O'Loughlin v Housing Guarantee Fund Limited , Gabor Tamas Constructions Pty Ltd & Ors [2001] VCAT 1921 (14 September 2001)

domestic building - negligence - builder - s131 Building Act 1993

RESPONDENTS: Housing Guarantee Fund Limited , Gabor Tamas Constructions Pty Ltd , Renaissance Projects Pty Ltd, Nanjey & Partners, JSC Builders Pty Ltd, Dawson Howard

Medium Neutral Citation [2001] VCAT 1921

For Fifth Respondent Mr Christopoulos, director and Mr Cyngler of Counsel

1. Order on the claim as against the First, Second and Fifth Respondents in such sum, in such proportions, to be determined.

2. Application as against the Third and Sixth Respondents dismissed.

5. I direct the Principal Registrar to list this matter before me on a convenient date after 14 October 2001.

1. In this matter the Applicant seeks damages interest and costs in respect of premises purchased by her on or about 16 October 1995 at 128A Nicholson Street Abbotsford ("premises")

2. The Applicant began proceedings by application filed on 22 December 1999. That application named as respondents the First and Second Respondents. Subsequently, on 19 July 2000, other respondents were added. Then, on 21 September 2000, a joined party was added. That joined party was, on 23 October 2000, then joined also as a respondent.

3. The hearing commenced on 4 June 2001. It concluded, with breaks in between, on 10 July 2001, when final submissions were concluded. It was originally due to commence on 31 May 2000. Then it was to commence on 25 September 2000. However, the hearing date of 4 June 2001 was fixed after a Compulsory Conference on 7 March 2001. That Compulsory Conference had earlier been part conducted on 19 January 2001. Prior to that, the matter had been referred to mediation.

4. At the hearing evidence was given by a number of witnesses including the Applicant herself; Mr Gabor Tamas; Mr Dawson Howard; various experts; and others.

5. The Tribunal, at the hearing, was in a good position to observe, and did observe, the demeanour of each of the witnesses called.

6. Also at the hearing, each of the parties, except for the Sixth Respondent, and except for the Third Respondent (but not including the last two days), was represented by Counsel. Each party made final submissions and provided the Tribunal with printed copies of the same. There was, however, no transcript.

7. The proceedings rely upon provisions of the Domestic Building Contracts Act 1995 ("1995 Act") and the Victorian Civil and Administrative Tribunal Act 1998 ("1998 Act"). Also relevant are provisions of the House Contracts Guarantee Act 1987 ("1987 Act") and the Building Act 1993 ("1993 Act").

8. The First Respondent is the Housing Guarantee Fund Ltd ("Fund"). The Fund has duties under the 1987 Act. The Second Respondent is Gabor Tamas Constructions Pty Ltd ("Tamas Constructions"). It is alleged that Tamas Constructions was the builder of the premises. The Third Respondent is Renaissance Projects Pty Ltd ("Renaissance"). Claims are made against Renaissance including that it was the vendor of the premises. The Fourth Respondent is Nanjey & Partners ("Nanjey") and it is alleged that Nanjey was the building surveyor. The Fifth Respondent is JSC Builders Pty Ltd ("JSC") which it is alleged was the structural engineer. The Sixth Respondent - previously joined party - is Mr Dawson Howard ("Mr Howard").

9. Prior to the hearing the Applicant achieved a compromise, so I understand, with Nanjey. I have no idea of any terms of settlement. However, no leave to withdraw as against Nanjey has been sought to this point or given under s74 of the 1998 Act. Later, at the hearing, Tamas Constructions, as I recall, did intend to join a party or parties but then, in a context in which costs of a possible adjournment were raised, withdrew the application. I reserved costs in respect of time spent on dealing with that application. In the course of the hearing Renaissance intended to make a no-case submission. However I ruled that Renaissance must be put to its election and, having so ruled, Renaissance decided to withdraw its submission. Also in the course of the hearing, an alternative claim in negligence as against the Fund, after hearing argument, was struck out as unmaintainable in law for reasons given at that time.

10. The Applicant's claim arises in respect of cracking at the premises which first became evident during 1999. There is a claim by her for costs of rectification and for bridging finance costs. In September 2000 the former were put at $64,047.00 and the latter were put at $4200.00 and continuing.

11. It is the Applicant's case that the cracking at the premises has nothing to do with her. It is her case that she had no involvement in the construction of the premises. She purchased the premises in a finished state. For this reason she says she did not even know the identity of the builder. However she became aware of an issue in that regard, as to the identity of the builder, late in 1999 after having submitted a Notice of Complaint earlier in March of that year. In October the Fund had written to her advising of its view that a defect existed at the premises in respect of the cracking and informing her that the builder had been given 28 days to rectify. But then, the following month, this was followed by a letter from the Fund advising that her claim had been rejected on the ground of information that the registered builder was not the one who or which did the construction. On this basis the Fund rejected the claim because it claimed no statutory guarantee was in existence at the time.

12. This remains the situation and the Fund has not reversed its decision. What influenced the Fund to alter its position was a Statutory Declaration which it received from Mr Tamas in which he declared that Tamas Constructions was not the builder of the premises. The Applicant, who wishes to sell the premises, and who has now moved elsewhere, is unable to do so while disputation continues as to whether a guarantee exists or not. It is the Applicant's intention to sell the premises after, however, first carrying out repairs. The premises currently are unoccupied and the Applicant regards the premises as untenantable.

13. The Applicant sues the Fund for wrongfully having refused to meet its obligations under the statutory guarantee and for having refused her claim. An alternative claim in negligence, as I have noted, was struck out. The Applicant sues Tamas Constructions as builder for breach of the building contract. The Applicant sues Renaissance for breach of duty, false and negligent representations. The Applicant sues Nanjey for breach of a duty of skill and care. The Applicant sues JSC also for breach of a duty of skill and care. Finally also Mr Howard is sued by her, but he was not initially a party to the proceeding.

14. Each of the Respondents has filed a defence in the proceeding.

15. In its defence the Fund makes certain admissions and certain denials. The Fund alleges that in breach of the contract between Renaissance and Tamas Constructions, or by agreement between them, the former procured someone other than the "Builder" to carry out the works at the premises. Thus the "Builder", otherwise than as required, did not carry out such works and the guarantee under the 1987 Act has no effect in relation to the premises. Further, the Fund says that the Applicant's allegations do not disclose a cause of action as against the Fund.

16. Tamas Constructions in its Defence denies that it was the builder who or which constructed the property for Renaissance. It says that any contract which it entered into with Renaissance did not proceed and another builder was engaged to carry out the works. Alternatively, it says that Renaissance constructed the townhouse at the premises as an owner-builder. As to such other builder it says the construction works were carried out by Mr Howard or that he procured Lone Eagle Builders Pty Ltd ("Lone Eagle") to carry out the works. Or it says Renaissance engaged Lone Eagle or Mr Howard to carry out the works. Moreover, it denies that the builder who carried out the works was doing so as its agent or as its partner. Further it says it did not authorise the Fund to guarantee to Renaissance its performance.

17. Where the same are pleaded to, but not admitted, Renaissance denies the allegation made by the Applicant. In his opening, however, Counsel for Renaissance made it clear that the real case of Renaissance is that it did not, in law, have any involvement at all in the construction of the premises which would make it answerable to the Applicant.

18. Nanjey in its Defence filed on 5 September 2000 admits that it acted as one of the building surveyors in relation to the works at the premises. Nanjey, however, denies that it was the sole building surveyor and it otherwise denies the allegations made by the Applicant.

19. For some reason there is a further defence filed by Nanjey on 20 September 2000. In this defence Nanjey says it was retained by A Genser & Associates to act as the building surveyor. It says also that it was reasonable for it to rely upon a Form 13 Certificate as to Compliance of the structural design which had been issued and which was dated 17 February 1995. It also says it was never retained to inspect the poured slab at the premises nor was it required to do so.

20. JSC in its defence pleads that it was engaged by A Genser & Associates to prepare preliminary computations and design for a slab and an upper floor framing plan for the premises. It says that such works were carried out properly and in accordance with the terms of its engagement. It otherwise denies the allegations (with the exception of those it admits) it pleads to. In particular it denies that the Applicant is entitled to the relief sought.

21. Mr Howard in his defence denies allegations but points out that there are allegations in relation to which "he cannot say". In particular though, he says that the building work at the premises "was carried out and/or supervised by" Tamas Constructions.

22. Tamas Constructions, as I believe, has also commenced proceedings against Renaissance and against Howard. As against Renaissance, Tamas Constructions, in confused pleadings, appears to allege that in substance it did not carry out the building works in a proper and workmanlike manner. As against Mr Howard, Tamas Constructions alleges, inter alia, breach of a joint venture agreement. It also calls in s131 of the 1993 Act which is set out below

23. I disallowed the alternative claim against the Fund in negligence as unmaintainable in law. The Fund's liability, it seems to me, can only be derivative. That is, in order for the Fund to be liable, it must be the case that the builder is liable in the first place. I refer to a ruling by Tadgell JA in Housing Guarantee Fund Ltd v Johnson (Court of Appeal, Victoria, 17 March 1995) that the "obligation of the guarantor [the Fund] to the building owner does not arise unless the builder has an obligation to the building owner under the domestic building contract". Accordingly, it is necessary, in the first place, to establish that the builder is liable. That, in turn, calls for the identity of the builder to be established.

24. A material question of fact in the proceeding is this - who was the builder on the project? In this regard, I have noted the contentions put forward by the various parties including those put forward by Tamas Constructions and by Mr Howard. I have noted also the sworn evidence given by the various witnesses (including those called by Renaissance) and I have noted the terms of the Statutory Declaration made by Mr Tamas. I have considered as well the answers given by the witnesses in cross-examination. In that regard, I noted carefully how they gave their answers also.

25. I am satisfied, on the balance of probabilities, that the builder on the project was Tamas Constructions. The evidence is, in my view, strongly in that direction. In my view it goes beyond being merely more probable that not. I refer in the first place to the contract executed between Renaissance and Tamas Constructions. That contract specifically engages Tamas Constructions as builder. It is a document in my view which speaks for itself. There is nothing in the evidence which would, in the least, indicate to me that Mr Tamas, when he signed that document on behalf of Tamas Constructions, did not know or realise what he was doing. That fact that he did know what he was doing was borne out by the evidence of Mr Howard. Mr Howard, I accept, only ever signed the document as a witness to signatures. I reject statements made by Mr Tamas in evidence that he is "not a lawyer". I do not reject them because he is a lawyer - he is not - but because I do not accept the inference he sought for me to draw, namely, that he does not understand documents or business documents. This was the impression which he clearly sought to give. At one stage, too, I think he may have said that he was no longer a young man - as if to say he gets easily confused. I reject his evidence that he does get easily confused. He impressed me in the witness box as quite readily able to appreciate true states of affairs. I could see and hear nothing at all that brought into question his mental capacity to understand what he is doing.

26. There is also the evidence of two delivery dockets signed for by Mr Tamas. These were for the delivery of sand supplies to site. They were signed, not on the same day (as might happen if one was confused) but 14 days apart - on 7 June 1995 and 21 June 1995. Why would Mr Tamas sign for these if he did not consider himself (Tamas Constructions) the builder? His subjective intention is hardly relevant at all but, if it is relevant, it persuades me that he knew that he indeed (Tamas Constructions) was the builder. His evidence that he signed the receipts, as (in effect) a gesture to help out, was entirely unconvincing. I am satisfied that by signing those receipts Mr Tamas was exercising, and was showing that he exercised, a degree of control over the happenings on site consistent with Tamas Constructions being the builder, and, on the balance of probabilities, consistent only with that conclusion.

27. Of course, no other contract of construction was ever entered into for the construction of the premises by Renaissance. It is true that Mr Howard was physically on site carrying out works but I am quite satisfied on the evidence that he only ever did so as a worker on behalf of Tamas Constructions and never did so on his own behalf or on behalf of Lone Eagle. As regards the so called "joint venture" existing between Tamas Constructions and Lone Eagle in respect of two previous projects - at Glen Iris and St Kilda - I note Mr Tamas admitted that he or Tamas Constructions had been the builder. The similarity between construction arrangements on those projects and at the site of the premises in this case was striking and entirely persuasive of the true arrangement existing between the various actors - whereby Mr Howard was manager of works on site, Tamas Constructions was the builder, and invoicing matters were dealt with by Lone Eagle.

28. There are also other considerations which point strongly to Tamas Constructions being the builder on the site. Mr Tamas was frequently on site, it would seem, coordinating or managing works being done on site. This includes him giving instructions (as stated in evidence by Beverley Genser) to a cabinet maker. I have already mentioned his signing of two delivery dockets. His account, that he was on site collecting past debts from Mr Howard, was completely unconvincing. Also, when, by letter dated 14 April 1999, the Fund first drew Mr Tamas' attention to defective work, Mr Tamas did not reply that he was not the builder; by letter dated 30 April 1999 he said simply that he could not attend an inspection because he was going overseas. He had the opportunity, at this early stage, to deny being the builder but he failed to do that. If he was not the builder, one would think he would wish to make this clear at an early point. As well, Mr Tamas had the opportunity to call the cabinet maker, whom Beverley Genser gave evidence about, and he has not taken any steps to do so. Moreover, it was Mr Tamas' evidence that he had spoken to a receptionist at the Fund and indicated to her not to accept a registration for the job at the premises. This was apparently given in evidence by him to show that he had made it clear to the Fund that he should not be taken to be the builder on the project. However Mr Tamas took no steps to call that person from the Fund to give evidence. His witness statement says that he has "forgotten" her name but in cross-examination he admitted he had never known her name - which is quite a different matter.

29. The evidence is very clear to me, commencing with the signing of the contract to do the work, that Tamas Constructions was the builder on the site. The ploy, it seems to me, although I do not need to make any actual finding that it is so (and I make no such finding), was for Mr Tamas via Tamas Constructions to make use of his status as registered builder but to have someone else, in this case Mr Howard, or Mr Howard via Lone Eagle, who was unregistered, carry out the work. I regard the Statutory Declaration made by Mr Tamas as being one which must be seen in this light. I consider that Declaration to be false and falsely sworn. There is no basis, on the evidence, for me to make any finding that Mr Howard was the "in-house_"_ builder of Renaissance or that anyone other than Tamas Constructions was the builder, in law, and in fact, on the site. The Statutory Declaration, I should add, I regard as a step knowingly taken by Mr Tamas to confuse the situation - a device to conceal the truth.

30. I am satisfied, as I say, that Tamas Constructions was the builder and I note that as my finding. I am not satisfied, on the evidence, that Mr Howard ever worked on site except for Tamas Constructions and certainly never as the builder on his own behalf. I am not satisfied that he was ever the "in-house" builder of Renaissance. In my view, the main feature of his role, was as actual worker. He impressed me, I should add, as a truthful witness not given to over-statement to suit his own case.

31. As regards Renaissance it was submitted that it, too, was a "builder" on site having regard to the definition of that expression in s3 of the 1995 Act. That definition reads as follows -

"builder" means a person who, or a partnership which--

(b) manages or arranges the carrying out of domestic building work; or

(c) intends to carry out, or to manage or arrange the carrying out of, domestic building work;

In my view, however, Renaissance does not come within any of the categories mentioned in s3. It did not itself, in my view, carry out any domestic building work. Nor did it, in my view, on the facts of the case "manage or arrange" the carrying out of such work or intend that it should do so. Those were things which were done by Tamas Constructions. That was why Renaissance entered into the contract with Tamas Constructions - so that those things would be done by Tamas Constructions. And those were, in my view, the very things which were done, on site, by Tamas Constructions.

32. I take the view, therefore, that Renaissance is not within the definition of "builder" under the 1995 Act. I take this view not because Renaissance is a developer but because, on the facts, the definition is not satisfied. Clearly a developer can fall within that definition, in the proper case, I should add. From this it follows that under the 1995 Act the proceeding as against Renaissance must be dismissed on the ground that there is no domestic building dispute under s54 of that Act, the 1995 Act.

33. Another material question in the proceedings is this - what was the builder's responsibility? As it happens that question resolves itself, in my view, into a legal question. For, in my view, it is in many respects co-extensive with the question whether, according to law, the builder owed the Applicant a duty of care.

34. It was submitted by Mr Dalton that, even if I should find Tamas Constructions was the builder, I should find, nonetheless, that Tamas Constructions owed the Applicant no duty of care at all. A fall back position to this was that, if a duty was owed, it was of limited scope or was not in any event breached. A further position was that Tamas Constructions was, if liable at all, liable only in the some minor way.

35. It was submitted no duty of care was owed at all because, in the first place, the contract between Renaissance and Tamas Constructions to do the building work was abandoned and Tamas Constructions did not do the building work. It was then submitted that if Tamas Constructions did do the building work, no duty of care was owed under ordinary principles of negligence in any event.

36. It was submitted that, as between Renaissance and Tamas Constructions there was a mutual abandonment of the contract to do the work. This followed withdrawal of an argument raising repudiation for failure to pay the deposit. That argument was withdrawn after it was pointed out that the amount sought to be demanded by Tamas Constructions as a deposit was in contravention, in any event, of provisions of the 1995 Act. The argument on abandonment seemed to develop after the withdrawal of that argument.

37. Reference was made to remarks of Isaacs J in support of the abandonment argument in Summers v Commonwealth (1918) 25 CLR 145 at 151 where he said that "whatever the terms of a contract may be, it is possible for the parties to so conduct themselves as mutually to abandon or abrogate it." I accept, of course, what his Honour said in that case but I cannot see how it could be said, in this case, that there had been any mutual abandonment at all. The fact is, as I find it, Tamas Constructions was the builder of the premises. In such circumstances, there can be no occasion for saying that no duty was owed because the contract was abandoned and Tamas Constructions did not do the work. The work was done by Tamas Constructions as builder, as I find it, and there is no basis whatever for saying that the contract to do the work was abandoned mutually or otherwise. But even if the contract had been abandoned, mutually or otherwise, that is not to say that Tamas Constructions could not have a owed duty of care on that account. It might be different, of course, if Tamas Constructions had not done the work but that is not my finding. Therefore, I reject the view that Tamas Constructions owed no duty of care because of a mutual or other abandonment of the contract with Renaissance. The submission to that effect, in my view, has no relation to realities. It was, I consider, best described as "contrived".

38. It was then submitted that, should I find, on the contrary, that Tamas Constructions did do the work, I should also find that no duty of care arose according to ordinary principles of negligence. The novelty of the proposition that a builder might not owe a duty of care at all in relation to works done, seemed to offend principle and sound policy. Many cases over the decades - both those reaching court and those settled beforehand - would have proceeded on a wrong basis if the proposition were true. Nevertheless, in submissions which I found confusing at times, I was taken through authorities, including Bryan v Maloney (1995) 128 ALR 163 and Perre v Apand Pty Ltd [1999] HCA 36; (1999) 164 ALR 606, in an endeavour to show that, by gathering together isolated references from judgments, I should be persuaded that no duty of care could arise.

39. I am in a position to agree, quite readily, that the law in this area is in something of a state of flux. I quote from the judgment of Hayne J in Brodie v Singleton Shire Council [2001] HCA 29; (2001) 75 ALJR 992 at 1055 (not quoted to me) as follows:

"It can readily be accepted that the search for a principled basis, or bases, upon which a duty of care will be found to exist is a search that continues. We have seen the rise and fall of notions of proximity, and of general reliance. We have seen reference to vulnerability, to encouragement, and to open-ended statements of conclusion like the three-part incantation said to derive from Caparo Industries v Dickman. None has proved a satisfactory explanation of what it is that has moved the debate in a particular case to the conclusion that was reached. We have, at least for the moment, retreated to what is thought to be the safe haven of incremental development, perhaps hoping that, in time, a unifying principle or principles will emerge."

From the fact, though, that it is difficult to formulate an exact principle behind the notion of a duty of care, it does not follow that a duty of care cannot be held to exist in a case or can never be said to be owed. And I think this really was the position adopted by Mr Dalton - show up the differences between judgments thereby to show that no duty of care could be owed by his client, Tamas Constructions. But this is not the effect of the authorities. We should all be very surprised if the effect of the authorities is that a duty of care has all but disappeared from our law.

40. I am not persuaded that Tamas Constructions did not owe a duty of care in this case to the Applicant. Tamas Constructions was, as I find it, the builder. The Applicant was the purchaser of the premises. Tamas Constructions was the builder of those premises. Those premises were purchased to live in and not at the time as I recall to re-sell. The Applicant was the first purchaser of the premises. Tamas Constructions was the last to have a hand in their construction. It was not within the contemplation of Tamas Constructions that no one would be living in the premises. How could this be so otherwise? It must have been in the contemplation of Tamas Constructions that someone would be living in them. That that "someone" happened to be the Applicant, and not someone else altogether, is fortuitous and not otherwise material. In my view it was reasonably foreseeable that if care was not taken by Tamas Constructions in the building of the premises then loss or damage might be caused to the Applicant. Or, I am satisfied, given their respective positions - owner and builder - that the Applicant was in a position of vulnerability as regards Tamas Constructions. Moreover, I am satisfied, given their close relation to one another - brought about by the construction of the premises by one and occupation shortly afterwards by the other - that the relationship between the Applicant and Tamas Constructions was one which would come within a traditional relationship of proximity.

41. It was sought to show that no duty of care could have arisen between the Applicant and Tamas Constructions because of the Applicant's evidence that she relied on there being in existence in respect of the premises a statutory guarantee under the 1987 Act. It was contended that she did not, therefore, rely upon any expertise of the builder. I reject this contention. It is true that the Applicant apparently did consider it important that the statutory guarantee be available but as was pointed out to me by Counsel for the Fund this, in reality, does not amount to saying very much at all. The statutory guarantee is not as efficacious as might appear or as some might expect. In fact, and in law, under the 1987 Act, the guarantee is, in any event, only one which comes alive, as it were, in the event of building defects occurring. Therefore it only ever has "derivative" force, as I have already pointed out, and is conditioned upon performance or not of the building contract by the builder.

42. It was also sought to show that no duty of care could have arisen - or should not be held to arise - between the Applicant and Tamas Constructions on the ground that, to hold that a duty exists, would be to hold a duty existed arising in respect of an indeterminate class against perhaps indeterminate losses. I cannot accept that this is so. I do not regard the class of possible purchasers of the premises as indeterminate in the sense mentioned in some of the judgments in the cases. In any event I note that in Brodie v Singleton Shire Council at p1024 Gaudron, McHugh, and Gummon JJ spoke of the duty of authorities to take reasonable care in relation to roads as being one owed "to a class of persons (road users) which includes the plaintiff." If road users can be sufficiently a class for the law of negligence as regards the plaintiff in that case I cannot see why purchasers - given limits on finances and specific preferences - cannot themselves constitute a class of "person" for this purpose.

43. I am satisfied, therefore, that in this case Tamas Constructions did owe the Applicant a duty of care. I consider this to be a conclusion I can arrive at, in any event, by application of the ruling in Bryan v Maloney which is of course binding on me. In that case Mason C J, Deane and Gaudron JJ said as follows (at p170-1):

"It is in the context of the above-mentioned relationships of proximity that one must determine whether the relationship which exists between a professional builder of a house, such as Mr Bryan, and a subsequent owner, such as Mr Maloney, possesses the requisite degree of proximity to give rise to a duty to take reasonable care on the part of the builder to avoid the kind of economic loss sustained by Mrs Maloney in the present case. It is likely that the only connection between such a builder and such a subsequent owner will be the house itself. None the less, 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, to 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 either lapse of time or change or ownership."

44. In the course of submissions I referred Mr Dalton to s53(1) of the 1995 Act by which the Tribunal may make any order it considers fair to resolve a domestic building dispute. It was my intention to ascertain whether s53 might be used to overcome limitations in authorities to arrive at a "fair" result for parties in a domestic building dispute. Mr Dalton's submission was that, considering also s53(2), s53(1) was concerned with remedies only. I was not persuaded that this is so. It seems to me that s53(1) is a free-standing provision having a utility hitherto unexplored. Limitations otherwise imposed by authorities may well be able to be overcome in exercise of the power it gives so as arrive at a "fair" result. In the event, however, in light of the conclusion I have reached, it is unnecessary for me to explore this further.

Did the Fifth Respondent have any responsibilities?

45. I regard this question as resolving itself also ultimately into a question whether JSC owed the Applicant by law a duty of care. Once more in my view the question of JSC's responsibility is co-extensive with the question whether JSC owed a duty of care.

46. In my view the considerations I mentioned earlier in relation to Tamas Constructions apply here with equal force. Applying those considerations I am satisfied that JSC did owe the Applicant a duty of care. JSC was the structural engineer involved in preparing computations and design. These were for use in the premises to be build by Tamas Constructions. Those premises were to be lived in as a residence by someone who just happened to be the Applicant. Plainly, in my view, if care was not taken by JSC in preparation of the same, the premises might be built on the basis of them in a way which might lead to loss or damage. I would regard that as quite clearly within the contemplation of JSC as it went about its work. That might be because someone in the position of the Applicant was reasonably foreseeable or it might be because the Applicant, as a home buyer, was in a position of special vulnerability. In any event it would seem to me to be incongruous, so to speak, to find the builder, Tamas Constructions, owed a duty of care, as I do find, yet to find that JSC, the structural engineer whose calculations formed the basis of the plans used by that very same builder, did not owe a duty of care.

47. In the circumstances I make the finding that JSC also owed the Applicant a duty of care. See also Voli v Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74. I should add that I do not regard that duty as delegated on the evidence by reference to the position of A. Genser & Associates. Nor, in any event, would I regard the duty as one delegable to any degree at all.

What Loss or Damage Has the Applicant Suffered?

48. As I have noted the Applicant's claim arises out of cracking occurring at her premises. She claims costs of rectification and bridging finance costs.

49. Experts' reports were made available to me during the hearing. Expert witnesses included Mr Robert Lorich and Mr Rod Neil. Also I was provided (and it was tendered) with a joint report of a meeting between Mr Barnett and Mr Neil and Mr Lorich which took place on site on 31 May 2001 ("the joint report").

50. My clear impression gained from the nature of the cross-examination undertaken, was that, in many respects, the technical evidence in the case was not seriously in dispute. I noted though, that many of the points made by Mr Neil, in particular, were challenged by Mr Christopoulos for JSC more perhaps than by the other Respondents. This, however, was at a time when JSC was not represented by Counsel. Mr Christopoulos' cross-examination though, I have to say, was not well directed or well conducted and did nothing as far as the credibility of the witnesses was concerned. Why JSC chose not to have Counsel from the beginning of the hearing, I am unable to say.

51. The conclusion arrived at by Mr Lorich in his report dated 9 August 2000 is that the cost to make good the premises is a total of $64,047.00. He states in his report as follows:-

11. The cost to make good the premises in total is $64,047.00.

12. The contributing factors toward the current situation seen on site are as follows:

1. Soil test never properly carried out on a cleared site.

2. Permit issued by Building Surveyor on basis of improper soil test and slab design.

3. Slab design incorrect due to use of incomplete soil test results.

4. Lack of adequate construction method by the Builder.

5. Building Surveyor inspected or approved the concrete slab when not constructed in accordance with approved plans (Engineers design).

13. In some ways it can be seen that the subsidence and defects in the dwelling have been caused by a comedy of errors, but if the Building Surveyor had of been carrying out his functions correctly then none of the problems would have occurred, except for the stormwater drainage problem which rests solely on the responsibility of the Builder."

52. The conclusion of Mr Neil in his report dated 5 August 2000 is that: "Severe distortion of the stiffened raft slab footing system has resulted in significant building damage." In his view the technical causes of the slab distortion and damage is considered to be lack of adequate design of the raft slab by JSC and lack of adequate of raft slab, articulation joint and services construction by the builder. He states in his report as follows:-

The technical causes of the building damage is considered to be:-

5.1 Lack of adequate stiffened raft slab design by the Engineer, JSC Consultants.

5.2 Lack of adequate raft slab, articulation joint and services construction by the Builder.

With regards to procedure. the following has contributed to damage:-

5.3 Failure to organise the further Site Investigation recommended by McGregor by the Developer and Project Manager,

5.4 Approval of inappropriate documents by the Building Surveyor and Certifying Engineer, and

5.5 Approval of foundations specified in the inappropriate documents and foundations in trench backfill by the Building Surveyor.

5.1 Lack of adequate stiffened raft slab design by the Engineer, JSC Consultants:

5.1.1 Excessive movements of the slab indicate that the slab design was inadequate for the site conditions.

The Engineer, JSC Consultants carried out a final design based on preliminary site information. There is no reference in the design to the need for further information as recommended in the Soil Report by MacGregor Soil Engineering Pty Ltd.

The Site Investigation was carried out by MacGregor Soil Engineer Pty Ltd for Renaissance Project dated 7't'June 1994. The site was classified as Class P in accordance with AS2870.1988. The Site Investigation report made preliminary design recommendations for a rigid raft slab footing, but stated. that the slab design must be carried out by an Engineer. Under Section. 9 'Construction Difficulties and Special Site Features', the report recommends "Further testing of this site should be carried out once the existing timber residence has been removed. All information in this report is preliminary."

5.1.2 Excessive settlement at the north west pomer indicates that the slab design did not take adequate account of the possible effect of existing trees andlor the effect of settlement of the fill on the services connections.

Section 8.3 "Vegetation" of the report requires that "Trees and large shrubs should not be planted or allowed to exist closer to the building than 0.75 times their expected mature height. Closer planting may be possible by the correct use of tree root barriers or equivalent." It is noted that the tree in the nature strip would have been closer than this to the proposed building at the time of the site inspection.

The site was classified P and extensive fill was described in the soil report The Engineer should have specified flexible joint connections for services to allow for expected movement in fill.

5.2 Lack of adequate construction by the builder:

5.2.1 Raft Slab construction not in accordance with design The builder has not constructed the stab in accordance with the design. This has contributed to slab settlement and building damage:-

a) The edge rib concrete thickness was measured to be 60OMM, which is less than the 650mm. specified. Reduction of rib thickness will cause increased differential movement

b) The depth of the rib below the surface was measured to be 15Omm. 45OMM depth was recommended in the soil report. Construction of ribs near the surface increases movement.

c) The edge rib was constructed over service pipes, in trench backfill. Movement in soft trench backfill has contributed to edge rib settlement and building damage.

Measurements at two inspection pits excavated adjacent to the north wall indicated that the edge rib thickness was approximately 600m, the depth of the base of the rib below the surface was approximately 1 5Omm, and the rib was based in or partly in services trench back fill.

The thickness of rib measured was less than the 65Omm thickness specified in the Engineers Computations and on the on the drawings by A Genser & Associates. The depth of the rib below the surface was less than the 45Omm specified in the Site Investigation Report (freeboard 15Omm).

5.2.1 Raft Slab construction not in accordance with design (Cont.)

It was observed that services had been installed directly under the edge rib near the front of the building. Further to the east the services were placed along side the rib but at the depth of the base of the rib. In both cases the rib was bearing on back fill of the services trench.

The builder articulation joints constructed in the centre party wall do not allow adequate movement in the centre party wall. Movement in the brickwork has caused cracking in the plaster.

Inadequate construction of services has caused leakage into the foundation soils. The effect of the water in the fill would be to decrease the strength of the fill, contributing to settlement.

Worboys Plumbing Pty. Ltd. identified leaks in the stormwater and the sewer drains in their report 81711999.

Leaks in the stormwater have been, verified near the west wall.

The cause is considered to be incorrect construction of services. The leaks may have resulted from incorrect initial construction, or the effect of stab movement on inadequate construction with lack of allowance for movement. Services in the vicinity of the footing slab should be constructed to allow for slab movements by incorporating sleeved and or flexible connections. Australian Standard AS 2870.1 referred to on the Architectural drawing requires sleeved construction Clause 6.3(b))."

He says that rectification will entail the following:-

Continuing stab movement between October 1999 and May 2000 indicates that further support for the slab is required.

6.1. A combination of perimeter support and jacking and internal grouting is recommended. Further site investigation of subsurface conditions will be required at the time of rectification.

6.2. For costing purposes, perimeter support by piers along the west, north and east boundaries should be adopted. The building should be jacked to level as far as practicable, and grouted. The west wall of No. 128 should also be re-supported.

6.3. Articulation joints should be provided in all walls to allow for movement. Four joints are required in the patty wall, to allow for movement in blocks and plaster. One joint is required in the north wall, eastern section.

6.4. Leaks in services should be repaired and flexible connections should be provided at all slab junctions.

6.5. Repair of tiles and slate, easing of doors and windows and patching and painting will be required."

53. The joint report expresses the view that building damage at the premises "is due to deflection of the stiffened raft slab caused by relative settlement of the underlying `uncontrolled' fill." The report notes PPK bore log data indicated a shallower depth of fill and the firm to strict nature of the fill at the rear of the building - "This would explain why the performance of the rear section is better than the front section." The joint report recommends footing rectification of the front section by re-support on underlying bedrock - "Nine piles/pins will be required. Grouting under the front section of the slab will be required after some re-levelling." It also says that internal rectification of building damage and provision of plaster board control joints at the location of the existing masonry articulation joints will be required - "Cosmetic repairs in the damaged areas will be required." The joint report goes on to note that these rectification measures relate to the front section of the building - "Some movement and cracking requiring cosmetic repair would still be expected to occur to the remainder of the building, in keeping with the performance of a stiffened raft slab founded on reactive clay filling." Then the joint report observes that: "It would be desirable to re-support 128B also, as future movement of 128B may affect 128A."

54. Having heard and seen the witnesses I find, on the balance of probabilities, that the building at the premises has the cracking and stresses mentioned by the witnesses. In particular I accept the matters set out in the joint report. I accept on the basis of all such evidence that rectification works will be necessary in the way indicated in the joint report. The exact monetary sum involved I leave to later consideration.

55. I am satisfied therefore that the Applicant has suffered a loss of the kind I have mentioned represented by significant damage to the building at the premises. That loss I attribute to Tamas Constructions and to JSC. I am satisfied that the monetary equivalent of that loss is the reasonable cost of carrying out the rectification works required and recommended in the joint report, that is, the introduction of piles/pins as needed and consequent repair works including repair works necessary by reason of such installation.

56. I have noted also the Applicant's claim for bridging finance costs. I can fully appreciate how it might be contended by her that, globally, as between herself and her partner, considered as one household unit, a loss has been suffered. However, I must be satisfied that it is the Applicant who has suffered a loss in this regard which goes to her account. The evidence advanced in this regard does not enable me to make any finding to that effect. The costs involved, I find, have not been incurred by her as such. I do not allow the sum claimed, therefore, in consequence.

57. Based on the evidence before me, and on the balance of probabilities, I find Tamas Constructions is liable to the Applicant. I find therefore that the Fund is liable as well. I also find that JSC is liable. I am troubled about making any finding that Nanjey is liable because no evidence - and certainly no adverse evidence - as such was lead by the Applicant against Nanjey.

58. I make the finding that Tamas Constructions caused the Applicant loss and damage. In the case of Tamas Constructions the breach of duty was that, in the ways indicated, it did not carry out the building works with the due care to be expected of a builder. The Fund, therefore, is liable. I also make the finding that JSC caused the applicant loss and damage. In the case of JSC the breach of duty was that in the ways indicated it did not carry out the work as a structural and consulting engineer with such degree of care to be expected of someone of that calling.

59. I am unable to be satisfied, (except speculatively), what it was that Nanjey did which may have constituted a breach of duty. In holding both Tamas Constructions (and thus the Fund) and JSC liable I am satisfied that the extent of their liability reaches to the loss or damage suffered by the Applicant, except so much of the same as I have not allowed.

60. This arises as an issue because of s131 of the 1993 Act which reads as follows:-

"Limitations on liability of persons jointly or

(1) After determining an award of damages in a 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 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.

"court" includes the Victorian Civil and Administrative Tribunal."

61. The purpose of s131 was explained by Chernov JA in Boral Resources Pty Ltd v Robak Engineering & Construction Pty Ltd [1999] VSCA 66 as follows:-

"26. I mention by way of an overview, that before the Act came into operation, the liability of defendants to the plaintiff in a proceeding which now falls within the definition of "building action" was often joint and several. In such circumstances, if one or more of them was or were not able to meet the judgment, the insured defendant or one with assets (known as the "deep pocket" defendant), would be required to do so, often without any - real prospect of obtaining contribution from other relevant parties due to their impecuniosity or lack of insurance cover. Similarly, because of its capacity to pay, it was not unusual for a "deep pocket" defendant to be the only one sued from amongst those who may have been responsible for the plaintiffs loss. As a result, prospective "deep pocket" defendants were regarded by insurers as being of high risk and this meant that insurance cover was either not available to them or, if available, was provided at very high rates.

27. Division 2 of Part 9 of the Act, which is concerned with "building actions" has abolished the effect of the doctrine of joint and several liability and has introduced the concept of proportionate liability so that each defendant's liability for damages is to be confined to the amount which reflects its responsibility for the plaintiff's loss. By s.131(1), if the court determines to award damages to a plaintiff in such a proceeding, it is required to apportion them between each defendant according to its responsibility for the loss and to give judgment against each defendant for the appropriate amount. Thus, if there are three defendants in such a proceeding, and the. court finds that the plaintiff is entitled to an award of damages in the sum of $90,000 and that each of the three defendants was equally responsible for that loss, it is required to enter judgment in favour of the plaintiff against each defendant in the sum of $30,000. If one defendant does not pay the amount of the judgment entered against it, the others are not obliged, directly or indirectly, to make up the shortfall. Moreover, the Act precludes the defendants from claiming contribution from one another (s132). That issue is, in effect, subsumed in the resolution of the responsibility of each defendant for the plaintiff's loss. In the example used, the maximum liability of each defendant to the plaintiff and as against the other defendants, would be fixed at $30,000. But the right of such defendants to claim contribution or indemnity against other persons under Part IV of the Wrongs Act 1958, is preserved under s133. As will be seen later, s131(1) has no operation if there is only one defendant in a building action."

62. I am required by s131 to apportion liability having regard to "just and equitable" considerations. No guidance is given by the 1993 Act on how to arrive at a conclusion based on these considerations. Nor is it made clear by any authorities I was referred to how I should approach such question.

63. There is this further troubling matter. I am persuaded that possibly some degree of responsibility may be borne by Nanjey yet as regards that party a compromise has been entered into. When this is so, however, how much I may find remaining parties liable may depend on how much I should attribute responsibility (if any) to Nanjey. I do not at present believe it would be "just and equitable" for me to hold Tamas Constructions and JSC liable, in such proportions as I may decide, for the whole of 100 per cent of the allowable loss and damage when a portion of that total liability may be the responsibility of yet another party. In order for me to know how much they should pay (that is, in what proportions) I may need to know what proportion to attribute to that party. Otherwise, an injustice may be done.

64. It is clear though that in order for s131 to operate, as it must, I need to determine in the first place what is the "award of damages" I must make. Then I must determine the proportions accordingly. My guide in that case must be what is "just and equitable."

65. I am satisfied that Tamas Constructions and JSC are liable to the Applicant. So, too, is the Fund by reason of the liability of the former as builder.

66. I am not persuaded yet of the proportions of the respective liabilities of Tamas Constructions and JSC considering the terms of s131. To enable me to make a decision in that regard I consider I need to know of the compromise reached between the Applicant and Nanjey. Without knowing the terms of that compromise I could be doing an injustice. But even knowing of that compromise, I may not be helped. The compromise may have been reached on an erroneous basis - too favourable to the Applicant or not favourable enough. But if the former, then how can it be put that I should require Tamas Constructions or JSC to pay the Applicant damages which could represent a windfall for her? I do not, therefore, consider that I should necessarily be bound by the terms of the compromise. Fundamentally, I should add, I think that it was unwise to compromise with Nanjey while issues under s131 may need to be finalised. Possibly, at the time, the operation of s131 may have been overlooked or disregarded.

67. Also I need to know the amount of damages I should award. In other words I need to have a specific figure on costs of rectification and any other allowable costs. The actual costs of the works following the joint report of the experts was, as I recall, put in excess of $10,000. But I need this to be verified in one way or another. For preference, to save recalling witnesses, the parties should be able to reach agreement on this.

68. So that I may do justice to the parties I propose to direct the Principal Registrar to list this proceeding on a further date or dates when this question and all questions of costs and any other questions in this difficult proceeding can be traversed and final orders made. I give notice to the relevant parties that, considering my findings, they should be prepared there and then to fully address the issues raised by s131.

69. It is of course open to the parties, to avoid costs, to reach agreement, again considering the findings I have made. In that regard, I should wish to be noted that I am prepared, if it is proper to do so, to give consideration to making any orders by consent.