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[2004] VSC 239
Supreme Court of Victoria
2004-07-01
SMITH J
Original judgment source is linked above.
Negligence - duty of care of private building surveyor to subsequent purchaser of dwelling - apportionment of damages under s 131 Building Act 1993. Appeal - VCAT decision - alleged errors of law - duty of care - apportionment of danger.
"D. That the question of law upon which the appeal is brought is:
(i) Whether the Tribunal erred in finding that Wally Mellis, as a private building surveyor exercising statutory functions under the Building Act 1993, owed a duty of care to Justin and Lisa Taitapanui who were not the owners of the property at the time when the building permit was issued and the statutory inspections were performed and who only suffered economic loss as a result of damage to the building caused by his issuing of the building permit and his failure to properly carry out the statutory inspections.
(ii) In apportioning the total amount of damages between the respondents in a building action pursuant to the provisions of section 131 of the Building Act 1993 is it legally correct to limit the basis on which such an apportionment is made to an evaluation of the legal obligations undertaken by each of the respondents in relation to the building works in question; or, should at least the following further matters be taken into account:
(a) the relative causal significance or potency of the breach of such obligations to the loss and damage suffered;
(b) the relative degree of blameworthiness of or culpability associated with the breach of such obligations;
(c) the relative importance of the acts or omissions of the respondents in causing the damage; and,
(d) the relative seriousness of the breach of such obligations.
(i) Senior Member Young erred in law in finding that Mellis, a private building surveyor exercising statutory functions under the Building Act 1993, owed a duty of care to the Taitapanuis who were not the owners of the property at the time that the building permit was issued and statutory inspections were performed and who suffered pure economic loss.
(ii) Senior Member Young erred in law in determining that the apportionment of liability, pursuant to s 131 of the Building Act 1993, was limited to only an evaluation of the legal obligations undertaken by each of the respondents in relation to the building works."
Thus there are two areas of dispute - the duty of care decision and the apportionment of liability decision. I will first consider the challenge to the duty of care decision. In analysing that decision it is necessary to consider the factual basis of the Tribunal's decision and its reasoning.
Duty of care - Tribunal reasons - statutory scheme
* private building surveyors would be required to work in a professional and impartial manner and would be regulated by scrutiny of the Building Control Commission and the legislation which included significant penalties;
* there would be other safe guards such as peer group scrutiny from other builders and building surveyors and the scrutiny of the insurer;
* insurers would not maintain insurance cover required under the legislation by a private building surveyor to practice[6] without a good professional record and acceptable standard of professional practice.
The Tribunal noted that the Act introduced insurance reform in the building permit industry. It observed that there was already a requirement that residential builders carry insurance but that, again referring to the second reading speech, the introduction of compulsory insurance for all building practitioners would put them all on the same footing and provide building owners with more certainty. The Tribunal then stated the following:
"3.15 I consider this demonstrates that the legislature was setting out to provide a comprehensive scheme of overall building regulation with the registration of building practitioners and the need for professional indemnity insurance for practitioners such as building surveyors."
"(1) After determining an award of damages in the building action, the Court must give judgment against each defendant to that action who is found to be jointly or severally liable for damages for such a proportion of the total amount of damages as the Court considers to be just and equitable having regard to the extent of that defendant's responsibility for the loss or damage. (2) Despite any Act or Rule of Law to the contrary, the liability for damages of a person found to be jointly or severally liable for damages in a building action is limited to the amount for which judgment is given against that person by the Court. (3) In this section - `Court' includes the Victorian Civil and Administrative Tribunal."
The Tribunal commented that the effect of this section was to limit the liability of persons jointly or severally liable in building actions to their apportioned share of the liability. The Tribunal also noted that s 134 introduced a limitation period of 10 years after the date of issue of an occupancy permit in respect of the building work or, where an occupancy permit is not issued, the date of issue of certificate of final inspection.
"A registered building practitioner must - (a) perform his or her work as a building practitioner in a competent manner and to a professional standard; . . ."
The Tribunal also referred to s 34 of the Act which requires the private building surveyor to carry out inspections at mandatory notification stages. The latter are defined, as the Tribunal noted in Regulation 7.1 "Inspection of Building Works". In particular it provides:
"(1) For the purposes of Part 4 of the Act the mandatory notification stages are - (a) prior to placing a footing; and (b) completion of frame work; and (c) prior to pouring an in situ reinforced concrete member nominated by the relevant building surveyor; and (d) final, upon completion of all building work."
Duty of care - factual basis of the Tribunal decision and its findings
"the mandatory notification stages are stump hole - foundation - frame and final".
It was issued to Mr Watson as owner and Mr Watson was nominated as builder but no registration number was recorded. The building classification was "1(A)" and was described as a two storey dwelling. The permit left blank the identification of the materials for roofing, the frame and external walls. The Tribunal presumed, however, that at the time of the issuing of the building permit, Mellis approved four plans marked "design and construct: Watson Constructions Pty Ltd" which it described as "rough and undetailed". The Tribunal also found that in relation to inspection, the records showed that Mellis approved the stump holes on 23 August 1996, the frame construction on 18 December 1996 and made his final inspection on 22 January 1997. He issued an occupancy permit under Regulation 9.5 on 28 January 1997.
* no specification had been provided describing materials and methods to be used in construction as required by Regulation 2.1.
* the plans did not identify the external wall material, but did show a wall thickness of 250 mm which should have alerted Mellis to the fact that a masonry product was likely to be used. The Tribunal also accepted that Mellis was Mr Watson' s building surveyor of choice and that Mr Watson was well-known in the area for using "Powerpanel".
* subfloor defects in the bearers and joists together with subfloor ventilation;
* the failure to provide the correct safety glass in the lower panels to windows and doors.
"reliance, undertaking of responsibility, a chain of contracts between the parties, a statutory regime regulating the supply of a service, whether imposing a duty would result in indeterminate liability or be inconsistent with normal business standards, the knowledge of the tortfeasor and vulnerability."[22]
The Tribunal also noted that it was obvious that not all of the above salient features would be "of equal significance in each case"[23] and that it was not necessary that each be present in some degree to establish a duty.[24] The Tribunal indicated it would proceed on the basis of the need to carefully analyse and assess each relevant feature and to assess its significance and weight in the process of assessment.[25] The Tribunal stated that it should stand back and look at the reasons why the courts take care in this area of economic loss - namely concerns about the possibility of "liability for an indeterminate amount for an indeterminate time to an indeterminate class" and a concern not to establish a rule that would "render `ordinary' business conduct tortious.[26] The Tribunal also noted Brennan J's observation in Heyman[27] that:
"A private purchaser in the market place cannot look to public funds to underwrite the information on which he makes his purchase, except in circumstances which may attract the operation of the principle in Shaddock & Associates Pty Ltd v Paramatta City Council [1981] HCA 59; (1981) 150 CLR 225."
The Tribunal stated its intention to keep the observations referred to above "as touch-stones in assessing the significance and weight of a salient feature".
"On the assumption stated the well settled principle applies that when statutory powers are conferred they must be exercised with reasonable care, so that if those who exercise them could by reasonable precaution have prevented an injury which has been occasioned and was likely to be occasioned, by their exercise, damages for negligence may be recovered."
The Tribunal stated that it considered that as a statement of principle this would apply both to a private and municipal building surveyor. It then noted that all building practitioners including private building surveyors were required under the legislation to be registered and to have professional insurance. Further, Regulation 15.2 of the Building Regulations 1994 required all building practitioners to carry out their duties competently and to a professional standard. It concluded that private building surveyors needed insurance to indemnify the quality of their work presumably to the standard required in Regulation 15.2 and to ensure the building owners received an acceptable product.[30] The Tribunal then noted that the building owner who engaged the private building surveyor would have a cause of action in contract for the negligent performance of surveyor's duties. Otherwise,[31] the Tribunal reasoned, it would be without remedy unless there was a remedy in tort. The Tribunal considered it,
"Therefore ... a significant feature that if it was held no duty existed, a building owner would have no redress against a private building surveyor in circumstances where the statutory structure required that building surveyor to have professional insurance to cover the eventuality of the private building surveyor failing to perform its functions satisfactorily competently."
Reference was then made to s 131 of the Act which requires a respondent to pay only its apportioned liability. The Tribunal reasoned that the result was that a building owner could not recover for the private building surveyor's degree of liability unless a duty was established. The Tribunal concluded that:
"To ensure that the 1993 statutory structure for building control operates satisfactorily for all owners, including those whose claims were in negligence, it is necessary that private building surveyors be under a duty to building owners."[32]
"Where the private building surveyor has the professional knowledge and understands his function, he is the only party that can ensure that the builder carries out his obligations in accordance with the Act and Regulation. I consider these circumstances to be a strong indicator that a duty should exist."
As I read the Tribunal's reasons, the Tribunal is here referring to the question of a duty of care owed to the owner of the premises at the time the building is being constructed. The Tribunal then went on to endorse the comments of Gummow J in Perre v Apand[40]:
"But where the defendant has actual knowledge of the risk and its consequences for an ascertainable class and it is not legitimately pursuing or protecting its interests, I see no reason why that actual knowledge should not be an important factor in deciding the duty issue. Furthermore, because fault remains the basis of negligence liability, I see no reason why recklessness or gross carelessness should not be a relevant factor in determining whether a duty of care was owed."
The Tribunal noted that no party disagreed that in this case there was a gross falling short of the professional competence required but then stated that it did not consider that the degree of fault could be any more than a gloss in the assessment and could not be decisive. The Tribunal concluded that, notwithstanding the private building surveyor exercised the statutory function to ensure that the Act and Regulations and their objects and purposes were achieved, it could see no reason why he and Moorabool should be treated any differently from other professionals and should not be liable for professional negligence to third parties like other professionals such as lawyers in Hill v Van Erp[41] and Hawkins v Clayton.[42] The Tribunal also stated that if there was to be no duty owed by the private building surveyor to the original building owner, the position should be abolished.
"A cause of this, must in part, be a failure of private building surveyors to competently carry out their functions."[44]
The Tribunal expressed the view that these matters indicated that as a matter of policy a duty should be found to exist.
Duty of care - submissions as to the approach to be taken
"we have only to ask whether the reasons that called for or denied a duty in other (usually similar) cases require the imposition of a duty in the instant case. No doubt that may sometimes mean that, whether or not a duty is imposed at a particular time, will depend on the extent to which the case law has progressed to that time. But that is the way of the common law, the judges preferring to go 'from case to case like the ancient Mediterranean mariners, hugging the coast from point to point, and avoiding the dangers of the open sea of system or science'. [54] It is not an approach that appeals to grand theorists who prefer to decide cases by general principles applicable to all cases. But in an area of law such as awarding damages for negligently inflicted economic loss, which is still developing and which has recently been cast adrift from any unified principle, there is no alternative to a cautious development of the law on a case by case basis.[55]...Until a unifying principle again emerges, however, the best solution is to proceed incrementally from the established cases and principles."
"Persons who are so closely and directly affected by my act I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question."[58]
Duty of care - the argument of the Taitapanuis -Bryan v Maloney
"It is likely that the only connection between such a builder and such a subsequent owner will be the house itself. Nonetheless, the relationship between them is marked by proximity in a number of important respects. The connecting link of the house is itself a substantial one. It is a permanent structure to be used indefinitely and, in this country, is likely to represent one of the most significant, and possibly the most significant, investment which the subsequent owner will make during his or her lifetime. It is obviously foreseeable by such a builder that the negligent construction of the house with inadequate footings is likely to cause economic loss, of the kind sustained by Mrs Maloney, for the owner of the house at the time when the inadequacy of the footings first becomes manifest. When such economic loss is eventually sustained and there is no intervening negligence or other causative event, the causal proximity between the loss and the builder's lack of reasonable care is unextinguished by the lapse of time or change of ownership."[68]
Their Honours then raised the question of whether mere economic loss might preclude recognition of the requisite relationship. After referring to the fact that the relevant relationship would have existed between the builder and Mrs Maloney with respect to ordinary physical injury to her or other property caused by a partial collapse of the house, their Honours commented that it was important to bear in mind the particular kind of economic loss involved.
"As has been said, the distinction between that kind of economic loss and ordinary physical damage to property is an essentially technical one. Indeed, the economic loss sustained by the owner of a house by reason of diminution in value when the inadequacy of the footings first become manifest by consequent damage to the fabric of the house is, at least arguably, less remote and more readily foreseeable than ordinary physical damage to other property of the owner which might be caused by an actual collapse of part of the house as a result of the inadequacy of those footings. Again, the policy considerations underlying the reluctance of the courts to recognise a relationship of proximity and a consequential duty of care in cases of mere economic loss are largely inapplicable to the relationship between builder and subsequent owner as regards that particular kind of economic loss."[69]
The majority went on to point out that there was no inconsistency between the builder's legitimate pursuit of his or her own financial interest because the builder owed a duty of care to the first owner. They also commented that where economic loss is sustained by an owner when the inadequacy of footings first becomes manifest, there is no basis for concluding that finding a duty of care would give rise to liability in an indeterminate amount to an indeterminate class more so than would occur by recognition of a duty of care as between the builder and the first owner. After considering the issue of indeterminacy of time, the majority then went on to consider the issues of assumption of responsibility and reliance. They commented:
"Upon analysis, the relationship between builder and subsequent owner with respect to the particular kind of economic loss is, like that between the builder and first owner, marked by the kind of assumption of responsibility and known reliance which is commonly present in the categories of case in which a relationship of proximity exists with respect to pure economic loss. In ordinary circumstances, the builder of a house undertakes the responsibility of erecting a structure on the basis that its footings are adequate to support it for a period during which it is likely that there will be one or more subsequent owners. Such a subsequent owner will ordinarily have no greater, and will often have less, opportunity to inspect and test the footings of the house than the first owner. Such a subsequent owner is likely to be unskilled in building matters and inexperienced in the niceties of real property investment. Any builder should be aware that such a subsequent owner will be likely, if inadequacy of the footings has not become manifest, to assume that the house has been competently built and the footings are in fact adequate."[70]
Their Honours went on to say that they could see no difference of significance between the relationship between the builder and first owner and builder and subsequent owner in relation to the particular kind of economic loss in question. They commented that:
"Both relationships are characterised, to a comparable extent, by assumption of responsibility on the part of the builder and likely reliance on the part of the owner. No distinction can be drawn between the two relationships insofar as the forseeability of the particular kind of economic loss is concerned: it is obviously forseeable that the loss will be sustained by whichever of the first or subsequent owners happens to be the owner at the time when the inadequacy of the footings becomes manifest. In the absence of competing or intervening negligence or other causative event, the causal proximity between negligence on the part of the builder in constructing the footings and consequent economic loss on the part of the owner when the inadequacy of the footings become manifest is the same regardless of whether the owner in question is the first owner or a subsequent owner."[71]
Their Honours commented that the policy considerations militating against recognition of a relationship of proximity and a consequent duty of care with respect to pure economic loss were insignificant and that there were persuasive policy reasons to recognise such a relationship and duty. They drew attention in particular to the superior knowledge skill and experience in the construction of homes of the builder who would be "better qualified and positioned to avoid, evaluate and guard against financial risks posed by latent defects".[72]
" ... whether under the law of negligence, a professional builder who constructs a house for the then owner of the land owes a prima facie duty to a subsequent owner of the house to exercise reasonable care to avoid the kind of forseeable damage which Mrs Maloney sustained in the present case, that is to say, the diminution in value of the house when a latent and previously unknown defect in its footings was structure first became manifest."[73]
" ... to no small extent on the particular kind of economic loss involved, namely the diminution in value of a house when the inadequacy of its footings first became manifest by reason of consequent damage to the fabric of the house. In particular, the nature of the property involved, namely a building which was erected to be used as a permanent dwelling house, constitutes an important consideration supporting the conclusion that a relevant relationship of proximity existed between Mr Bryan, as the builder, and Mrs Maloney, as a subsequent owner."[74]
Their Honours then went on to caution that the decision was not directly decisive of other questions concerning other relationships and referred in particular to the question of the relationship between manufacturer and purchaser of chattels which contain a latent defect.
* The second question raised by his Honour concerned whether Bryan v Maloney is confined to the situation where there is a contract between the building owner on the one hand and the builder on the other. It does arise in this case.
The Tribunal did not reach a conclusion on the question whether there was an initial relationship between the private building surveyor and the owners. But under the Building Act[80] only the owner can appoint a private building surveyor and the limited evidence adduced was consistent with such a relationship. Further, the appellants led no evidence before the Tribunal to contradict that conclusion. Any legal analysis in this case, therefore, should proceed on the basis that there was a contract between the owners and Mellis under which he had contractual and common law duties which were owed to both owners. The question of contributory negligence on the part of Mr Watson and whether Mrs Watson would have been affected as principal are other matters.[81]
* The twelfth question raised by Brooking JA related to whether the statutory scheme then in existence bore on the question whether a duty of care should be imposed. The legislative scheme now in place is different.[82] I refer to and repeat the Tribunal's analysis summarised above and my comments. To them I add the following points.
Under the present statutory scheme, potentially any professional involved in the design and construction of a house could be subject to a "building action"[83] because of the width of the definition of "business practitioner". [84] They are required to take out insurance.[85] At the same time, the legislative scheme does not purport to alter common law or statutory liability of building practitioners save for:
* the limitation period of 10 years[86] which will allow actions to be brought in respect of latent defects that emerge at a time when properties are likely to be in the hands of subsequent owners;
* limiting liability of those responsible, who are found jointly or severally liable, to a just and equitable proportion of the loss or damage having regard to his or her "responsibility" for the loss,[87] and
* removing any liability to contribute, when jointly or severally liable, to the damages apportioned to any other person in the same action or to indemnify any other person in respect of those damages notwithstanding anything to the contrary in the Wrongs Act 1958.[88]
It may fairly be said that the intention of the legislation was to deal comprehensively with compensation arising out of or concerning defective building works and to spread liability equitably between all those "responsible" for the design, construction, and approval of buildings - and their insurers. Not all building practitioners at fault will necessarily be linked contractually with other building practitioners or the original building owner and none will be so linked with subsequent owners - the class of people directly affected by any defective design, construction or approval. If building practitioners are not liable in negligence to other building practitioners or to owners, including subsequent owners the above objectives will not be achieved.
* Application to building practitioners. Unless those at fault can be held liable in tort for loss and damage resulting from their want of care, the provisions limiting liability could operate unfairly against other building practitioners and their insurers; for those in breach of contract will bear more than the proportion of the loss and damage attributable to their fault.
* Application to building owners. Where there is no contractual connection with the owner who suffers the loss, and no duty of care, that owner will not recover any compensation in respect of defective design, construction or approval where the defects emerge within the 10 year prescribed period. If, however, liability to the building and subsequent owners in negligence also exists, all "responsible" for defects in design or construction will be liable to the owner who suffers the loss if they failed to perform their tasks with reasonable care - but only to the extent of their responsibility.
Thus to impose a duty of care on the private building surveyor in the circumstances of this case would assist the scheme to apply comprehensively and fairly.
* The issue of the significance of "reliance".[89]
* The factual components of the relevant category of relationship. I will return to that issue.[90]
"The categories of case in which the requisite relationship of proximity with respect to mere economic loss is to be found are properly to be seen as special. Commonly, but not necessarily, they will involve an identified element of known reliance (or dependence) or the assumption of responsibility or a combination of the two."[97] (my emphasis)
In later passages the majority clearly indicate that they regarded both as being present as between builder and building owner and builder and subsequent purchaser. In referring to the situation of the subsequent purchaser, they commented as noted above that a builder would be aware that a subsequent owner would be likely to assume that the house had been competently built and that the footings were in fact adequate unless the inadequacy of the footings had become manifest. They also commented that the situation was one where there was a likely reliance on the part of the owner.[98] It is clear, however, that known reliance was not regarded as the essential factor in identifying the class of person to whom a builder would owe a duty of care - assumption of responsibility or known reliance or both would be relevant. This is consistent with other High Court decisions involving alleged negligence by persons with expertise who undertake to perform some service using that expertise.[99]
"Some passages in the reasoning of the majority opinions in this Court in Bryan v Maloney might be read as suggesting adoption of the 'general reliance' theory.[101] That case concerned a claim in negligence by a subsequent purchaser against a professional builder for cracks later discovered. There had been no actual contact between the parties to the proceeding. There was therefore no room for an imputed, but actual, reliance. Nevertheless, as I read the decision, Bryan did not ultimately turn on a rule of 'general reliance'. There is therefore, no holding of this Court on the subject."
Duty of care - applying the reasoning of Bryan v Maloney
* situations where the defendant has assumed responsibility and there is "known reliance"[105] and
* the negligent misstatement cases, where central to the plaintiff's allegation is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information provided by the defendant.
Their Honours comment that the two latter examples can be explained as suggested by Professor Stapleton by reference to notions of vulnerability.[106] Their Honours declined however to attempt to "identify or articulate the breadth of any general proposition about the importance of vulnerability". I suggest that it is clear from the majority judgment that the concept of "vulnerability" is much wider than the concept put forward by counsel for the appellants.
"Where any person suffers damage as a result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, . . ."
Developments since the hearing - Woolcock St Investments Pty Ltd v CDG Pty Ltd & Anor[108] (Woolcock)
"In Bryan v Maloney, the Court . . . decided that the builder of a dwelling house owed a subsequent purchaser, Mrs Maloney, of the house a duty to take reasonable care to avoid the economic loss which the subsequent purchaser suffered as a result of diminution in the value of the house when the fabric of the building cracked because the footings were inadequate."[109]
In Woolcock, the majority referred to what in its view was the reasoning employed in Bryan v Maloney and compared that to the case before it. It noted the following aspects of the reasoning.
"the ordinary relationship between a builder of a house and a first owner with respect to that kind of economic loss is characterised by the kind of assumption of responsibility on the one part (ie, the builder) and known reliance on the other (ie, the building owner) which commonly exists in the special categories of case in which a relationship of proximity and a consequent duty of care exists in respect to pure economic loss."[111]
* The house was a connecting link, being a permanent structure and a significant investment for a subsequent owner like the respondent.
* It was foreseeable that economic loss would likely result from negligent construction of the house.
* There was no intervening negligence or other causative event.
* The similarities with the relationship between the builder and first owner in relation to the particular kind of economic loss were of much greater significance than the differences, namely, "absence of direct contract or dealing and the possibly extended time in which liability might arise".[112]
"Both this anterior step, and the conclusion drawn from it, were considered in the context of the facts of the particular case - in which the building in question was a dwelling house. The propositions about assumption of responsibility by the builder and known reliance by the building owner were said to be characteristic of `the ordinary relationship between a builder of a house and the first owner' (emphasis added). At least in terms, however, the principles that were said to be engaged in Bryan v Maloney did not depend for their operation upon any distinction between particular kinds of or uses for buildings. They depended upon considerations of assumption of responsibility, reliance and proximity. Most importantly, they depended upon equating the responsibilities which the builder owed to the first owner with those owed to a subsequent owner."
" ... be put no higher than that the builder of a dwelling house owes a duty to a subsequent purchaser to take reasonable care to avoid reasonably foreseeable decreases in its value arising from the consequences of latent defects caused by the house's defective construction."[115]
"Neither the stated reasons of the Court nor the material facts of the case justify any wider conclusion. Certainly they do not justify the conclusion that the ratio of the case covers commercial premises.
"That the builder of a dwelling house owes a duty to a subsequent purchaser who relies on the skill of the builder to protect that person from reasonably foreseeable decreases in value resulting from latent defects in the house."[116]
"Nothing in this judgment is intended to suggest that Bryan v Maloney would now be decided differently. Whether a different decision would now be reached under current doctrine almost certainly depends on whether evidence would reveal that the purchasers of dwelling houses are as vulnerable as the Court assumed in that case."
"is concerned, and concerned only, with the duty of a builder (or like person) to subsequent purchasers of a dwelling house."[117]
His Honour noted that Bryan v Maloney both had its critics and its defenders, the latter viewing Bryan as:
"conformable with other developments of the law of negligence as elaborated by this Court including the protection of the vulnerable. Indeed the decision in Bryan is one of those described by Professor Stapleton as `fit[ting] well within the Atkinian mould of successful tort law making [which is] the envy of tort commentators abroad'. She has suggested that reversals of such decisions can be left to legislators on the basis of reports of inquiries rather than `judicial activism' instituting what she terms the `dramatic pro defendant era in tort decisions' in this country in recent times."[118]
His Honour went on to discuss the case further and would seem to have some reservations about Bryan v Maloney. While he rejected expressly the application to overrule it, he appeared to favour modification or at least reconsideration.
"in any relevant sense vulnerable to the economic consequences of any negligence of the respondent in their design of the foundation for the building."[122]
They also referred to the fact that there was no warranty of freedom from defect included in the contract when the appellant bought the land and no assignment of any rights by the vendor that it might have had against third parties and the absence of any facts about whether such terms could have been sought and obtained. They also noted that it was neither alleged nor agreed that the defects complained of could not have been discovered.[123] McHugh J identified vulnerability as the key issue in the case and explored the opportunities open to first owner and purchasers of commercial buildings to protect themselves against economic loss arising from the condition of the building. The discussion focussed on contractual protection and protection by expert examination.[124] This reasoning would appear to apply to all subsequent purchasers of commercial premises. Plainly, Callinan J took the view that the subsequent purchasers were not a vulnerable class.
"disconformity between the obligations owed to the original owner under the contract to build or design a building and the duty of care allegedly owed to a subsequent owner . . ."[129]
It referred to the fact that the original contract would be a relevant circumstance at least to the extent that it defines the task which the builder or engineer undertook and referred to the difficulty in holding that the respondent owed the appellant a duty of care to avoid economic loss to a subsequent owner if the performance of that duty would have required the respondents to do more or different work than that specified in the contract with the original owner.[130] Their Honours also noted that in Bryan v Maloney there was no disconformity between the duty owed to the original owner and the duty owed to the subsequent owner.
"Negligence law will fall - perhaps it has already fallen - into public disrepute if it produces results that ordinary members of the public regard as unreasonable."[133]
Assuming Bryan v Maloney to be good law, it seems to me that ordinary members of the public would regard it as unreasonable that a building surveyor, not only closely involved in, but ultimately responsible for allowing negligent design and construction of the building, should not find himself liable for breach of duty of care to a subsequent purchaser when the builder would be so liable.
* issues as to the consequences of imposing a duty of care in the circumstances of the case in question ("impact of duty issues"), including the issues of indeterminacy, the effect on individual autonomy (particularly commercial autonomy) and the operation of other areas of the law;
* issues as to the features required in the relationship between the defendant and the class of persons to whom the plaintiff claims to belong before a duty of care will be imposed ("relationship issues") including "vulnerability" and its subsets.
Impact of duty issues appear to be critical issues which generally control and guide resolution of the duty of care question. They may
* prove decisive in the circumstances of the case and require denial of a duty of care;
* raise concerns that may affect the definition of the features of the relationship that are required before a duty of care will be imposed, or
* be of no concern, with the result that imposition of a duty of care can be contemplated with comparative equanimity.[138]
(a) Would the imposition of a duty of care to subsequent purchasers impose indeterminate liability? This concern does not arise in the circumstances of this case. I merely make the point that apart from the narrowness of the class of person involved and the limited nature of the loss and damage for which damages might be awarded, legislation has also introduced a time limit of 10 years.[140] It is also relevant to this issue that the economic loss is closely connected to physical damage and risk of injury.
(b) Would the imposition of a duty of care to subsequent purchasers unreasonably interfere with individual autonomy, particularly legitimate commercial competition? Again, there is no relevant disconformity and therefore no interference. I note that McHugh J in Woolcock[141] stated:
"Questions concerning the autonomy of individuals do not seem relevant in the context of claims for damages for pure economic loss arising out of the defective design or construction of a building. Those involved in the building are already under a duty to the first owner to avoid physical injury to the owner's person and property. Consequently, imposing a duty to avoid economic loss to the first or a subsequent owner is not inconsistent with the pursuit of the legitimate interests of those who design or construct the building."[142]
The same reasoning applies to the present case.
(a) Known reliance. A building surveyor in the position of Mellis would be or ought to have been aware that subsequent purchasers would be likely to assume that the house had been competently built and that the footings were in fact adequate.[148]
(b) Dependency. Subsequent purchasers are a class of people linked to and dependent upon the building surveyor in the sense that there is nothing that they can do to undo the defective design or defective work. The building surveyor is in fact intended under the statutory scheme to ensure that standards are met[149] and so give protection to building owners - initial and subsequent. The most they can do is to take additional steps to try to protect themselves after the event, from possible want of care on the part of the person intended to give protection, by informing themselves about the building, attempting to renegotiate the contract or refusing to proceed with the purchase.
(c) Limited ability of the class of plaintiffs to secure protection.
(i) Practical protection. For most purchasers of dwellings, the only way they can inform themselves of structural deficiencies is by engaging another expert to inspect thoroughly the premises and all plans and specifications and, to a large extent, repeat the work the building surveyor undertook to perform. A detailed inspection of the kind needed is likely to be costly. Much depends on what a purchaser can afford to pay and a significant proportion of purchasers of dwellings will have difficulty funding a complete inspection by experts. Many, if not most purchasers will rely upon a visual inspection and an assumption that the original work has been done properly. Such an assumption is reasonable (and to be expected) when there is, as here, a comprehensive system of building regulation under which building surveyors undertake to monitor the design and critical aspects of the construction.
I note also, the Tribunal's finding about the problems of gaining access to the private building surveyor's file compared with the situation where the relevant Council officer did the work. It may be said that engagement of the private building surveyor increases the vulnerability of a subsequent purchaser.
(ii) Legal protection. It is unrealistic to expect purchasers of dwellings as a class generally to be able to obtain, let alone know about, contractual protections. Further, there can be no guarantees that such action will provide adequate protection.
For these additional reasons subsequent purchasers form a class of people that is "vulnerable" to the negligence of the private building surveyor.
"This indicates an apportionment based on percentages of perceived degrees of responsibility. Generally, I do not consider that such an assessment can be too fine; I consider I should stand back and look at both parties with respect to the obligations they undertook when assessed against what are major shortcomings in the design and construction that resulted in the damage. Assessed from this viewpoint it is obvious that the crucial default is the preparation of the design without nominating the exterior wall material and with the stump footings by the builder, followed by the subsequent approval of the defective plans by the private building surveyor."[151]
"8.5 An argument can be made that the builder has the primary obligation to satisfactorily design and construct the dwelling in accordance with the assumed terms of any building contract and definitely in accordance with the statutory warranties ......and, the failure to do so is the substantial causes of the damage. 8.6. However, equally, the view can be taken that the private building surveyor's sole participation in the design and construction of this property is a statutory role set out under the Act and Regulations to ensure that the Act and Regulations are complied with, for this he takes a professional fee. The private building surveyor failed in both his roles of issuing the building permit and carrying out the mandatory inspections. 8.7. In both the case of the builder and private building surveyor they fell far short of the competence required of them. Given their areas of responsibility and the importance of both their roles I consider they are equally liable for the damage sustained by the owners."
(a) the respective degree of blameworthiness of each defendant;
(b) the relative importance of the acts or omissions of each defendant;
(c) the relative seriousness of each of the breaches found against each defendant.
[1] The sums were different principally because the appellants were held not to be responsible for one item of defective work - the garage.
[4] Section 169 of the Act and Part 15 of the Building Regulations 1994.
[7] Division 4 does not have relevance in this instance.
[10] Para 6.34. For reasons discussed below I have come to the conclusion that the contract was between Mellis and Mr and Mrs Watson.
[12] Para 4.6 - Not an issue in these proceedings.
[19] [1985] HCA 41; (1985) 157 CLR 424 at 481.
[20] [2002] HCA 54; (2002) 211 CLR 540, para 321.
[21] [2003] VSC 27 para 755.
[23] Citing Callinan J in Barclay Oysters at para 321.
[24] Referring by way of example to Gummow J in Pyrenees Shire Council v Day & Another [1998] HCA 3; (1998) 151 ALR 147 para 170.
[25] Relying upon McHugh J in Crimmins v Stevedoring Committee [1999] HCA 59; (1999) 200 CLR 1 and Gillard J in Johnson Tiles, para 756.
[26] Citing Hayne J in Perre v Apand Pty Ltd ([1999] HCA 36; 1999) 198 CLR 180, para 329.
[31] Presumably, if the owner had not contracted with the building surveyor; but under the Act the building surveyor has to be engaged by or on behalf of the building owner (s 79 & 17). A subsequent owner will be confined to tortious remedies.
[32] Para 6.20. In this paragraph the Tribunal was not suggesting that the owner could not recover full compensation but was making the point that it could not recover compensation from all persons responsible. Later in paragraph 6.22 the Tribunal stated that the consequence of holding that a duty of care did not arise where there was no contractual obligation was that either the proportion could not be recovered or it would be borne by the practitioner who had some liability.
[34] It may be more accurate to say that s 131 limits liability to a proportionate share of whatever amount is assessed. The amount will not be indeterminate because of the nature of loss and damage for which compensation is given.
[44] For my part, I would have thought more evidence would be needed before that conclusion could be drawn. Inspections may be carried out for a variety of reasons; e.g., to quantify the cost of rectifying visible defects or to assess the feasibility and cost of renovations and extensions.
[45] Para 6.40; it is not clear on what this conclusion is based. The Tribunal does not cite evidence in support of the proposition.
[47] Toomey v Scolaro's Concrete Constructions & Ors [2001] VSC 279.
[52] Heyman's case, 430 -1, 447; also Alec Finlayson Pty Ltd v Armidale City Council [1994] FCA 1198; (1994) 51 FCR 378, Pyrennes, above.
[54] Citing Lord Wright, "The Study of Law", Law Quarterly Review, Vol 54 185, 186.
[55] Citing Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstead" [1976] HCA 65; (1976) 136 CLR 529 at 555, per Gibbs J; at 576, per Stephen J.
[59] Gillard J lists some 8 potentially relevant salient features - Johnson para 755.
[60] One that is an aspect of the relationship.
[61] Hawkins v Clayton above; Bryan v Maloney (1995) 182 CLR 609; Hill v Van Erp above at 166-8, 170-1, 180-4, 195-6; Alec Finlayson Pty Ltd v Armidale City Council [1994] FCA 1198; (1994) 51 FCR 378.
[65] Which was consistent with s 17 and Part 6 Building Act 1993.
[66] V_oli v Inglewood Shire Council_ [1963] HCA 15; (1963) 110 CLR 74; Pullen v Gutteridge [1993] VicRp 4; [1993] 1 VR 27 at 39-40; Bryan v Maloney (1995) 182 CLR 609; Caledonian Collieries Ltd v Speirs above at 220; Heyman at 436, 458, 484, 487-8, 503; Alec Finlayson above; Pyrenees Shire Council above at 391, 422-3.
[75] I note that counsel for the Taitapanuis sought to rely on the fact that Mellis and the builder were "building practitioners" for the purpose of the Act and that this was relevant to the issue of duty of care. It does not seem to me, however, that that title is relevant. The consequences of being a "building practitioner", are relevant and the content and purpose of the statutory scheme may be.
[79] At first reading they can cause alarm. Some reassurance may be found, however, by reflecting on the list of questions that could have been formulated after Donoghue v Stevenson. Case by case, the issues can and will be sorted out - as is the way of the common law.
[81] In any event, I question whether more is required than a deliberate assumption of responsibility on the part of the private building surveyor with knowledge or reasonable foresight of the existence of, and likely assumption of competence, by at least one owner.
[82] See Building Act 1993; Domestic Building Contracts Act 1995; Building Regulation 1994.
[83] "Building action" is defined as "an action (including counterclaim) for damages for loss or damage arising out of or concerning defective building works."
"Building work" is defined to include "the design, inspection and issuing of a permit in respect of building work".
[84] "Building practitioner" is defined in s 3 of the Act to mean, inter alia, a building surveyor, building inspector, quantity surveyor, engineer engaged in the building industry, draftsperson, builder including domestic builder.
[85] Building Surveyor, Building Act 1993 s 135; Building Practitioners Ministerial Order, Victorian Government Gazette s 52 16 May 1996.
[87] Building Act 1993 s 131.
[88] Building Act 1993 s 132, 133.
[90] Question 9. As to the significance of the terms of the contract, in the present case the terms of the contract do not raise any issues; Question 10.
[91] Fangrove Pty Ltd v Tod Group Holdings Pty Ltd [1998] QCA 404; (1999) 2 QdR 236 at 241 (De Jersey CJ), 242 (McPherson J)
Woolcock Street Investments Pty Ltd v EDG Pty Ltd (2002) QCA 88; Woolahra Municipal Council v Zved (1996) 40 NSWLR 101 at 133 (Clarke JA); see also Goulding v Kirby [2002] NSW CA, 9 December 2002
[92] While the common law was in an expansive phase, the precise definition of limits was not critical. With it now in a retractive phase, the definition of limits has become critical.
[97] Above 619, citing Sutherland Shire Council v Heyman above, and Hawkins v Clayton, above.
[99] eg. Hawkins v Clayton and Hill v Van Erp, above.
[101] Citing 627 of Bryan v Maloney.
[103] E.g. Woolcock, above; & Esanda Finance Corporation Ltd v Peat Marwick Hungerfords [1997] HCA 8; (1997) 188 CLR 241.
[105] Citing Bryan v Maloney as an example.
[106] Para 24, referring to Stapleton, "Comparative Economic Loss: Lessons from Case-Law Focused `Middle Theory'". (2002) 50 UCLA Law Review 531, 558-559.
[107] Building Act 1993 s 135(1) and the Ministerial Orders made thereunder.
[111] Bryan v Maloney, above, at 624.
[112] Para 13, quoting from Bryan v Maloney, above, at 627.
[113] Para 14. While the reasoning of the majority in Bryan v Maloney relied heavily on the analysis of the relationship between the builder and first owner, including their contractual relationship, it also commented (at 620/1) that the relevance of such a contractual relationship will vary.
[118] Para 150 citing Stapleton, "The Golden Thread at the Heart of Tort Law: Protection of the Vulnerable", (2003) 24 Australian Bar Review 135 at 140 referring to Luntz, "Torts Turnaround Downunder" (2001) 1 Oxford University Commonwealth Law Journal 95.
[125] Including the relevance of assumption of responsibility and "known reliance".
[126] Cf, Woolcock, para 43 and 139.
[127] Referring to paras 28 to 30 of the majority judgment in Woolcock.
[131] See the discussion of this problem by Kirby J in Woolcock paras 133, 134.
[134] Cf structures suggested by McHugh J in Perre v Apand, above, [133]; McHugh J and Kirby J in Woolcock (para [74]ff and [165]ff); Professor Stapleton "Duty of Care Factors" in "The Law of Obligations" Cane and Stapleton at 91; and Gillard J in Johnson.
[135] Cf, McHugh J and Kirby J in Woolcock, above.
[136] Professor Stapleton, "The Golden Thread At The Heart Of Tort Law: Protection Of The Vulnerable" (2003) 24 ABR 135.
[137] Cf, List of McHugh J in Perre v Apand, para 105 and Woolcock, para 74 and the list of Gillard J in Johnson para 755. I suggest they too can be divided in this way.
[138] McHugh, J in Perre v Apand, above, paras [102] to [104].
[139] E.g. Perre v Apand Limited at 192, 199, 219, 267; listed by Gillard J in Johnson as the 4th, 5th and 8th salient features - para 755.
[142] Citing Bryan v Maloney at 623-624.
[145] Building Regulation 1994 15.2.
[146] Caledonian Collieries v Speirs above, particularly at 220; Pyrenees Shire Council, above, particularly at 391, 422-3; Alec Finlayson Pty Ltd v above; Heyman, above, at 436 - 7, 458.
[147] Hawkins v Clayton, Hill v Van Erp, Bryan v Maloney, above_._
[148] If it be necessary that it be established that there was a duty of care owed to the original owners, the same considerations apply. As to "known reliance" there was no evidence that Mellis had any basis for thinking that the original owners would not be relying upon him, particularly Mrs Watson.
[150] If the ultimate guiding principle is that it be "fair, just and reasonable" to impose a duty, that principle is satisfied - see the discussion of Hayne J in "Restricting Litigiousness" (2004) 78 ALJR 381; Nettle J (as he then was) "Commentary on `Restricting Litigiousness'" (2004) 78 ALJR 389, 395.
Moorabool Shire Council
Taitapanui [2004] VSC 239
(1981) 150 CLR 225
(1985) 157 CLR 424
(2002) 211 CLR 540
(1998) 151 ALR 147
(1999) 200 CLR 1
(1997) 188 CLR 159
(1988) 164 CLR 539
(2004) 78 ALJR 628
(1994) 51 FCR 378
(1976) 136 CLR 529
(1995) 182 CLR 609
(1963) 110 CLR 74
(1997) 2 VR 525
(1999) 2 QdR 236
(1996) 40 NSWLR 101
(1997) 188 CLR 241
(2002) 76 ALJR 1348
(2004) 78 ALJR 381
(2004) 78 ALJR 389