Plaintiffs v Defendants

1 This is the trial of two preliminary questions before the trial of the proceeding.

2 In the proceeding, the plaintiffs, who are the joint owners of a townhouse dwelling at Patterson Lakes, constructed in 1997 and purchased by them in 1999, allege that in consequence of the defendants' negligence and breaches of statutory warranties, the foundations of their dwelling have subsided, the walls have cracked, and the dwelling has deteriorated to such an extent that it requires demolition and reconstruction, at an estimated cost of $1,232,880.

3 The plaintiffs and the first to fifth defendants have finalised settlement of all claims between them, and those defendants remain parties to the proceeding "solely for the purposes of any apportionment of the plaintiffs' claims against the other defendants pursuant to any applicable proportionate liability regime"[1]. Meanwhile, Timelink Pacific Pty Ltd ("Timelink") and Grant Russell Vincent Wharington ("Wharington") (the sixth and seventh defendants respectively, who I will call "the builders" wherever convenient), have not reached a settlement with the plaintiffs. The builders have added third parties to the proceeding, who in turn have added fourth parties.

4 The builders contend that the plaintiffs' claims against them are statute barred by reason of s 134 of the Building Act 1993. Peter Luzinat & Associates Pty Ltd ("the fifth third party"), who is a building surveyor joined to the proceeding by the builders, and whose liability appears to stand or fall with the builders' liability, indicated support for the builders' submission at an earlier directions hearing. The plaintiffs contend that their claim against the builders is not statute barred.

5 In these circumstances, and at the request of the plaintiffs and the builders, and supported by the solicitor for the fifth third party, on 10 September 2008 I ordered that pursuant to r 47.04 the following questions in the proceeding be tried before the trial of the proceeding:

(a) paragraphs 1, 2, 7, 8, 9, 10, 19, 20, 21, 22, 23, 24, 25, 63, 64, 66, 67, 68 of the Plaintiffs' Further Amended Statement of Claim dated 29 August 2007, and

(b) paragraph 70(b) and (c) of the sixth and seventh defendants' Defence dated 31 August 2007,

and having regard to such relevant and admissible evidence as may be adduced:

(i) Is the proceeding against the sixth and seventh defendants for loss and damage, wholly or partly a building action within the meaning of s 134 of the Building Act 1993?

(ii) Is the proceeding wholly or partly statute barred by operation of s 134 of the Building Act 1993?"

6 Pursuant to my orders, before the hearing date the parties filed written outlines of submissions, a Court Book, and a document entitled "Agreed Facts" which, in effect, paraphrases the allegations in the paragraphs of the pleadings referred to above, which are assumed to be true for the purposes of the trial of the preliminary questions.

7 I heard the trial of the preliminary questions on 6 November 2008, counsel for the plaintiffs and the builders appearing and making oral submissions.

8 I now set out the assumed facts. Unless otherwise noted, all paragraph references in this part of my reasons for decision relate to the plaintiffs' further amended statement of claim.

9 The plaintiffs are joint owners of the residential property at 31 Scarborough Drive, Patterson Lakes (more particularly described in Volume 10253 Folio 690) ("the Property") upon which is constructed a dwelling ("the Dwelling")[2]. The plaintiffs purchased the Property from David Thomas Ford "(Ford") on 20 December 1999[3]. The Property is described as unit 14 of precinct 7B in the building documentation.

10 Timelink ("the sixth defendant") is and was at all material times a corporation which traded as "Wharington Constructions" and carried on business as a builder and developer of land[4].

11 Grant Wharington ("the seventh defendant") is and was at all material times: a registered building practitioner and carried on business as a builder; a director of Timelink; and, was responsible for overseeing and supervising building works carried out by Timelink[5].

12 Cavendish Properties Limited ("the first defendant") is a corporation. Between July 1994 and August 1996 Cavendish was the owner and developer of land at Patterson Lakes, including the Property[6]. The development included, inter alia, filling the land and constructing dwellings[7].

13 On 23 December 1995 Cavendish entered into an agreement with Ford to sell to Ford the land on which the Dwelling was subsequently built and to construct a dwelling on the land ("the Ford Agreement")[8].

14 In early 1996 Timelink and/or Wharington successfully tendered to Cavendish for the development of units 7-14 at Precinct 7B[9]. The tender documents included drawing number 14581-S1, Precinct 7B Ground Floor Footing Plan, drawn by Gamble Cosentino Pty Ltd, consulting structural and civil engineers, ("the Drawing"), which showed that pre-cast concrete piles had been installed on the land where the dwelling was subsequently built[10]. Wharington therefore knew or ought to have known that the pre-cast concrete piles had been installed on the land where the dwelling was subsequently built[11].

15 On 31 July 1996 Cavendish assigned its interest in the Ford Agreement to Timelink and Pilcher Investments Pty Ltd ("Pilcher") jointly and severally[12]. Pursuant to that assignment, Timelink and Pilcher undertook and assumed all liabilities and obligations of Cavendish to construct Units 7-14 at Precinct 7B on the land[13].

16 Timelink and Pilcher engaged Wharington, alternatively, Timelink under the direction and control of Wharington, to construct the Dwelling[14]. To that end, Timelink and/or Wharington procured an engineering design prepared by Mitford Engineering Pty Ltd (Drawing No 96/2542 Sheet 6 of 6) ("the Slab Plan") which prescribed that the ground floors of Units 7-14 at Precinct 7B would consist of a monolithic raft slab, and gave the following instructions for the site preparation prior to the construction thereof[15]:

(a) all footings were to have at least 300mm below their bases and above any existing piles or ground anchors[16];

(b) if piles needed to be cut down under footings, then 300mm of compacted sand should be placed between the piles and the footings above[17].

17 Timelink, under the direction and supervision of Wharington, constructed units 7-14, including the Dwelling on the Property, and were responsible for the proper preparation of the land on which the Dwelling was to be constructed[18]. I interpolate that the statement of Agreed Facts said that "the 'responsibility' of Timelink and Wharington to properly prepare the land was a part of their obligations assigned under the successful tender from Cavendish". The quoted words in the statement of Agreed Facts are not found in the pleadings, however it is to be noted that para 23(b) pleads that under the assignment, Timelink and Pilcher undertook and assumed "all liabilities and obligations of Cavendish" in relation to the construction of the units on the land.

18 Timelink or Wharington warranted and agreed that the construction of the Dwelling and the "site preparation works" would be carried out:

(a) in a proper and workmanlike manner and in accordance with the Designs and Specifications and the Drawing[19];

(b) in accordance with all laws and legal requirements including the Building Act 1993 and its regulations[20]; and

19 Timelink and Wharington also owed a duty of care to the plaintiffs, as subsequent owners of the dwelling:

(a) to carry out the construction of the dwelling with reasonable care and skill[22]; and

(b) to properly carry out the "site preparation works" and prepare the sub-surface of the land on which the buildings were intended to be carried out (including the construction of the dwelling on the land) by ensuring that the top of the pre-existing concrete piles on the land were cut down to achieve a 300mm clearance between the top of the piles and the underside of the footing beams to be subsequently constructed, as described by the Drawing and place 300mm of compacted sand between the cut-down piles and the footing beams[23].

20 In breach of the implied warranties and their duty of care to the plaintiffs, "the Wharington Works" and "the site preparation works" carried out by Timelink and/or Wharington:

(a) were not carried out in a proper and workmanlike manner and in accordance with the Designs and Specifications[24];

(b) were not carried out in accordance with, and failed to comply with, all laws and legal requirements including the Building Act 1993 and its regulations[25];

(c) were not carried out with reasonable skill and care[26].

Particulars of breach were provided as follows[27]:

(i) Timelink and Wharington knew or should have known of the presence of the pre-cast concrete piles on the land prior to the commencement of the construction of the Dwelling;

(ii) Timelink and/or Wharington failed to ensure that the piles were cut down to achieve 300mm clearance between the top of the piles and the underside of the footing beams as prescribed by the Drawing to leave allowance for the settlement of the slab to be subsequently constructed on the Property;

(iii) Timelink and/or Wharington failed to ensure that the nominated 300mm depth of compacted sand was placed between the top of the piles and the underside of the footing beams to be subsequently constructed on the Property, as prescribed by the Drawing;

(iv) Timelink and/or Wharington failed to ensure that the instructions shown on the Drawing were complied with;

(v) Two pre-cast concrete piles are present under the existing slab of the Dwelling and are offering support to the building structure;

(vi) The existence of the piles has contributed to the significant damage to the Dwelling requiring demolition and re-construction.

21 In consequence of the breaches referred to above, the plaintiffs have suffered loss and damage including the costs of demolition and reconstruction of the Dwelling and consequent expenses[28].

22 On 20 September 1996, Peter Luzinat & Associates Pty Ltd (the "Building Surveyor") issued permit BS1048/97/011 (the "building permit"). The building permit referred to "Structural drawings 96/2542: S1, S2, S3, S4, S5, S6" beside the heading "Approved Documents". That is to say, the Slab Plan was among the documents referred to in the building permit.

23 On 25 February 1997, an occupancy permit in respect of the building work was issued[29].

24 On 4 May 2007, the plaintiffs commenced the proceeding against Timelink and Wharington[30].

25 The relevant sections of the Building Act 1993 ("the Act") provide as follows:

"134. Limitation on time when building action may be brought

Despite anything to the contrary in the Limitation of Actions Act 1958 or in any other Act or law, a building action cannot be brought more than 10 years after the date of issue of the occupancy permit in respect of the building work (whether or not the occupancy permit is subsequently cancelled or varied) or, if an occupancy permit is not issued, the date of issue under Part 4 of the certificate of final inspection of the building work.

• "building action means an action (including a counter-claim) for damages for loss or damage arising out of or concerning defective building work"; and

• "building work includes the design, inspection and issuing of a permit in respect of building work".

27 Section 3(1) defines "building work" as "work for or in connection with the construction, demolition or removal of a building". It is also stated that "building includes structure, temporary building, temporary structure and any part of a building or structure".

28 Counsel for the plaintiffs submitted that the limitation period in s 134 of the Act was not applicable because the plaintiffs' claim against the builders was not a building action within the meaning of s 134. That was so, he submitted, because the claim did not arise out of defective building work. Rather, the complaint was the builders' negligent failure to properly prepare the sub-surface of the land prior to carrying out any building work on the site. The negligence and breach of warranties complained of in the pleading was "clearly not work carried out for or in connection with the construction of a building or structure". He submitted that s 134 did not apply to an action for negligent failure to properly prepare land on which future building work is to be carried out. Rather, the provision concerned "defects in the actual construction of the building", as to which no complaint was made in this case. In support of this submission, counsel referred to the distinction drawn in the plaintiffs' pleading between "the site preparation works" and the construction of the Dwelling itself ("the Wharington Works"). He also referred to Schedule 1 to the Act, entitled "Regulation-Making Powers", which refers to "Preparation of land for building work" and "The construction of buildings" as two separate heads of regulation making power. Thus, he submitted, the Act distinguished between the two types of work.

29 As to the intended scope of the Act, he referred to the second reading speech where the Minister for Planning stated that "the 10 year cap applies to property damage resulting from defects in the design, construction approval and inspection of buildings". Counsel submitted that the 10 year cap "obviously does not extend to property damage which might occur due to inadequate preparatory site works on the land on which a building is to be eventually constructed, but may never be constructed or commenced to be constructed". The facts assumed in the present case - namely the builders' failure to ensure proper clearance between the piles and the underside of the footings, as contemplated by the instructions in the Slab Plan - were, counsel submitted, no different from a builder's negligent failure to remove a tree and roots or rocks from the sub-surface of land during the preparation of a future building site on which the construction of a building or structure had not yet commenced, which may have an impact on future settlement. It was irrelevant, he submitted, that proper site preparation for future footings may be stipulated in the footings plan. The site preparation was still not "building work" but works preparatory to building work.

30 Next, counsel submitted that while s 129 expands the definition of building work to include the design, inspection and issuing of a permit in respect of building work, in the absence of express words it cannot be said that the legislature intended site preparation works to be covered by the definition of building works. On the contrary, counsel referred to the following provisions of the Act which, he submitted, supported the conclusion that the legislature intended "building work" to be confined to the construction of a building (or part of a building) rather than preparatory works: (a) the issuing of a Certificate of Final Inspection under Part 4 and an Occupancy Permit under Part 5 of the Act apply solely to the construction of a building itself, not to preparatory site works. As to that, an Occupancy Permit must be issued under s 39 if a person is to occupy a building, as evidence that a building is suitable for occupation. But an Occupancy Permit is not needed for civil works on land preparatory to the carrying out of building works in order to render the site suitable for future building; (b) the definition of "construct" in s 3(1) includes "build, re-build, erect or re-erect the building", so the clear focus is on building or erection of a "building". And the definition of "building" focuses entirely on a building or structure (or part thereof), rather than preparatory site works; (c) the objects of the Act in s 4 include "to establish, maintain and improve standards for the construction and maintenance of buildings"; (d) under s 16 of the Act, a building permit must be obtained for the carrying out of building work, but there is no obligation under the Act to obtain a building permit to carry out civil works to prepare a site for future construction.

31 In short, the intent of the Act was to provide a 10 year cap in relation to defective building work, in relation to which an occupancy permit or certificate of final inspection is required to be issued, not to other incidental activities such as fences, civil works including provision of water and sewerage to the building site, landscaping or site preparation before building works are commenced.

32 Further, and by way of contrast to the Building Act which does not specifically include site preparation works in the definition of "building work", counsel referred to the Domestic Building Contracts Act 1995 ("the DBCA"), as to which s 5(1)(f) expressly includes "site work" in the definition of the "building work" covered by that Act. It followed, counsel submitted, that the definition of "building work" in the Building Act was narrower than that of the DBCA.

33 Counsel for the builders submitted that the plaintiffs' claim against the builders was statute barred, as the claim was a building action within the meaning of s 134 of the Act, commenced more than 10 years after the issue of the occupancy permit. He submitted that, on a plain and fair reading of the relevant sections of the Act, the claim was a "building action", in that the claim arose from defective building work, the relevant failures of the builders being work "for" or "in connection with" the construction of a building. The direct connection between the builders' failures and the construction of the dwelling was patent from the facts assumed.

34 There is no dispute that the plaintiffs' action against the builders was brought more than 10 years after the date of issue of the occupancy permit. The critical question is simply whether the plaintiffs' action against the builders is a "building action" for the purposes of the limitation provision. The starting point is s 129 which relevantly defines a building action as "an action for damages for loss or damage arising out of or concerning defective building work" (emphasis added). As to the meaning of "building work", s 3(1) relevantly defines it as "work for or in connection with the construction ... of a building". And a building is defined to include any part of a building or structure.

35 It is convenient to begin by referring to the misconception which lay at the heart of the plaintiffs' submission. Counsel asserted on numerous occasions that the Act drew a distinction between site preparation works and building work. He submitted that a building permit was required for the latter but not for the former. It followed, he submitted, that the meaning of "building action" in the Act was limited to those works which required a building permit. It is true that, as s 16 provides, building work must not be carried out without a building permit. But it does not follow as a matter of logic that "site preparation works" are not "building work". Rather, counsel asserted, without reference to the particular nature of the works described in the assumed facts, that "site preparation works" can be carried out without a building permit, and then reasoned from that assertion that "site preparation works" (and, by extension, the works in the present case) must not be building work, because they did not require the issue of a building permit. The flaw in that reasoning is that the question whether "site preparation works" require a building permit cannot be answered in the abstract, but rather requires an analysis of the nature of the particular works in question to determine whether or not they are "building work", the answer to which will determine whether a building permit will be required. In effect, the plaintiffs' submission rests on the erroneous assumption that the works in the present case can be characterised in advance as "site preparation works" (in respect of which it is asserted that no building permit is required), and from which it then follows that the works are not building work. There is nothing in the Act which requires or permits such an approach. Rather, the relevant provisions of the Act, referred to above, focus attention on whether any particular work is "for or in connection with" the construction of a building. If it is, then the work is "building work", regardless of whether the work is carried out before the actual construction of the building otherwise commences, and irrespective of the fact that the work may be referred to as "site preparation works".

36 Approaching the present case in this way, I consider that on the assumed facts, it is clear that the site preparation works were "building work" for the purposes of the Act. As counsel for the builders asked rhetorically, if the site preparation works here were not "work for the construction of a building", then what were they? I agree with counsel that the preparation of land in accordance with foundation plans is not work performed for any purpose other than the construction of those foundations, which form part of the building.

37 In this regard I do not overlook the submission by counsel for the plaintiffs that it was important not to confuse the notion of footings (which are part of the building) with site works (which are not part of the building). In my view, however, on the assumed facts, it is artificial to distinguish the "site preparation works" from the construction of the footings themselves. First, the Slab Plan (the plan for the footings) states on its face the very requirements of site preparation which were not followed by the builders. Secondly, the building permit identifies the Slab Plan as one of the "Approved Documents", and further states that the first mandatory notification stage is "prior to placing a footing". Thirdly, this is not a case where "site preparation works" were done in the abstract, that is to say without reference to any actual building which was to be constructed on the site, as might be the case where land is cleared for future building but at the time of clearing there are no actual plans to build. Nor is it a case where one party did site preparation works, and then a different party came in to construct a building on the prepared site. Rather, according to counsel (the building contract not being in evidence), the builders were engaged under a single contract to perform both the site preparation works and the work of constructing the building.

38 In these circumstances, the construction of the building, and in particular the construction of the footings, followed on from, and was directly connected to, the site preparation works. In my view, it is clear that the "site preparation works" was work for or in connection with the construction of a building or, at the very least, for or in connection with the construction of the footings, which was a part of the building. It follows that the relevant work was building work, and the plaintiffs' claim against the builders is a "building action".

39 Several additional matters support the above conclusions. As counsel for the builders submitted, by reference to the second reading speech, one of the purposes of the limitation provision in s 134 was to provide clear start and end dates for the operation of the new 10 year limitation period for claims in respect of defective building work, not involving personal injury or death. I agree with counsel that it promotes the purpose of the Act to construe the definition of "building work" so as to avoid the result that different parts of the work performed by a builder might be covered by different limitation regimes. The interpretation contended for by the plaintiffs would not promote certainty in relation to limitation periods.

40 Further, the interpretation contended for by the plaintiffs would affect the powers of building surveyors under Part 4 of the Act, which provides for the inspection of building work. Part 4 provides that a person in charge of the carrying out of building work for which a permit has issued must notify the relevant building surveyor without delay after completion of each mandatory notification stage of that work (s 33(1); that on being notified that a mandatory notification stage has been completed, the relevant building surveyor must cause the building work concerned to be inspected (s 34); that the relevant building surveyor may cause building work for which a permit has been issued to be inspected at any time whether or not a mandatory notification stage has been completed (s 35); powers of the building surveyor are then set out in relation to inspections (s 36), directions as to work (s 37) and the issuing of a certificate of final inspection (s 38). As counsel for the builders correctly pointed out, if site preparation works were not building work, then the building surveyor would have no power under Part 4 in relation to those works. Mandatory inspections would not extend to inspecting the excavation of foundations. A similar result would obtain in relation to the powers of private building surveyors under Part 6.

41 In the present case, where the site preparation works were so directly linked to the footings themselves, and where such works were expressly referred to in the building permit as a mandatory notification stage, it would be an unsatisfactory result that the building surveyor did not have the powers referred to in Part 4 in relation to his inspection of the works. More to the point, it would be unworkable and an absurdity to require a building surveyor to inspect footings, while at the same time ignoring defective site preparation works (which were clearly going to impact on the footings, and which were even referred to in the specifications for the footings) on the basis that the defective site works were not "building work". And further, bearing in mind that one of the objects of the Act is "to enhance the amenity of buildings and to protect the safety and health of people who use buildings and places of public entertainment"[31], the interpretation contended for by the plaintiffs would not promote this object.

42 Finally, I note that both counsel referred me to a number of authorities. I have had regard to these authorities, but it is not necessary to set them all out. There was really no dispute between the parties as to the applicable case law. Ultimately, the matter for resolution being one of statutory construction to be undertaken in light of the assumed facts, decisions on other provisions are of limited assistance. I merely note two cases. Counsel for the plaintiffs relied on the decision of the Court of Appeal in Winslow Constructors Pty Ltd v Mt Holden Estates Pty Ltd[32] as being analogous to the present case. In Winslow, the issue was whether the works in question (being civil engineering and earthworks, roadworks, drainage, sewer and water reticulation works for a new residential subdivision) were "domestic building work" under the DBCA. In essence, the Court[33] held that the works were carried out in contemplation of prospective homes, and lacked a sufficient nexus with actual existing homes to satisfy the definition of domestic building work in the DBCA[34]. That is, applying the provisions of the DBCA to the facts, the works were not "domestic building work". The point to note, however, is that the facts in Winslow were very different from the facts assumed in the present case. In my view, the conclusion in Winslow that works which one might refer to as "site preparation works" were not "domestic building work" under the DBCA does not assist the plaintiffs on the different facts and statutory provisions which they confront in the present case.

43 I note also that counsel for the plaintiffs relied on Re Leighton's Joinder Applications[35] where Bongiorno J expressed doubt[36] as to whether the expression "defective building work" was sufficiently wide to include the collapse of a part of a construction whilst unfinished. The observation by his Honour was clearly obiter and was made by way of general observation rather than purporting to express a principle as to the limit of the relevant expression. As I said to counsel during oral argument, the critical issue is whether, on the facts of the present case, the relevant statutory definitions are satisfied or not. Finally, I note that none of the other cases referred to assisted the plaintiffs' submission as to statutory construction.

44 It follows that the answers to the two preliminary questions are:

(1) The proceeding against the sixth and seventh defendants for loss and damage is wholly a building action within the meaning of s 134 of the Building Act 1993; and

(2) The proceeding is wholly statute barred by operation of s 134 of the Building Act 1993.

45 I will hear the parties as to the appropriate form of orders and as to costs.

[1] Merely for the purpose of understanding the role of the respective defendants in the proceeding, I note that the plaintiff's pleading alleges that the first to fifth defendants were involved in the design and/or construction of a 1200mm Circulation Drain running immediately adjacent to the western boundary of the plaintiffs' property. The Circulation Drain was part of the Patterson Lakes Development which included filling land, constructing dwellings, and developing the Patterson Lakes tidal waterways system to ensure adequate circulation of water.

[3] The statement of Agreed Facts erroneously refers to para 21 as the source of this fact. Rather, para 35 deals with this matter, stating that the purchase date was "on or about 20 July 1999". Nothing turns on the difference in dates.

[18] Para 63. The pleading refers to the construction of the Dwelling as "the Wharington Works", while the preparation of the land is referred to as "the site preparation works".

[29] Para 70(b) of the builders' Defence.

[30] Para 70(c) of the builders' Defence.

[31] Section 4(c).

[32] [2004] VSCA 159; (2004) 10 VR 435.

[33] Hansen AJA (Callaway and Buchanan JJA agreeing).

[35] [2003] VSC 189.