Lym International Pty Ltd v Marcolongo

BUILDING AND CONSTRUCTION - s 109ZJ Environment Planning and Assessment Act 1979 - whether party was a "contributing party" - effect of agreement of all parties that it would not be alleged that, had a person been a party to the action, that person would have been a contributing party

NEGLIGENCE - causation - s 5D Civil Liability Act 2002 - whether failure to warn or advise can only be causative of loss if a warning or notification, if given, would have been acted upon in a way that prevented the loss - whether it is appropriate to attribute liability to someone who puts in place the preconditions that enable another person's negligence to become effective - discussion of the principles governing causation under s 5D

AGENCY - whether one party contracted with another as agent for a third party, or whether that party separately contracted with the other in performance of contractual obligations to the third party

APPEAL - interference with judge's finding of fact - Jones v Dunkel inference - enables tribunal of fact to infer that the evidence of an absent witness, if called, would not have assisted the party who failed to call that witness - missing witness must have been expected to have been called by one party rather than other - inference not available where disputed issue is whether missing witness was agent for the party and no other reason to believe missing witness was in camp of that party

CONTRACTS - construction and interpretation - admissibility and legitimacy of use of evidence of post-contractual conduct - discussion of for what proposition County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 is authority - majority reasons do not have as their ratio any proposition about the availability of post-contractual conduct for the purpose of finding the terms of an agreement that is wholly or partly oral

CONTRACTS - construction and interpretation - admissibility and legitimacy of use of evidence of post-contractual conduct - post-contractual conduct can be used for the purpose of finding the terms of an agreement that is wholly or partly oral when that conduct is an admission - Tomko v Palasty [2007] NSWCA 258 - circumstances in which being an admission would not permit post-contractual conduct to be used to find terms of a wholly or partly oral contract

CONTRACTS - construction and interpretation - that a particular person is party to a contract is a matter of mixed fact and law - whether a party to litigation can make an admission concerning a matter of mixed fact and law - whether admission made by person other than party to the litigation can be admitted against that party - effect of the introduction of the Evidence Act 1995 to the pre-existing common law principles concerning admissibility of admissions for post-contractual conduct

CONTRACTS - construction and interpretation - admissibility and legitimacy of use of evidence of post-contractual conduct - post-contractual conduct can be used for the purpose of ascertaining the terms or the subject matter of an agreement that is wholly or partly oral regardless of whether the post-contractual conduct is an admission. Legislation Cited: Building and Construction Industry Security of Payment Act 1999 Civil Liability Act 2002 Civil Liability Amendment (Personal Responsibility) Act 2002 Conveyancing Act 1919 Environmental Planning and Assessment Act 1979 Evidence Act 1995 (Cth) Evidence Act 1995 (NSW) Property (Relationships) Act 1984 Uniform Civil Procedure Rules 2005 Cases Cited: Adeels Palace Pty Ltd v Moubarak [2009] HCA 48; (2009) 239 CLR 420 Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 CSR Ltd v Eddy [2005] HCA 64; (2005) 226 CLR 1 Day v Rogers [2011] NSWCA 124 Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317 Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 1 WLR 1213 Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 J Blackwood & Son v Skilled Engineering [2008] NSWCA 142 Jones v Dunkel (1959) 101 CLR 298 Jones v Sutherland Shire Council [1979] 2 NSWLR 206 Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 Manly Council v Byrne [2004] NSWCA 123 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Marcolongo v Chen [2011] HCA 3; (2011) 274 ALR 634 Markisic v Commonwealth of Australia [2007] NSWCA 92; (2007) 69 NSWLR 737 Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; (2009) 261 ALR 382 National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569 Nominal Defendant v Gabriel [2007] NSWCA 52; (2007) 71 NSWLR 150 Payne v Parker [1976] 1 NSWLR 191 Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 Pitcher v Langford (1991) 23 NSWLR 142 Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALJR 492 Pusell v Grabham [1963] NSWR 172 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 Sutherland Shire Council v Heyman (1985) 157 CLR 424 Tomko v Palasty [2007] NSWCA 258 Tucker v McCann [1948] VR 222 Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 Wilson v Hart (1817) 7 Taunt 295 at 304; 129 ER 118 Woolworths Limited v Strong [2010] NSWCA 282 Zanner v Zanner [2010] NSWCA 343 Texts Cited: J D Heydon, Cross on Evidence, 8th Australian edition (2010) Commonwealth, Review of the Law of Negligence Final Report, (2002) Category: Principal judgment Parties: Lym International Pty Limited (Appellant) Leonilda Marcolongo (First Respondent) QBE Insurance (Australia) Pty Ltd (Second Respondent) Representation: Counsel D A Robertson (Appellant) T Alexis SC; D H Mitchell (First Respondent) R Cheney (Second Respondent) Solicitors Unsworth Legal (Appellant) Dunstan Legal (First Respondent) Lee & Lyons (Second Respondent) File Number(s): 2009/326965 Publication restriction: Nil Decision under appeal Jurisdiction: 9101 Citation: N/A Date of Decision: 2009-11-26 00:00:00 Before: Elkaim SC DCJ File Number(s): 3372/2004

Judgment 1BASTEN JA : In proceedings in the District Court, the respondent, Mrs Leonilda Marcolongo, obtained a judgment against parties found to be responsible for causing damage to a building owned by her by removing supporting land. The appellant was the developer, the proportionate liability of which was found to be 25%. It challenges that judgment, asserting that its proportionate liability was a lesser figure. I agree with Campbell JA that the appeal should be dismissed with costs. Subject to the following qualifications, I also agree with his reasons. 2First, with respect to issue 1, namely the question whether Mr Young acted as a agent of the developer in contracting with MacDonald Sheetpiling (NSW 1) Pty Ltd, I agree that Mr Brown was not authorised to make admissions on behalf of the developer in respect of that issue. I do not, however, find it necessary to address the scope and operation of the Evidence Act 1995 (NSW) in respect of admissions. 3Secondly, with respect to issue 4, causation of damage, I agree that it is necessary to apply the provisions of s 5D of the Civil Liability Act 2002 (NSW). Once it is accepted, as it should be, that the negligence was a "necessary condition of" the harm suffered, it was incontestable that the appellant was responsible for such harm, at least in the present statutory context, for the amount of its apportioned liability. Its failure to take reasonable care related to the maintenance of support for the respondent's land. Its breach of duty was a cause of damage to that land and the respondent's building. The damage fell squarely within the area covered by the duty. It was therefore "appropriate" for the appellant's liability to extend to its proportion of the harm so caused, within the terms of s 5D(1)(b). In that circumstance, I do not find it necessary to express a view in relation to the matters discussed by Campbell JA at [239]-[260]. 4Appeals to "commonsense" in the context of findings as to causation are usually little more than an exhortation to avoid over-sophisticated analysis. That exhortation should generally be accepted. The point at which careful analysis becomes necessary, and reliance on "common sense" unhelpful, is where there is a real risk that "common sense" conceals fallacious assumptions, illogical reasoning or plain careless thinking. This case does not raise such risks. 5CAMPBELL JA : Mrs Leonilda Marcolongo has at all relevant time owned land at 7 xxx Street Mona Vale (" No. 7 "), on which a building containing both shops and residential units was constructed. Lym International Pty Ltd, the Appellant, at all relevant times owned an adjacent property at 5 xxx Street Mona Vale (" No. 5 "). I will refer to it as the Developer. For the purpose of constructing a new building on its land, the Developer made arrangements through which first demolition work, then excavation work, was carried out. The excavation was intended to be the site of an underground carpark. The work of demolition and excavation was carried out in June to October 2002 by Mr Rod Young, who traded under the name of Modern Demolition. 6One particular wall on the northeastern corner of Mrs Marcolongo's property was in very close proximity to the boundary between No. 7 and No. 5. 7The side of the excavation adjacent to Mrs Marcolongo's property was shored up using the process known as sheet piling. The sheet piling was installed by a company called MacDonald Sheetpiling (NSW1) Pty Ltd (" MSP "). 8While the sheet piling was being installed on 20 July 2002, Mrs Marcolongo's building suffered damage as a result of, at least in part, some subsidence that affected its foundations. 9She brought proceedings in 2004 in the District Court, initially against the Developer and MSP. The trial did not take place until August 2009. 10We were informed that the extraordinary delay in bringing the case on for hearing was affected by the events involved a related piece of litigation that culminated in the High Court decision in Marcolongo v Chen [2011] HCA 3; (2011) 274 ALR 634. 11By the time of the trial, MSP had been deregistered. It had been insured by QBE Insurance (Australia) Pty Ltd (" QBE "). QBE came to be a party to the litigation. Both the trial and this appeal have been conducted on the basis that QBE is liable for whatever amount MSP might be liable for. 12Mr Young had at one time been a cross-defendant in the District Court proceedings, but he ceased to be a party, on the basis of an agreement between the remaining parties to the litigation. The effect of that agreement is one of the matters in dispute in this appeal. 13One of the causes of an action on which Mrs Marcolongo sued QBE and the Developer was negligence, based upon breach of the statutory duty of care contained in s 177 Conveyancing Act 1919 . The other was trespass, because some of the work involved in installation of the sheet piling involved incursions into the subsoil of Mrs Marcolongo's land. The Legislation 14It is convenient to set out here the legislative provisions that were relevant to the causes of action. 15Section 177 Conveyancing Act was introduced into the legislation in 2000. It provides, so far as relevant: "(1) For the purposes of the common law of negligence, a duty of care exists in relation to the right of support for land. (2) Accordingly, a person has a duty of care not to do anything on or in relation to land (the supporting land ) that removes the support provided by the supporting land to any other land (the supported land ). (3) For the purposes of this section, supporting land includes the natural surface of the land, the subsoil of the land, any water beneath the land, and any part of the land that has been reclaimed. (4) The duty of care in relation to support for land does not extend to any support that is provided by a building or structure on the supporting land except to the extent that the supporting building or structure concerned has replaced the support that the supporting land in its natural or reclaimed state formerly provided to the supported land. ... (8) Any right at common law to bring an action in nuisance in respect of the removal of the support provided by supporting land to supported land is abolished by this section. ... (12) A reference in this section to the removal of the support provided by supporting land to supported land includes a reference to any reduction of that support." 16At the times relevant to this litigation the Environmental Planning and Assessment Act 1979 (" EPA Act ") contained a Part 4C, which included ss 109ZI and 109ZJ. Section 109ZJ was repealed by Schedule 4.2 of the Civil Liability Amendment (Personal Responsibility) Act 2002 , but that Schedule of the Act came into effect on 1 December 2004, after accrual of the various causes of action sued on in these proceedings. 17Section 109ZI contained some definitions that applied for the purposes of Part 4C: " building action means an action (including a counter-claim) for loss or damage arising out of or concerning defective building work. building work includes the design, inspection and issuing of a Part 4A certificate or complying development certificate in respect of building work." 18Because the definition of "building work" in s 109ZI was an inclusive one, it had the effect of expanding, for the purposes of Part 4C, the definition contained in s 4 EPA Act : " building work means any physical activity involved in the erection of a building." It is the definition in s 4, not its extension by s 109ZI, that is relevant to this case. 19Section 109ZJ relevantly provided: "(1) After determining an award of damages in a building action ..., a court must give judgment against each contributing party for such proportion of the total amount of damages as the court considers to be just and equitable, having regard to the extent of that party's responsibility for the loss or damage in respect of which the award is made. (2) Despite any Act or law to the contrary, the liability for damages of a contributing party is limited to the amount for which judgment is given against that party by the court. (3) A contributing party cannot be required: (a) to contribute to the damages apportioned to any other person in the same building action ..., or (b) to indemnify any such other person in respect of those damages. (4) In this section contributing party , in relation to a building action ..., means a defendant or other party to the action found by the court to be jointly or severally liable for the damages awarded, or to be awarded, in the action." 20Section 109ZJ allowed for apportionment of liability amongst defendants or other parties to an action. It did not make the more radical inroad on the common law concerning solidary liability that was made by the proportionate liability provisions of Part 4 of the Civil Liability Act 2002 , introduced into that Act by the Civil Liability Amendment (Personal Responsibility) Act. For the " apportionable claims " to which it applied, the Part 4 provisions permitted apportionment of the total damage among all the concurrent wrongdoers who had caused the relevant loss or damage, whether or not all of those concurrent wrongdoers were defendants or other parties in the action. 21It was common ground, both at the trial and on the appeal, that the excavation work that was carried out on the Developer's land was "building work" within the meaning of the EPA Act , and thus if both QBE and the Developer were liable for the damage sustained by Mrs Marcolongo's property, apportionment of the damages under s 109ZJ EPA Act was in principle possible. The Result Below 22The District Court judge held that both the Developer and QBE were liable by reason of a breach of the duty of care imposed by s 177 Conveyancing Act . He took the view that his finding on liability under s 177 made it unnecessary for him to decide the trespass claim. No complaint is made on the appeal about the judge's failure to decide the trespass claim. 23The judge assessed the quantum of damage that Mrs Marcolongo had suffered as being $1,554,574.50. He apportioned responsibility for the damage 25% to the Developer, and 75% to QBE. Accordingly, he entered judgment for Mrs Marcolongo against the Developer for $388,643.62, and judgment for Mrs Marcolongo against QBE for $1,165,930.88. Judgments of that size were possible because the parties had consented to the monetary limit of the ordinary jurisdiction of the District Court being extended. Issues on the Appeal 24The present appeal is brought by the Developer. It does not dispute that Mrs Marcolongo's property was damaged, or the quantum of damages. Its contention on the appeal is that the judge was wrong in finding that it had any liability to Mrs Marcolongo at all, or alternatively that the judge should have found that its proportionate liability was less than 25%. 25QBE does not cross-appeal. It has paid to Mrs Marcolongo the amount of the judgment given against it. 26The Developer submits that there are four reasons why its appeal should succeed. It submits that:

SCHEDULE 7.43 It is in the context of the second element - namely scope of liability for consequences - that the statement that causation is a matter of commonsense is most often made. However, courts use various other terms and phrases to describe the sort of connection between negligent conduct and harm that can justify the imposition of legal liability to pay damages. These include 'real cause' and 'effective cause' . It is also said that if another necessary condition 'intervenes' between the defendant's conduct and the harm and 'breaks the chain of causation' , the defendant will not be liable for the harm. 7.44 The concept of foreseeability is used in this context as well. A basic rule of negligence law is that a negligent person will not be held liable for unforeseeable consequences of their negligence (although there are important qualifications to this rule - such as the principle that the victim of negligently-caused harm must be 'taken as found' - that need not be discussed in detail here). A point that should be noted is that the rule laid down in the Shirt case ..., that a person cannot be liable for failing to take precautions against a far-fetched or fanciful (albeit foreseeable) risk of harm, does not apply in this context. Once a person is held to have behaved negligently, they can, in theory at least, be held liable for foreseeable consequences of that negligence, even if they were of a very low probability. 7.45 None of these terms and phrases provides very much guidance as to the likely outcome of individual cases, and the question of 'the scope of liability for consequences' tends to be seen as one that has to be answered case-by-case rather than by the application of detailed rules or principles. This is not to say that there are no relevant guidelines in the law. For instance, it is said that a person is not liable for 'coincidental' consequences of their negligence. Suppose that a driver negligently injures a pedestrian, who is further injured when the ambulance in which she is being taken to hospital is involved in a collision as a result of negligence on the part of the ambulance driver. The first driver would not be held liable for the injury resulting from the second accident, because the sequence of events would be considered a 'coincidence' , even though the first driver's negligence was a necessary condition of the harm suffered in the second accident. On the basis of this example, it is easy to see the appeal of the 'coincidence principle' as an outworking of ideas about personal responsibility. 7.46 However, this principle of 'no liability for coincidences' is not of universal application. For instance, in Chappel v Hart , the failure of the defendant to warn the plaintiff was accepted to have been a necessary condition of the materialisation of the risk because the plaintiff would not have had the operation, at the defendant's hands or when it was performed, if she had been warned; and in that case she would almost certainly not have suffered the harm. But the fact that the risk materialised despite the exercise of reasonable care by the defendant could be called a coincidence. The best explanation of the difference between this case and the example discussed in paragraph 7.45 is not that the doctor caused the patient's harm whereas the first negligent driver did not cause the harm suffered in the second accident. Rather, the explanation would seem to lie in differing ideas about the responsibilities of doctors to their patients on the one hand, and the responsibilities of drivers to pedestrians on the other. In Chappel v Hart , several of the judges made this point by saying that the doctor should be liable because the risk that materialised was precisely the risk about which (in discharge of the reactive duty) he should have warned the patient. 7.47 For present purposes, the important point is that there appears to be a perception amongst various groups that courts are too willing to impose liability for consequences that are only 'remotely' connected with the defendant's conduct. In other words, there is a feeling that the net of responsibility for the consequences of negligence is being cast too widely. The question that confronts the Panel is whether there is anything that we can usefully propose by way of legislative statement that might reduce the element of uncertainty in the law and indicate to courts that issues of responsibility are directly relevant in this context. 7.48 A major difficulty here is to strike a balance between making legislative statements that are so abstract and general as to be more or less useless, and making detailed provision that denies courts the flexibility they need to deal with the infinitely various facts of individual cases. What is needed is a provision that will suggest to courts a suitable framework in which to resolve individual cases. Terms and phrases such as 'effective cause' , 'foreseeability' and 'commonsense causation' do not provide such a framework because they express a conclusion without explaining how that conclusion was reached. They discourage explicit consideration and articulation of reasons, for imposing or not imposing liability for the consequences of negligence, that are securely grounded in the circumstances of individual cases and address issues of personal responsibility. 7.49 The Panel believes that it is possible to give some helpful legislative guidance that holds out a reasonable prospect of furthering the objectives of the Terms of Reference. Such a provision would be to the effect that in determining liability for the harmful consequences of negligence (whether in such terms or in terms of 'legal cause' , ' effective cause' , 'commonsense causation' , 'foreseeability' , 'remoteness of damage' and so on), it is relevant to consider, (a) whether (and why) responsibility for the harm should be imposed on the negligent party, and (b) whether (and why) the harm should be left to lie where it fell. [The Report then set out the terms of its recommended legislation, which differed in some respects from s 5D, but which included in para (h) a recommendation that is in substance the same as s 5D(1)(b) and s 5D(4), and continued] 7.50 It may be helpful to give an example of how paragraph (h) of this Recommendation (dealing with scope of liability) might be used. Consider the case of Chappel v Hart again. Because the plaintiff would not have had the operation, at the hands of the defendant and at the time it was performed, if she had been warned of the risk, the defendant's failure to warn played a part in bringing about the harm suffered by the plaintiff. But this conclusion does not settle the question of whether the doctor ought to have been held liable for that harm. In favour of denying liability, it could be argued that in the absence of negligence on the part of the defendant in performing the operation, the harm suffered by the plaintiff was a mere coincidence for which the defendant ought not to be liable. On the other hand, it could be argued that even though the occurrence of the harm was a coincidence, it was the very risk about which the plaintiff had inquired. For that reason, the imposition of liability would be justified in order to reinforce the doctor's reactive duty to inform and the patient's interest in freedom of choice. The provision in paragraph (h) of Recommendation 29 does not support either of these arguments against the other. Rather, it is intended to encourage courts to articulate such arguments and to discourage them from explaining decisions in terms of unhelpful phrases such as 'commonsense' or 'real and effective cause' . Articulation of principles of personal responsibility will further the objectives underlying the Terms of Reference. 272SACKAR J : I have had the advantage of reading the judgment of Campbell JA in draft and I am in agreement with his reasons and the orders he proposes.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 September 2011