costs of the appeal to be assessed on the standard basis.

[62] McMURDO J: The appellant Mr Titmus is a professional engineer who in 1993 designed the engineering detail, including the footings design, for the respondents’ proposed house at Flaxton, near Maleny. Shortly after that he became employed by the appellant company in its engineering practice, in the course of which he had a role in the supervision of the house’s construction. The respondents have lived there since 1994. The house was built on steeply sloping land and was supported by 40 steel posts and 10 timber poles. In 1999, after a week in which more than a metre of rain had fallen, a loud noise was heard when the house was substantially damaged because eleven of the footings had subsided. All of them were under the south eastern corner where the land is lower because it slopes down from the northwest.

[63] The respondents sued the appellants for damages for negligence. They argued that not only the 11 footings which had failed, but each of the 50 footings needed underpinning. The trial judge accepted that to be so, but found that it would be cheaper to simply demolish this house and build a new one. Upon that basis, he gave judgment against the appellants for $581,200.

[64] The appellants seek to have that judgment varied, so that it would represent only the cost of underpinning the eleven footings which failed. They accept the trial judge’s findings as to the cost of that work and accordingly they seek to have the judgment reduced to $193,200.

[65] The appellants do not argue that there was actionable damage only by the actual failure of a footing. They accept that a compensable loss would exist from a sufficient potential for a footing to fail. They challenge the judgment by essentially two arguments. First, they say that the respondents had to prove that each and every footing was at “serious” risk of failure which was not, or if it was should not have been, the trial judge’s finding. Secondly, they say it would be an unreasonable course to demolish the house and rebuild (or moreover to underpin every footing) having regard to what was proved or not proved about the risk of further failure, in the sense in which reasonableness was described as a qualifying factor in the assessment of damages for building rectification in Bellgrove v Eldridge (1954) 90 CLR 613.

The appellants’ negligence

[66] At the trial the appellants admitted that the design was negligent by its not following certain recommendations of Mr Murdoch, a geologist. In December 1991, the respondents asked Mr Murdoch’s firm to advise about their land’s suitability for house construction. He then wrote a report in which he described the land’s geology and identified possible home sites. He described areas of instability resulting from layers of highly weathered material overlying less permeable layers of rock (specifically rhyolites). He explained that this instability had the potential for landslip, from the movement of concentrations of water down the steep slopes and through the unretained weathered material overlying the rock. Then in May 1993, the respondents had Mr Murdoch undertake a geotechnical study on the land which involved more extensive investigation and assessment of the land’s geology, particularly with regard to what became the house site. He then wrote a report which the respondents briefed to Mr Titmus for his design of their house.

[67] In that 1993 report, Mr Murdoch described the house site as having deeply weathered and highly permeable soils, which were prone to instability if infiltrated by storm water run off. He advised that “the proposed building site is considered to be stable provided load bearing footings are placed into rock”. At paragraph 3.7 he wrote:

“Footings need to be placed into dense weathered rock or onto interlocking boulders at depths in the order of 2-2.5 metres below natural. The footing holes need to be inspected by a geologist prior to pouring.”

Then under the heading “Building Recommendations” he wrote:

“4.1Construction Design – The proposed building site is suitable for a pole, steel post or concrete column type house design.

4.2Footing Depth – Recommended footing depth is 2000-3000 mm below natural, into dense basalt or onto interlocking boulders, ideally to maximum penetration of backhoe digging the footings. The holes should be inspected prior to pouring.

4.3 Footing Width – Minimum recommended footing diameter is 450 mm.”

[68] Mr Titmus produced a design of footings and other structural details, including a drawing of what he proposed as a typical pole-foundation detail. It showed a post standing on compacted gravel “or found on rock”. In another drawing he showed the footings as having a proposed diameter of 350 mm. And there was no reference on any of his drawings to a necessity for the holes to be inspected by a geologist prior to the pouring of footings.

[69] The statement of claim pleaded negligence in terms which included the following:

“17(b)Titmus owed to the plaintiffs a duty to take reasonable care, and to act in the manner of a reasonably competent Engineer with expertise in the design of footings and in giving certificates of design;

…

20.Titmus breached the duty pleaded above in paragraph 17(b) by:

(a)failing to provide the footing design in accordance with the Murdoch Report and in particular failing to require in the design that the footing excavations be inspected prior to pouring;”

It pleaded the Murdoch Report as that written in 1993, and pleaded the terms of its paragraphs 3.7 and 4.2 which are set out above. The appellants denied those allegations in their pleadings. But shortly before the trial, the solicitors by then acting for both appellants wrote that paragraphs 17(b) and 20(a) of the statement of claim were admitted, an admission was recorded at the commencement of the trial.

[70] So as the appellants thereby conceded, the exercise of reasonable care in the design required at least two things which the Titmus design did not include. The first was that each and every footing had to be placed into dense weathered rock or onto interlocking boulders, whereas Mr Titmus’ design allowed for an alternative. Secondly Mr Titmus did not stipulate that the builder had to have the holes inspected prior to the construction of footings. (The statement of claim did not specifically complain of the diameter of the footings although his Honour found, it being uncontested, that this was a further particular of negligence.)

[71] The case against the appellant company relied upon a certificate which it provided, through Mr Titmus, to the effect that the footings had been properly constructed, when in fact they did not comply with the recommendations of Mr Murdoch. The trial judge found negligence in that respect, a finding which is now unchallenged.

[72] In the case then against each appellant, negligence was admitted or otherwise proved because the footings were not designed or constructed as Mr Murdoch had recommended. In the context of what was known of this site in 1993/94, the exercise of reasonable care by a designing or supervising engineer required that each footing be constructed into or onto the material described in his report as rock. That is because from what was then known, there was such a risk of failure from the footings being in other material that any alternative design had to be rejected. That fact is significant for the assessment of damages, because the appellants say that upon what is now known, it does not matter that the footings were not constructed into or onto rock. They argue that the footings which did not fail in 1999 have such a remote chance of failure that it should be ignored, both in relation to the remedial work should be done and the compensation the respondents should have.

The trial judge’s finding of defects

[73] The trial judge found, as the appellants now accept, that the cause of the subsidence was a landslip brought on by the heavy rain in the preceding week. He found, as is also accepted, that the subsidence would not have occurred had the Murdoch recommendations been followed.

[74] The investigations undertaken by several engineers after the 1999 damage provided direct evidence as to the material in which the footings had been constructed, in only five cases. That is explained by the high cost of digging up each footing, or in some cases the impracticability of doing so with the house in place. There was evidence from which his Honour found that in at least some cases, the builder had not constructed the footings even to the (lesser) demands of his contract, which was according to Mr Titmus’ design. That fact encouraged a submission at the trial that the chain of causation, between the appellants’ negligence and any defective footing, had been broken by the builder. His Honour rejected that submission and it was not made in this Court.

[75] The trial judge was able to infer, correctly as the appellants seem to accept, that each of the 50 footings was not constructed according to the Murdoch recommendations: instead, it was constructed either according to the Titmus design or otherwise as the builder had seen fit. His Honour regarded the prospect that the builder chose to disregard the Titmus design, but nevertheless constructed the footings deeper than his contract required and down to the rock, as fanciful. The respondents proved then that in consequence of the appellants’ negligence, each and every footing was not built into rock (which would have avoided any risk) but instead into other material above it.

[76] Then followed the finding which is critical for this appeal, which was that each of the 39 footings which did not subside in 1999 still has a sufficient risk of failure as to result in a compensable loss. His Honour reasoned as follows:³⁶

“What conclusion, if any, can be reached on the evidence as to the state of the footings other than those in the south-eastern corner? They have either been constructed in accordance with the second defendant’s design or they have not – and not necessarily all are in the one category. Those constructed in accordance with the second defendant’s design, if there are any, must be regarded as at risk of failing if there is another landslip in this landslip-prone area. Those not constructed in accordance with the second defendant’s design … must also be regarded as at risk of failing, unless they were taken down to rock. The latter possibility can safely be labelled as fanciful on the evidence. … I therefore conclude that all of the footings are, on the balance of probabilities, inadequate in some way and that the house is as a result at risk of suffering further substantial damage if there is another landslip.”

What risk of failure is compensable?

[77] If those footings are at a sufficient risk of failure the respondents have suffered a loss. This house could have been constructed with no more than a negligible risk of subsidence. If there is a risk of subsidence in these footings, which is more than negligible, is that sufficient, and if not, what must be the extent of the risk for it to result in a compensable loss?

[78] The appellants argue that the risk must be “serious”, which they would put as carrying some higher probability of failure than any risk which is more than negligible. They do not seem to now say that the respondents had to prove that more probably than not these footings will subside. But in relation to a statement by Mr Murdoch in his evidence, in which he suggested that the probability of failure was about five per cent, they argue that a risk of that level was not "serious" and does not constitute a compensable loss.

[79] Although the trial judge was much impressed by Mr Murdoch as a witness and in substance accepted his evidence, he thought that this particular statement was something of an imprecise and hasty estimate and he placed no reliance upon it. His impression of that evidence should be accepted and the statement as to five per cent is of no assistance. The trial judge made no finding which quantified the probability of any further failure. But such a finding was neither possible from the evidence or necessary in the proof of the case.

[80] The essential challenge to this judgment is in his Honour’s conclusion that each footing required remedy from the fact that it was not built as Mr Murdoch had recommended. It is argued that the need for remedial work had to be proved by further evidence of, for example, the material in which a footing was constructed and whether that material was sufficiently stable. They say that the need for evidence of this kind is highlighted by the fact these 39 footings have not failed. This lack of failure was said to strongly indicate, and perhaps to prove, that the footings are satisfactory. And they emphasise that the onus of proof, of course, was upon the present respondents.

[81] These arguments pay no regard to the admissions or findings as to negligence. Had there been no admission of the negligence in this design, his Honour would have discussed why the exercise of reasonable care required each and every footing to be constructed in rock. But implicit in the admission of negligent design, and in the finding of negligence as to the certificate, was this fact: that if each footing was not constructed in rock, then at least on what was known in 1993, there would be an unacceptable risk of its failure. The risk would be unacceptable in an objective sense, judged by a standard of reasonableness. That is why the exercise of reasonable care required the footing to be so constructed. And if the risk of failure was unacceptable, it would constitute a compensable loss. Just as it was unnecessary for Mr Murdoch or Mr Titmus to consider an unacceptable risk in percentage terms, it was unnecessary for the trial judge to do so.

[82] The respondents’ case is that their house has a susceptibility to structural failure, and that susceptibility is an outcome from which the appellants were bound to protect them. The level of risk of failure which constitutes a compensable damage thereby corresponds with that level of risk by which the appellants’ duties of care were defined. This is because of the necessary coincidence between duty, breach and damage, by which “each element can be defined only in terms of the others”, as Brennan J said in John Pfeiffer Pty Ltd v Canny (1981) 148 CLR 218 at 241-242 and in Sutherland Shire Council v Heyman (1984-1985) 157 CLR 424 at 487, and McHugh J said in Tame v New South Wales (2002) 211 CLR 317 at 349.

[83] The fact that every footing had an unacceptable risk of failure, and thereby required remedy, judged by what was known in 1993, need not compel the same conclusion according to what is now known. Other facts may have emerged which should have left the trial judge unpersuaded of an unacceptable risk of failure. Absent further facts of that kind, the trial judge was right to conclude that the risk was unacceptable, and thereby warranted an award of damages, from the fact that no footing had been built as Mr Murdoch had recommended. The trial judge had to consider then such evidence as suggested that the risk of failure was not as it appeared in 1993. In my view the trial judge did consider that evidence (such as it was) and rightly concluded that the risk of failure was still unacceptable.

What is the risk of failure?

[84] The fact most emphasised by the appellants is that the footings have not failed despite their being in place for nearly twelve years and during periods of very heavy rainfall, including one which did cause the others to fail in 1999. This in itself demonstrates, it is argued, that the footings are in good enough ground, or at least the contrary should not have been found. This argument does not have substantial support from the expert evidence. Four engineers as well as Mr Murdoch gave evidence, but no witness said that from the expiry of time and the non occurrence of failure, the risk of failure was now negligible or acceptable. Mr Murdoch said that if the (relevant) footings “haven’t moved, depending on the depth that they’re at they’re probably okay, but I would put them down into rock if I was doing any remedial work at all on that block”. The effect of this evidence is that probably the footings will not fail, but the risk was still high enough to warrant remedial work.

[85] In the investigations that followed the 1999 damage, some excavations were undertaken by various engineers. These included pits around five of the footings. In 2000, three were excavated by the engineering firm of Mr Wright, who gave evidence. One of these pits was next to a footing which had failed. The others were under the north western section of the house. In his report of August 2000, Mr Wright said in relation to the posts found in those two excavations, that “the materials these posts were founded on was … more than adequate to provide support for the imposed loads (and that) there is little likelihood of the movement in the dwelling been (sic) the result of a bearing type failure if all posts are founded in similar stiff material”. But he added that “this does not however, rule out the possibility that the entire soil mass into which posts are bedded is part of a quasi-stable soil mass and susceptible to slippage”. And in a later report (4 August 2003) he wrote:

“We do not believe that partial underpinning would produce a long term solution to the ground movement problems that have been or are likely to be experienced on this site in the future. Full underpinning, if appropriately designed would afford a much higher degree of protection to the building against future ground movement than partial underpinning.”

In his oral evidence he agreed that it was his recommendation that “the only safe way” to remove the risk of failure was to demolish and rebuild footings down to the rock.³⁷ So Mr Wright’s description of the material found in these two excavations hardly provided much support for the appellants’ case. Just as what he there found did not affect Mr Wright’s conclusion as to what remedial work was warranted, nor need it have affected the trial judge’s conclusion. Further, the material in these excavations was thought to be more stable because of its dryness, which was attributed to its being sheltered by the house. But in 1993, when he was considering a house in this precise location, Mr Murdoch was sufficiently concerned about this material becoming water logged that he recommended that every footing underneath this house be built in rock. In his oral evidence Mr Murdoch did not change his view as to the geology of this site or its susceptibility to movement. And there is no basis for disturbing his Honour’s acceptance of Mr Murdoch’s opinions.

[86] Other excavations around footings were performed by Coffey Geosciences Pty Ltd, a firm associated with the witness Mr Thorley. In 2002 it dug two pits but each was in the south east corner where the footings had failed. In his report of 14 May 2002, Mr Thorley said that in these two places, “no obvious slip plane was identified above the footing level”. The appellants argue that Mr Thorley was there saying that there was no slip plane anywhere on the site, and therefore no risk of another landslip. But that is a misunderstanding of his reports. In an earlier report,³⁸ he had said that excavations should be made, but in order to assess the cause of the subsidence which had occurred. This is why he excavated around two failed footings.

[87] Apart then from what Mr Wright had said as to the material under two footings, there was no direct evidence as to the suitability of the particular material into which any of the footings in question had been constructed. And with the possible exception of what Mr Wright had written as to his two excavations, which he qualified by the other statements I have mentioned, there was no evidence which tended to contradict the evidence of Mr Murdoch in relation to the geology of the site, and in particular as to the instability of the material above the layer of rock across the house site.

[88] The appellants then rely upon comments made by expert witnesses in which they were not prepared to say that the footings would probably fail. But as discussed already, that is not the critical question, because the risk of failure could be unacceptably high without its being more than a 50 per cent chance. So it is not sufficient for the appellants to point to Mr Wright’s concession that he would not “be prepared to certify” that the footings are going to move and that he did not “have sufficient information to demonstrate to the court that they will move”.³⁹ When he was asked whether it was “likely now that (the footings) are going to move” Mr Wright said:

“Well, I haven’t analysed it. The risk is certainly reduced by the site development that’s occurred. The rain event that you refer to is not necessarily the rain event that could trigger a slip. I believe we can have heavier rainfalls than that and the other complication is not just a period of rain in a short space of time, but if we got, say, six months of wet weather followed by a very heavy downpour it could have a different effect from what we saw in February 1999.”

Nor are the appellants assisted by Mr Wright’s concession that he could not be certain that the footings would fail.⁴⁰ For the same reason, it hardly assists the appellants to point to this part of Mr Murdoch’s evidence:⁴¹

“But there is no material before you to say that they will fail, the other footings? - No, there is no material.

Wherever they are? – That’s right. There is no material to say that they’re failing, but they could fail, but I wouldn’t like to be sitting here again.”

[89] Another engineer witness was Mr Bowler. He could not say “with any certainty” what was the “degree of risk of it moving”: he said he could not be certain that the footings would move or that they would not move.⁴² Similarly, Mr Fox, an engineer called by the appellants, gave evidence in terms of an uncertainty as to whether the footings would move. His evidence seems to have been affected by an assumption that the ground in which each of these 39 footings had been constructed was sound. In his report of May 2004, Mr Fox said: “It appears that the bulk of the house is securely founded on stable ground which is also shielded from excessive ground moisture infiltration”. But this was simply his understanding, and he did not have direct knowledge of whether that material was sound or not. He said that as it should not be assumed that it was less stable than the rhyolite,⁴³ so he saw no basis to conclude that it was prone to landslip. To the extent that this contradicted Mr Murdoch’s evidence, who said it was less stable, as I have said his Honour clearly preferred that of Mr Murdoch and there was no demonstrated error in that.

[90] On the other hand, there was support in the engineering evidence for the respondents’ case that the risk of failure was sufficient to warrant remedial work. I have mentioned already Mr Wright’s view that partial underpinning would not produce a long term solution and that the only safe way to rectify the house was to demolish and rebuild it. Mr Bowler said that the possibility of a further progress of the landslip remained and so then did the risk of further movement.⁴⁴ In his report of 24 May 1999 Mr Bowler wrote that:

“For a house built in a region with potential for landslip it is necessary to continue all foundations into rock and also ensure that the structural integrity of the supports is sufficient to withstand lateral loads imparted to them by moving soil.”

Mr Thorley said that with partial underpinning “no guarantee could be given … that other footings may not experience future movement, leading to more building damage”, and that full underpinning of all foundations was required to “return all footings to a standard that would be expected of new house construction”.⁴⁵

[91] To summarise then, the facts and circumstances known by the date of trial, but not known in 1993, did not demonstrate that the risk of failure was non existent or acceptable. Nor did it preclude the inference of an unacceptable risk which could be drawn from the appellants’ negligence. Instead, there was a body of evidence supportive of Mr Murdoch’s opinion that the footings as constructed required rebuilding. It was not necessary for the respondents’ proof of their case that they undertake excavations of each and every footing and an analysis of the relative stability of the material beneath it. Their case was well proved by the admission or proof of negligence, fortified by the expert opinion at the trial.

Is the award unreasonable?

[92] In Bellgrove v Eldridge (1954) 90 CLR 613, the High Court upheld a judgment for damages for breach of contract brought by a building owner against a builder. The builder failed to build according to the specifications and, as a result, the foundations were so defective that the building suffered from “grave instability”. The principal question was whether damages should be measured by the difference between the value of the house as it was built and its value as it should have been, or instead by the cost of having the building conform with the contract. It was held that ordinarily the latter was the appropriate measure. But in the judgment of the Court (Dixon CJ, Webb and Taylor JJ), this was said at 618-619:

“The qualification , however, to which this rule is subject is that not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt. No one would doubt that where pursuant to a building contract calling for the erection of a house with cement rendered external walls of second-hand bricks, the builder has constructed the walls with new bricks of first quality the owner would not be entitled to the cost of demolishing the walls and re-erecting them in second-hand bricks. In such circumstances the work of demolition and re-erection would be quite unreasonable. … Many examples may, of course, be given of remedial work, which though necessary to produce conformity would not constitute a reasonable method of dealing with the situation and in such cases the true measure of the building owner’s loss would be the diminishing in value, if any, produced by the departure from the plans and specifications or by the defective workmanship or materials.

As to what remedial work is both “necessary” and “reasonable” in any particular case is a question of fact. But the question whether demolition and re-erection is a reasonable method of remedying defects does not arise when defective foundations seriously threaten the stability of a house and when the threat can be removed only by such a course. That work, in such circumstances, is obviously reasonable and in our opinion, may be undertaken at the expense of the builder.”

[93] Bellgrove v Eldridge was a contract case but no party submits that the relevant passage is inappropriate for an assessment in tort.⁴⁶ The appellants argue that to the extent that there is a risk of failure, it would not be a reasonable response to demolish the house and rebuild it, or to underpin the footings which had not failed.

[94] Where it operates, the qualification in Bellgrove affects an assessment of damages because of its relevance in the definition of the plaintiff’s loss. To take the example given in Bellgrove, the building owner with better bricks than those specified by the contract has suffered no loss, and for that reason would not be awarded the cost of replacing them. This qualification does not operate as some discretionary power to deny a plaintiff an award which is commensurate with a proven loss. In the present case there is a loss from the respondents having a house with an unacceptable risk of structural failure, an event which if and when it occurs could have drastic consequences, and whilst it remains a contingency, still affects their enjoyment of their property. Ordinarily that loss would be measured by the cost of remedying the defect, so that they were compensated in an amount which, as far as possible, would put them in the position they would enjoy had their engineers not been negligent. The appellants do not argue that a proven loss, in relation to these (unfailed) footings, should be measured in another way which is more appropriate in the circumstances. Instead they argue that there should be no damages. Ultimately, this alternative submission returns to the appellants’ first argument, which is that there is no proven loss.

[95] The underpinning of these footings, or the cheaper course of rebuilding, is said to be unreasonable because, it is said, the risk of failure is acceptable. But as the risk is unacceptably high, the argument in reliance on Bellgrove must be rejected.

[96] The appeal should be dismissed with costs.

Footnotes

[2005] QSC 197 at [20]. ↩
[2005] QSC 197 at [28]. ↩
[2005] QSC 197 at [30]. ↩
[2005] QSC 197 at [32]. ↩
[2005] QSC 197 at [26] - [27]. ↩
[2005] QSC 197 at [20]. ↩
Mr Coote was named as a defendant in the action brought by the respondents, but he was not served with the proceedings and took no part in the trial. ↩
[2005] QSC 197 at [10]. ↩
See generally [2005] QSC 197 at [30] - [34]. ↩
See [2005] QSC 197 at [33] - [36]. ↩
[2005] QSC 197 at [28]. ↩
[2005] QSC 197 at [34]. ↩
[2005] QSC 197 at [35]. ↩
[2005] QSC 197 at [35]. ↩

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment

Footnotes

Parties

Cases Cited (4)