Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd & Ors

Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd & Ors - [2006] NSWCA 356 - NSWCA 2006 case summary — Zoe

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Thursday 14 December 2006 RICKARD CONSTRUCTIONS PTY LTD v RICKARD HAILS MORETTI PTY LTD & ORS Judgment 1 HANDLEY JA: I agree with Giles JA. 2 GILES JA: The trial judge, McDougall J, began his reasons of 17 December 2004 (Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2004] NSWSC 1041) - "The plaintiff ("Rickard Constructions") constructed a pavement for a container depot ("the container depot" or "Lot 1") at Port Botany. The pavement was designed by the first defendant ("Rickard Partners"). The second defendant ("Jeffery & Katauskas") provided geotechnical services. The third defendant ("Allianz") issued a contract works insurance policy ("the policy") for the project in favour of Rickard Constructions. The pavement failed shortly after it was put into service. Rickard Constructions rebuilt it. The question is, who should bear the loss?" 3 The answer was that Rickard Constructions bore the loss. The trial judge ordered that there be judgment for each of the defendants on Rickard Constructions' claim against it. 4 Rickard Constructions brought its claims broadly in three ways. 5 First, it claimed as assignee from the lessee of the container depot (Mayne Nickless Ltd ("Mayne Nickless"), and an associated company, MPG Logistics Pty Ltd ("MPG Logistics" (together, "Mayne")) of Mayne's causes of action against Rickard Partners and Jeffery & Katauskas. The trial judge held that the assignments on which Rickard Constructions relied were ineffective, and refused a late application by Rickard Constructions to join Mayne Nickless as a plaintiff claiming in its own right. He did not consider the merits of any causes of action Mayne may have had, save for findings as to some of the damage it was claimed Mayne had suffered. 6 Secondly, Rickard Constructions claimed as the possessor in its own right of causes of action in negligence and pursuant to the Trade Practices Act 1974 (C'th) against Rickard Partners and Jeffery & Katauskas. The claims pursuant to the Trade Practices Act were not pursued on appeal, and need not further be mentioned. The trial judge held that, with a possible qualification which he did not resolve, Rickard Partners did not owe Rickard Constructions a relevant duty of care, that any duty of care had not been breached, and that Rickard Constructions had not shown that it suffered any damage. He held, with a like possible qualification which he did not resolve, that Rickard Partners owed only a limited duty of care, and that any duty of care had not been breached. 7 Thirdly, Rickard Constructions claimed against Allianz under the policy. The trial judge held that an exclusion in relation to defective workmanship was engaged, and that Rickard Constructions had not proved that which, on the proper construction of the exclusion clause, it had to prove in order to make out the recovery left to it under the clause. 8 The trial judge found that the pavement failed because the asphalt wearing layer was placed over basecourse which was, in sections, excessively wet, and the pavement was put into use before the basecourse had any opportunity to dry out. He preferred the view of the majority of the experts that there was a build-up of excessive moisture in the basecourse and that, when the pavement was loaded by the operation of heavy forklift trucks, there was an increase in pore pressure which caused its ability to resist load to diminish sharply, so that it was unable to support the loaded asphalt wearing layer and the pavement collapsed. There was no appeal from his Honour's finding as to the mechanism for the failure. 9 The trial judge dealt in a lengthy section of his reasons with what he described as responsibility for the failure, it seems following the parties' usage in this respect, and found that the primary responsibility should be attributed to Rickard Constructions because (at his [133]) - " … [t]he conditions that caused the failure occurred because, in substance, Rickard Constructions permitted the asphalt wearing layer to be placed over the basecourse, thereby sealing the basecourse (and the underlying layers) whilst the basecourse was excessively wet." 10 Responsibility for the failure was greatly re-agitated by Rickard Constructions on appeal. It was the basis of the trial judge's holding that the exclusion clause in relation to defective workmanship was engaged, and provided the background to whether Rickard Partners or Jeffery & Katauskas was liable on Mayne's purportedly assigned causes of action or on Rickard Constructions' direct causes of action. It is necessary, however, to decide Rickard Constructions' claims not by an attribution of responsibility for the failure, but by application of the terms of the exclusion clause in the policy and by consideration of breach by Rickard Partners or Jeffery & Katauskas of contractual obligations or tortious duties of care owed to Mayne or to Rickard Constructions. 11 By Rickard Constructions' extensive grounds of appeal, and with a notice of contention filed by Jeffery & Katauskas, many issues were raised on appeal: the so-called responsibility for the failure; the construction of the exclusion clause; proof sufficient for recovery under the exclusion clause; assignment; Mayne's causes of action; joinder of Mayne; Mayne's damages; and for Rickard Constructions' direct causes of action against Rickard Partners and Jeffery & Katauskas, duties of care, breach and damage. 12 To a considerable extent, and in particular in its submissions concerning responsibility for the failure, Rickard Constructions treated the appeal as though it were a new trial. So did the appellant in Williams v Minister Aboriginal Land Rights Act 1983 (2000) Aust Torts Rep 81-578; [2000] NSWCA 255, of whom Heydon JA (with whom Spigelman CJ and Sheller JA agreed) said at [60]-[61] - "The plaintiff's approach, on the other hand, paid insufficient regard to the nature of the appeal. The appeal was by way of rehearing: Supreme Court Act 1970 (NSW) s 75A(5). It was not a trial de novo or a trial of the case afresh on the record. The plaintiff bore the burden in the appeal not merely of showing that on the facts her contentions might be available or even correct, but of showing that the trial judge's conclusions ought to be reversed. The plaintiff made only limited challenges to the credit-based findings of the trial judge. Most of her challenges were to inferences drawn, or characterisations made, by the trial judge. Even in relation to those challenges, however, the Court of Appeal is in the same position as that ascribed to the Full Federal Court in Minister for Immigration, Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359 at 369 per Beaumont and Lee JJ: ' ... the court is not obliged to proceed to make new findings of fact on all relevant issues and discharge the judgment appealed from if those findings differ from those of the trial judge and do not support the judgment. The court must be satisfied that the judgment of the trial judge is erroneous and it may be so satisfied if it reaches the conclusion that the trial judge failed to draw inferences that should have been drawn from the facts established by the evidence. The court is unlikely to be satisfied if all that is shown is that the trial judge made a choice between competing inferences, being a choice the court may not have been inclined to make but not a choice the trial judge should not have made. Where the majority judgment in Warren v Coombes [(1979) 142 CLR 531] (at 552-553) states that an appellate court must not shrink from giving effect to its own conclusion, it is speaking of a conclusion that the decision of the trial judge is wrong and that it should be corrected. (See also Edwards v Noble (1971) 125 CLR 296, per Barwick CJ (at 304), per Menzies J (at 308-309) and per Walsh J (at 318-319).)' 61 The plaintiff's approach sometimes invited the court to survey for itself, afresh, all the evidence on particular points and arrive for itself at particular conclusions about them, without essaying the necessary task of positively demonstrating that the trial judge was wrong. The plaintiff's approach also paid insufficient regard to the difference between, on the one hand, pointing to difficulties in the defendants' path of establishing matters which they wished to contend for and, on the other, pointing to sufficient evidence to permit an inference to the contrary of the defendants' contention." 13 It is necessary for Rickard Contructions to show error on the part of the trial judge, so that his conclusions should be overturned.

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(d) an asphalt layer as the wearing surface. 17 The pavement design was prepared by at least by 28 March 1998, since plans and a specification of that date were referred to in the contract between Container Park and Rickard Constructions to which I shortly refer. The design thereafter changed in its detail. 18 The design document in evidence was dated September 1998. It said that the design had been undertaken in accordance with "Austroads - Pavement Design, A Guide to the Structural Design of Road Pavements". It also said that a qualified geotechnical engineer would "undertake geotechnical testing throughout the construction", without greater specificity. It provided for a sub-base layer of 475 mm, comprising three levels. The lowest and intermediate levels were each to be compacted to 98 per cent standard. The highest level was to be compacted to 100 per cent standard. The basecourse of DGB 20 was to be 150 mm thick and compacted to 100 per cent standard. The asphalt wearing layer was to be 100 mm thick. 19 By the end of 1998, and taken in the proceedings to be the pavement Rickard Constructions was to construct, the design provided for a sub-base 550mm thick laid in two levels of 200 mm (compaction 98 per cent standard) and one level of 150mm (compaction 100 per cent standard), with the basecourse layer and an asphalt layer of AC 28. The design was reviewed in a further design document dated February 1999, following testing of the elastic modulus of the sandstone sub-base by Jeffery & Katauskas in late 1998, but according to Mr Rickard by early December 1998 the design had already been changed - the pavement had been "thickened up" - and it was not further changed. 20 A great many criticisms of the design were rejected by the trial judge, and were not revived on appeal. It is sufficient for the issues raised on appeal to note that, while the required compaction was stated, the design document did not expressly state any required moisture content for the sub-base or basecourse. 21 Rickard Constructions was established as a construction company by Mr Rickard, who was its sole director. Mr Rickard did not design the pavement, which was designed by Mr Brett Hails. The link through Mr Rickard between Rickard Partners and Rickard Constructions remained throughout the design and construction of the pavement, and Rickard Partners and Rickard Constructions "operated out of the same building". 22 On 23 April 1998 there was executed a contract between Container Park and Rickard Constructions, providing for the construction of the pavement in accordance with Rickard Partners' plans and specification dated 28 March 1998 for a contract sum of $6 million. By cl 1(a) of the contract Rickard Constructions undertook " … in a workmanlike manner and subject to these Conditions, [to] execute and complete the Works shown on the Contract Drawings and described in the Specification." The contract provided for the Proprietor to direct the Builder if any discrepancy or ambiguity were found in the drawings or between the drawings and the specification, but did not otherwise provide for directions by the Proprietor or by a Superintendent. It did not provide for a Superintendent at all, or for any kind of supervision or certification by a third party. 23 The plans in evidence, which were largely concerned with drainage and other matters not directly relevant to the proceedings, were later versions of the plans dated 28 March 1998. Their depiction of the pavement layers and required compaction was in accordance with the pavement design as it had become by the end of 1998. 24 The specification in evidence, different from the design document although some of the submissions equated them, was dated November 1998 and was noted as Revision A. One of the copies was endorsed in Mr Hails' writing "Final specification". The proceedings were conducted on the basis that it became the contractual specification, although Jeffery & Katauskas said on appeal that no basis for so concluding had been established. 25 The specification did not say anything about a qualified geotechnical engineer undertaking testing. It contemplated a Superintendent, but did not identify who would have that office; there was no evidence that anyone was appointed Superintendent. All works were to be done "in a sound, efficient and workmanlike manner and in accordance with sound Engineering practice and principles". There was to be testing in accordance with a document "Quality control procedures for Pavement Works". 26 The statement of required compaction in the specification was consistent with that in the design document, and again no required moisture content was expressly stated for the sub-base or basecourse. However, moisture content for each layer was to be "maintained at near the optimum during compaction", and - "Where material is too wet to allow proper compaction, the working of such material shall be deferred until the required optimum moisture content has been obtained." 27 The optimum moisture content of a material is the moisture content which best achieves, in laboratory testing, the 100 per cent standard compaction. It is stated as a percentage, meaning the percentage by weight of water over weight of dry material. A moisture content in excess of the optimum means that the material becomes less stiff and can not be compacted to the same dry density value. 28 Moisture content for the purposes of optimum moisture content differs from moisture content in the sense of degree of saturation, which is a volumetric percentage of the voids in the material filled with water. Deviation from optimum moisture content and deviation from a specified degree of saturation can bring differences of substance in the strength of the compacted material. Material compacted to a given standard compaction can retain its density while gaining increased moisture content in the sense of degree of saturation; this will affect its strength. 29 There is a relationship between the weight-based moisture content and the degree of saturation, and if the specific gravity of the material is known the degree of saturation can be calculated from the moisture content. There was evidence that the specific gravity of fallen crushed rock was well known. Further, in the present case the test results for the compaction testing by Jeffery & Katauskas recorded moisture content as part of recording deviation from standard optimum moisture content. Increased moisture content would indicate an increased degree of saturation, and there was evidence that the degree of saturation could be calculated from the test results. 30 In fact in November 1998 Rickard Partners specified in correspondence to Rickard Constructions a moisture content of 10% ± 2%, at least for the sub-base. Mr Hails told Jeffery & Katauskas that it had done so. Mr Rodney Jeffery of Jeffery & Katauskas questioned whether this meant standard optimum moisture content and applied also to the basecourse. It appears to have been accepted in the course of the works that it did. Moisture content in the sense of degree of saturation was not expressly specified in correspondence. 31 The quality control document was dated November 1998. It said that field testing of the base layers (that is, the sub-base and the basecourse) "is to be undertaken to ensure that the compacted granular layers achieve the above design values", meaning the specified compaction, and that tests to the frequency in a table would be carried out by the contractor and the results made available to the client for approval. The table provided for testing and thereafter "audit" of the quality of the materials (properties and grading). It also provided, relevantly, for field density tests (compaction tests) for all layers at a frequency determined by area or volume of material laid, and for proof rolling of "Top of base". All the testing was the responsibility of the contractor. 32 The quality control document concluded - "WET WEATHER

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In the event of wet weather, the Client's Representative may call for field density tests at his discretion prior to recommencement of construction. It is understood this will only be called on after prolonged wet weather and after discussion with the Contractor." 33 The document did not explain what was meant by the Client's Representative, and there was no evidence that anyone was appointed to that position. In his reasons the trial judge treated Rickard Partners as the Client's Representative. 34 Mr Rickard said that he provided the quality control document to Mr Treweek of Jeffery & Katauskas, but Mr Treweek said that Jeffery & Katauskas did not have either the specification or the quality control document. However, it is clear enough that it knew the nature of the pavement. 35 Jeffery & Katauskas carried on business as geotechnical engineers. They had not been engaged in relation to the design of the pavement as it was at the time of the plans and specification of 28 March 1998. 36 On 24 April 1998 Jeffery & Katauskas put a proposal to Rickard Partners, following an approach by the latter, for the provision of geotechnical services in the construction of the pavement. There were communications over many months, generally between Mr Hails and Mr Jeffery. Jeffery & Katauskas recommended that the services be on a Level 1 basis of a full-time inspection and testing service and deciding the locations and timing of sampling and testing operations. In a letter to Rickard Partners dated 20 October 1998 Jeffery & Katauskas said that they considered Level 1 Certification was essential "since it is the fill and pavement materials quality and density which is so relevant to the ultimate pavement performance". Rickard Partners indicated preference for Level 2 Certification, under which sampling and testing was carried out as required or specified, with "the superintendent" advising when visits were required and ensuring that sufficient samples and tests were taken. 37 During this period Jeffery & Katauskas did site investigation and testing for Rickard Partners, particularly as work was done to prepare the subgrade but also some CBR testing on sub-base in late 1998. The lastmentioned testing led to the review in the further design document of February 1999. Rickard Partners expressed concern at the expense, and Jeffery & Katauskas responded in a fax dated 9 December 1998 that Rickard Partners should budget for other tests including "a number of quality control tests to confirm DGB20 compliance due to critical impact of this layer … ". 38 It is evident that Rickard Partners decided otherwise. The culmination of the engagement was on 21 December 1998, when Rickard Partners confirmed Level 2 Certification and stated the frequency (on an area basis) of the testing required. This meant acceptance of Jeffery & Katauskas' conditions as part of the engagement, which included - "These levels of certification are based on field observations and tests by a geotechnician. They do not involve any engineering overview or advice unless explicitly commissioned. The geotechnician is not qualified to give engineering advice. Also, he does not fulfil the role of earthworks coordinator, supervisor or surveyor, though some of these aspects can be addressed if our brief is explicitly extended to do so. If a client wishes to extend our commission then he should provide a precise specification of the services required and we can submit an appropriate proposal." 39 In due course Jeffery & Katauskas carried out compaction testing, apparently in satisfaction of the field density testing in the quality control document although the frequency in the letter of 21 December 1998 was different from the frequency in that document. It was asked to come to the site to perform the testing, usually by Mr Michael Goodwyn, described as a Rickard Partners site engineer, or sometimes by one of Rickard Constructions' site personnel, by the site person telephoning Mr Treweek; Mr Treweek then dispatched a technician. The site person would nominate the area for testing. The test results, when completed, would be provided to Rickard Partners. The testing fulfilled Rickard Constructions' responsibility in the quality control document, but via Rickard Partners. 40 It should be said that it was no part of the appeal that Jeffery & Katauskas made mistakes in carrying out the compaction testing required of it. There was, however, some particular advice given by it and a degree of involvement by Jeffery and Katauskas in proof rolling, which it will be necessary to consider later in these reasons. 41 As at the end of 1998, then, there was a contract between Container Park and Rickard Partners at least for the design of the pavement; a contract between Container Park and Rickard Constructions for the construction of the pavement; and a contract between Rickard Partners and Jeffery & Katauskas for Level 2 Certification provision of geotechnical services in the construction of the pavement. In early 1999 Mayne Nickless came into the picture. 42 By a Business Purchase Agreement dated 4 January 1999 Mayne Nickless agreed to purchase the assets of Container Park's Sydney business. The assets included the lease of the container depot and what were described as the Sydney Contracts, amongst which were Container Park's contract of 23 April 1998 with Rickard Constructions as a specifically identified contract and "[a]ny other executory agreements with third parties relating to Works being carried out under the Building Contract with Rickard Constructions Pty Ltd". The Business Purchase Agreement was a complex document, with Container Park and Mayne Nickless carefully allocating risk in the sale of assets. It included an indemnity by Container Park in respect of any claim for which Mayne Nickless might be liable in respect of the ownership of the assets or the conduct of the business. 43 The Business Purchase Agreement did not itself assign the contract of 23 April 1998 or, if it was one of the executory contracts with third parties, the contract under which Rickard Partners had been engaged. It provided that on completion Container Park would transfer the contracts either by assignment or by novation. Completion must have taken place, but there was no evidence of what, if anything, happened by way of assignment or formal novation. Mr Rickard said that Mayne Nickless representatives came to site meetings after Container Park sold its interest in the container depot, although that presumably was after completion at some time later than 4 January 1999. Rickard Constructions and Rickard Partners must have come to know of the change in ownership. It does not seem to have been disputed that in some manner Mayne Nickless became the Proprietor under the contract with Rickard Constructions. That it became a contracting party with Rickard Partners was questioned by the latter, and I will return to it. 44 Turning to performance of the Works, Rickard Constructions engaged Walker Civil Engineering Pty Ltd ("Walker") to prepare the sub-grade and to lay and compact the sub-base and basecourse, and CSR Emoleum ("CSR") to lay the asphalt wearing layer. As I have indicated, work began during 1998, but on the sub-grade in preparation for laying the pavement materials and, it seems, commencement of the first level of the sub-base. Construction of the pavement was completed in late August 1999. During the construction of the pavement the general manager of Rickard Constructions, Mr Lance Woodworth, was involved on its behalf, and it had an on site project manager, Mr Chris Potts. It also had a site foreman, from 12 July 1999 Mr Stephen Hulbert. 45 A letter dated 11 January 1999 from Rickard Partners to Jeffery & Katauskas said that Rickard Partners would have an engineer, Mr Andrew Castle, on site full time; however, in an organisation chart he was also identified as Rickard Constructions' site engineer. Mr Treweek referred to Mr Goodwyn as a Rickard Partners site engineer. Mr Rickard said, however, that while Rickard Partners "had engineers on the site from time to time" they "did not go to the site specifically to inspect the pavement work that was being done"; he said that they went to deal with other issues such as drainage and finished pavement levels. It is clear enough that Mr Hails frequently went to the site, including in relation to the pavement work, and the trial judge accepted that Rickard Partners had a site engineer. I will return to Rickard Partners' supervisory role in the performance of the works. 46 As would be expected, the laying of the sub-base, basecourse and asphalt wearing layer was not wholly sequential, but overlapped. Broadly speaking, work progressed from the eastern side of the site to its western side. Two large buildings were also being constructed on the site, a little to the east of centre, there were drainage works in respect of which particular provision was made in the specification for the pavement over the pipelines, and there were other works such as retaining walls. 47 The evidence did not permit a detailed understanding of the progress of the works. The two buildings were almost complete by about mid-July 1999. The laying of sub-base began in October-November 1998, and sub-base was still being initially laid and compacted (as distinct from being removed and relaid or tyned up and recompacted) on western parts of the site in at least mid-June 1999. Basecourse was first laid on the eastern part of the site on about 6 May 1999. There was evidence that as at about mid-July 1999 approximately the western ten per cent of the sub-base remained to be laid and approximately the western one-third, or perhaps a little more, of the basecourse remained to be laid. A diary entry for 6 August 1999 recorded "finished the DGB to the west". Asphalt was first laid on 7 June 1999, then there was a break until laying asphalt recommenced at the end of June 1999; after another break it recommenced in early August 1999 and continued, apart from some later rectification work, until a little after mid-August 1999. There was evidence that about half the asphalt had been laid by the beginning of July 1999, but that may have been an over-statement; the greater part of the asphalting seems to have been from early August 1999. 48 Laying the asphalt was preceded by spraying a tack coat of tar on the basecourse, intended to seal it and provide adhesion for the wearing layer. The tack coat may have preceded laying the asphalt by some time, but the evidence was particularly unclear in this respect. 49 Construction of the pavement was completed on about 26 August 1999. On 27 August 1999 Rickard Partners provided "pavement certification" to Rickard Constructions, which in turn notified practical completion to Container Park (curiously, not Mayne Nickless). 50 Mayne Nickless apparently gave MPG Logistics a right to occupy the container depot, and one or both of them began to use it for the storage of shipping containers. Heavy fork lifts moved the containers. Within three days of being put into service, the pavement failed. 51 There was predictable finger-pointing, and notification to Allianz. Mayne took the stance that it was for Rickard Constructions to rectify the failed pavement. Rickard Constructions maintained that it had complied with its obligations under the contract, and that it should be paid for the rectification work as a variation. 52 Rectification work proceeded, and eventually an agreement was reached between Rickard Constructions and Mayne recorded in a deed dated 3 May 2000 ("the May 2000 Deed"). Rickard Constructions agreed to complete the rectification of the pavement. Mayne (both companies) agreed to accept the claim for payment for doing the rectification work, but on the basis that Rickard Constructions accepted in full payment the amount it recovered pursuant to any Assigned Action. Assigned Action was defined to mean - "… any right, claim, action or cause of action which may be brought by MNL [Mayne Nickless] or MPG [MPG Logistics] to recover from the designers of the payment on Lot 1 or the supervisors of the pavement construction on Lot 1 (including Jeffery and Katauskas and Rickard & Partners Pty Ltd) the amount payable by MNL or MPG to Constructions in connection with a Variation Claim (other than any right, claim, action or cause of action against Constructions, its contractors, agents or employees)". 53 In the May 2000 Deed Mayne assigned the Assigned Actions to Rickard Constructions, and declared that to the extent to which any of the Assigned Actions was not assignable it held it on trust for the benefit of Rickard Constructions. 54 The proceedings heard by McDougall J were commenced in September 2000. In due course Rickard Partners and Jeffery & Katauskas raised as an issue that the assignment under the May 2000 Deed was limited and ineffective to give recovery to Rickard Constructions. 55 Apparently as a result of this, on 22 September 2003 Mayne, Rickard Constructions and others entered into a deed ("the September 2003 Deed") for the purpose, as expressed in one of its recitals, of "confirm[ing] the assignment of the Assigned Causes of Action and, to the extent (if any) that the Assigned Causes of Action have not been assigned to Constructions, to effect that assignment". Assigned Causes of Action was defined to mean - "… any right, claim, action or cause of action which MNL or MPG has or might have to recover from the designers of the pavement on Lot 1 or the supervisors of the pavement construction on Lot 1 (including Jeffery & Katauskas and Rickard & Partners Pty Limited) which is connected with the pavement on Lot 1 (other than any right, claim, action or cause of action against Constructions, its contractors, agents or employees)." 56 In the September 2003 Deed Mayne assigned to Rickard Constructions the whole of the Assigned Causes of Action to the extent that all or any part of them had not already been assigned to it. 57 In the meantime, on 23 November 2000 MPG Logistics had sold the assets of its business to Patrick Stevedores Operations No 2 Pty Ltd, Minnow (No 1) Pty Ltd and Minnow (No 2) Pty Ltd ("Patricks"). In the course of the hearing before the trial judge, it seems to meet a contention that the assignment by the September 2003 Deed had done nothing because the Assigned Causes of Action were no longer vested in Mayne but had gone to Patricks amongst the assets of the business, a further deed dated 15 October 2004 was entered into between Mayne, Rickard Constructions and Patricks ("the October 2004 Deed"). 58 By cl 2 of the October 2004 Deed Mayne and Patricks acknowledged and agreed that they did not intend that the agreement for sale of the assets of the business would have the effect of transferring to Patricks any part of the Assigned Causes of Action, and that the agreement should be "interpreted consistently with that intention". For good measure, cl 3 provided that Patricks assigned to Rickard Constructions any part of the Assigned Causes of Action which had not already been assigned to it. 59 In the reasons which follow I deal first with the claim against Allianz, then the claims as assignee of Mayne's causes of action against Rickard Partners and against Jeffery & Katauskas, and then with the claims in Rickard Constructions' own right against Rickard Partners and against Jeffery & Katauskas. I follow that order in the belief that the sequence of consideration of the claims will inform and assist in explaining the disposal of the claims later in the sequence.

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(a) Defective workmanship 68 Rickard Constructions accepted on appeal the finding that it was not good construction practice to apply an asphalt wearing layer over basecourse material that was excessively wet. The evidence fully justified that finding. There may be instanced the Jeffery & Katauskas letter of 3 May 1999, set out later in these reasons, concerning proof rolling of saturated sub-base before placement of basecourse in order to detect and rectify soft areas - the necessity would be at the least the same for basecourse - and the warnings by CSR of the risk of asphalting over wet and soft basecourse. Mr Michael Thom, a geotechnical engineer called by Rickard Partners, said bluntly that if basecourse becomes saturated "all contractors know it has to be dried back", and his agreement that a moisture test was necessary to determine the degree of saturation did not detract from the proper practice. Mr Hulbert was equally direct in his evidence - "Q. You were aware at the time that [it] was contrary to good construction practice to lay asphalt over soft base area, wasn't it? A. Certainly aware of that, yes." 69 Rickard Constructions submitted that the trial judge erred in finding that it knew that this was not good construction practice. It does not matter. Rickard Constructions undertook in the contract to construct the pavement "in a workmanlike manner", and by the specification was obliged to carry out the works "in a sound, efficient and workmanlike manner and in accordance with sound Engineering practice and principles". Failure to appreciate what good construction practice called for would not excuse it. 70 However, this finding was also amply supported in the evidence. Through Mr Potts, Rickard Constructions had the Jeffery & Katauskas letter of 3 May 1999. Through Mr Hulbert, it had the CSR warnings, and in any event, Mr Hulbert knew that it was contrary to good construction practice to lay asphalt over soft base area. It was no part of Rickard Constructions' case that it was an incompetent contractor. 71 And it was not just any contractor; Mr Rickard took at least an overseeing role, and was a civil engineer who had studied soils and their behaviour and whose evidence showed that he well appreciated that moisture content was a significant factor in the stiffness and stability of the layers. Indeed, Mr Rickard gave evidence of the problem perceived at the end of April 1999 that rainfall was damaging the laid and tested sub-base, which had to be allowed to dry or to be removed and re-laid with dry material before proceeding to the next layer. Relevant also to the submission next considered, Mr Rickard said that Rickard Constructions decided to carry on with the asphalting over basecourse despite "the very suspect state" of areas of which CSR warned, and - "Rickard Constructions took a commercial decision that if they had held up the larger area of asphalt to rectify these very small areas they would have placed greater material at risk. So they took the decision, because CSR provided a very good quality assurance system for us in checking the base course before they laid the asphalt, that the company as a whole were prepared to take the risk on those areas and in fact if they did fail in the future we would rectify them because at least the rest of the park, which was a much bigger area, had been protected and dealt with." 72 Rickard Constructions' principal submission in relation to responsibility for the failure was that the asphalt was not laid over basecourse which was excessively wet, and that the trial judge had erred in so finding. The submission had a number of strands. The trial judge's account of the facts was in rather summary form, and this Court was taken to the evidence in detail; it is necessary to recount some of the detail. 73 As a first strand it was suggested that it did not rain on the site after 22 July 1999, it seems in aid not only of the contention that the pavement where asphalt was laid from the latter part of July 1999 did not fail because the basecourse was wet but also of the contention that the failure of the pavement where asphalt had earlier been laid could not have been due to excessive wetness of the basecourse. Reliance was placed on the site diary of Walker's foreman, Mr Michael Nugent. 74 Mr Nugent's diary does not support the submission, and other evidence comprehensively negates it. 75 Mr Nugent was on site during working hours six days a week, and his diary even if accurate was not a complete record of weather conditions. It was not necessarily complete even for the times he was on site. Nonetheless, he recorded rainfall and wet conditions after 22 July 1999. He recorded for 26 July 1999 that because of overnight rain the grader, water cart and two rollers were stood down. He also recorded work by machinery stabilising, pushing out or drying wet sandstone and in one case "wet DGB" on 29, 30, and 31 July and 2, 3 and 4 August 1999. The asphalt wearing layer was being laid from early August 1999, and one of the CSR warnings was a memorandum of 3 August 1999, see later in these reasons. Even from the diary, there were wet conditions well after 22 July 1999, and during laying of the asphalt wearing layer. 76 Mr Hulbert's diary recorded showers on 26 July, a light sprinkle on 6 August 1999 and rain on 13 August 1999. The Bureau of Meteorology records from Sydney Airport, not far distant from the site, recorded rain on 26 and 27 July and 1, 7, 13, 14, 15 and 24 August 1999 (including 46 mm on 15 August 1999). There was ample support in the evidence for rainfall affecting the basecourse when asphalt was laid after 22 July 1999, and there was evidence that it did so to which I refer in considering the next strand in the principal submission. 77 For the consideration of the next strand, more of the evidence before the trial judge should be described. 78 There was considerable rainfall in the months of April, May, June and July 1999. According to the Sydney Airport records, a total of 210.6 mm fell in April; 55.6 mm in May; 71.2 mm in June; and prior to 22 July, 165 mm in July. Mr Nugent's diary described the site as "saturated" on 6 May 1999; as too wet for any form of work on 11 May 1999 and too wet for work on 12 May 1999; as closed because of rain on 24, 25, 26, 27 and 28 May 1999; and as closed because of overnight rain on 4 June 1999. He recorded that heavy rain overnight "flooded the site" on 9 June 1999 and all plant was stood down on that day and on the next two days; that the site was again closed because of rain on 22, 23, 24 and 25 June 1999; that the plant was stood down because of rain on 1 July 1999 and the site was closed on the next day; that work stopped because of rain on the afternoon of 8 July 1999; and that the site was closed because of rain on 12, 13, 14, 15 and 16 July 1999. Mr Hulbert said that when he began on the site a large part of the basecourse material was submerged under 50mm of water. 79 The effect of rainfall on the sub-base was the occasion for Rickard Constructions to ask for Mr Treweek's attendance at the end of April 1999, from which came the letter of 3 May 1999. When Mr Treweek walked around part of the site with Mr Potts on 29 April 1999 a great deal of water was ponding on the sub-base. The water was not draining away because the drainage pits were at the level of the completed pavement, higher than the level of the then pavement layer; only in July did Mr Hulbert cut holes in the sides of the pits to enable surface water to drain into them. Mr Nugent's diary recorded collection of water around the drainage pits on 27 May and 8, 26 and 28 June 1999, sometimes with comments about Rickard Constructions' failure to pump it away. The effect of rain was compounded by the downpipes from the two buildings discharging onto the ground, rather than into any form of drainage. 80 More specifically as to basecourse, CSR referred in a number of site memoranda to Rickard Constructions to excessive moisture content, wetness or softness of the basecourse and sometimes to instructions from Rickard Constructions nonetheless to lay the asphalt wearing layer. · In a memorandum dated 29 June 1999 (04731) headed "Wet & soft area (?) of basecourse material" Mr Isedale of CSR said that the areas which he identified by a sketch were "showing deflection due to high moisture content of base material" and that CSR would "cover these areas with AC 28 as instructed by Rickards but take no responsibility for future failure of pavements in these areas". · In a memorandum dated 30 June 1999 (04732) headed "Failed base course" Mr Isedale said that the failed area which he identified by a sketch was "wet & soft and deflecting", but that "it will be covered with AC28 as per your instructions"; the memorandum continued "We advise that asphalt in these areas will fail under load and that CSR Emoleum will bear no costs regarding rectification of these areas". · In a memorandum dated 3 August 1999 (04733) Mr Isedale said that areas which he identified by a sketch "are deflecting under construction equipment due to excess moisture and lack of compaction" and that CSR "will pave over these areas as instructed by Rickard Constructions but take no responsibility for future pavement failures". · In a memorandum dated 11 August 1999 (07717) Mr Isedale referred to "soft road base" and "Instructed to lay asphalt over the soft base". · In a memorandum dated 12 August 1999 (07721) Mr Isedale said that the area he identified by a sketch "was soft", that Mr Hulbert "got the road base taken out and replaced with dry base and instructed me to lay over it" but that after removal and replacement "some of the areas were still soft". 81 In a letter to Mr Potts dated 1 July 1999 Mr Sean Durkin, Operations Manager of CSR, wrote - "We have completed approximately half of the above mentioned project and as you are aware we are experiencing difficulties in paving the asphalt due to deficiencies in the base provided by others. We have had to leave out numerous patches due to the base softening up under the construction traffic. This has increased the number of joints in the job with a consequential increase in the risk of water penetration and reduction in the aesthetic appearance. We have also paved over soft areas at your direction and have concerns regarding the longevity of the pavement in these areas. Although we have endeavoured to identify weak areas in the base by proof rolling with a loaded truck prior to asphalt paving we have concerns that we will have not picked up all of the soft areas as the base has tended to deteriorate under the passage of the compaction plant due to 'pumping up' of the water contained within the base layers. We believe that the DGB layer(s) are saturated and that the prime coat has been applied on this wet base. As a consequence the moisture within the DGB layers is trapped (it cannot be dissipated through the underlying sandstone layers) and the pore water pressures within the material increase under load with a consequent reduction in strength. Our observations indicate that your current remedial action is to remove the top 100mm of the DGB layer, replace with dryer material and then recompact the area. This drier material would appear to be dry of optimum and has resulted in a generally loose surface when compaction has been completed. We have doubts that these reworked areas will be of acceptable strength as we believe the depth of rework is too shallow and that saturated material is remaining untreated. Also insufficient time is being allowed for the DGB to set up prior to trafficking." 82 An internal note dated 22 July 1999, written by Mr Isedale as a "summary", referred inter alia to the memoranda 04731 and 04732 and the instructions to pave over the wet and soft areas. It included as to 04731 "Paved 603 tonne", indicating that CSR did pave over the areas. In comments in the note, Mr Isedale wrote that the sub-base was too moist (referring to "Slurried top 5mm which breaks down more under construction traffic"), and to lack of time for it to have dried out; he wrote - "Due to pavement design regarding drainage ie long valley lines leading into pits which are finished at design level pavement has been underwater for large amounts of time due to heavy rain fall over the past 6 weeks." 83 Coming then to the second strand, Rickard Constructions submitted that the CSR memoranda did not support that asphalt was laid over wet or soft basecourse. It said that the evidence showed that all the areas to which the memoranda referred had been appropriately attended to by it, by its contractor Walker, prior to the asphalt wearing layer being laid. 84 Rickard Constructions first submitted that the evidence of Mr Nugent showed this, and that the trial judge did not give Mr Nugent's evidence the weight it deserved when he said - "143 I have not overlooked the evidence of Mr Michael Nugent. He was the site foreman for Walker Civil Engineering ("Walker"). Walker was contracted to supply, place and compact the sub-base and base course layers. Rickard Constructions submitted that his evidence was inconsistent with there having been faulty or defective workmanship on its part. I do not accept that submission. I agree that his evidence is that he recorded no instance of what he regarded as faulty workmanship. But I think his testimony cannot bear the load that the submission places on it. Whilst I accept Mr Nugent as a witness of truth, who sought to give evidence to the best of his recollection, I do not think that his evidence can prevail against the overwhelming facts, and the inferences from them, to which I have referred." 85 On examination of Mr Nugent's evidence, the trial judge was fully entitled to take the view of it he did; any other view could barely be countenanced. 86 Mr Nugent understandably did not have a good recollection of the detail of what occurred. The evidence on which Rickard Constructions relied was - "Q. Would it be fair to say you were perpetually ripping out material, putting material back in and rerolling it in that area? A. That's correct. Q. Every time you took the material out, do you roll it to the stage that no water holds on the surface and no deflection showing on the surface as you role [sic] back over it? A. We did the best we could. Q. Ultimately, when the asphalt seal was laid so you could record the area was such that no moisture was coming to the surface and the roller was not showing a deflection? A. I basically can't recall. Q. If you were not content you would have recorded it in your diary. A. I would have. … Q. I take it that you were on site for the whole of the time that CSR was on site putting in the asphalt over the pavement area? A. I was for the asphalt. Q. So far as you can recall, was there any area that you left and which was sealed by CSR which you believe was not up to standard? A. That is not my - it was not up to me to make that decision. Q. I understand you did not make the decision. So far as you recall, there was no area that was rolled and which you believed to be unsatisfactory which was then sealed, was there? A. I don't think it would have been sealed if it wasn't up to standard. Q. You would have noted in your diary? A. I would have, yes." 87 Mr Nugent was a plant operator by training. That Mr Nugent said that he did the best he could, and that it was not up to him to decide whether any area sealed by CSR was not up to standard, detracted from useful evidence that asphalt was not laid over wet or soft basecourse. The penultimate answer in this evidence, to which Rickard Constructions attributed great weight, meant only that if CSR laid the asphalt, the basecourse must have been up to standard. That was scarcely persuasive in the face of other evidence, and even absence of noting unsatisfactory areas in Mr Nugent's diary fell away when his evidence continued - "Q. But is it safe for us to assume from your comment that it wasn't up to you about whether the asphalt was appropriately laid, you did not closely monitor what CSR did on site? A. No, it wasn't my responsibility. Q. You did not make it your business to make observations whether the CSR work was progressing satisfactorily? A. Again, it is not my responsibility. Q. You were not aware of leaving an area ready for asphalting that you thought was poor except to the extent you noted in your diary? A. I can't recall." 88 There are other reasons why Mr Nugent's evidence was not inconsistent with defective workmanship on the part of Rickard Constructions, but supported it. 89 Mr Nugent's diary for 6 May 1999 noted, "I was instructed by Lance Woodworth of Rickard Const to spread DGB20 on saturated sub-grade", and for 8 May 1999 "Again I was instructed to place DGB20 on wet & heaving sub-grade by Lance Woodworth of Rickards [sic] Partners". The references to sub-grade must have been to sub-base; Mr Nugent said that 6 May 1999 was the commencement of the placement of DGB20. He said that he could not get the required compaction, and the material was left and reworked. He could not specifically recall further. He had no recollection of the placement of asphalt on these areas, but the instructions themselves were not indicative of concern for proper practice. 90 In his diary for Saturday, 5 June 1999 Mr Nugent recorded that he was instructed by Mr Potts "to roll a section of failed pavement between buildings 1 & 2", and that "the problem is deep seated and there was no sign of recovery. They intend asphalting on Monday". The diary for the Monday, 7 June 1999 recorded - "Asphalting started today on Bumborah Point Road side of the site. Areas to be covered are very suspect. Any failure will reflect back to Rickards site managements decision to carry on regardless."

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Mr Nugent had no recollection of the area of the site to which this referred. 92 On 19 July 1999 Mr Nugent recorded in his diary "Reworked DGB20 not up to standard. I did suggest some form of stabilising might help." 93 His evidence included - "Q. Just as a general proposition, it seems from late June through the first three weeks or so of July 1999 you were spending quite a lot of time trying to rework wet DGB 20? A. That's correct. Q. Can you recall what problem had led to the need for that work to be carried out? A. I can't recall. Q. Can you tell us what area of the site or what areas of the site were being reworked during that three week period? A. I have a fair idea of that. Western side of the sheds 1 and 2 towards, the boundary, western boundary. Q. Is it your recollection that this work was being done in preparation for asphalting? A. I can't recall that." 94 Apart from his diary entries, in a witness statement in the proceedings Mr Nugent said that in an area which he marked on a plan he saw the compacted sandstone (meaning the sub-base) "wetting up after it had been compacted" and "wet DGB20 being laid in the same area … and that that material wetted up after it had been compacted". He marked a large area to the west of Building 2, broadly part of areas in the CSR memoranda. 95 Mr Nugent's evidence as a whole, particularly through his diary entries, pointed to wet sub-base and basecourse and to dissatisfaction, to the extent that he considered it a matter for him, extending to the placement of asphalt on wet basecourse. It did not support rectification of wet and soft areas prior to laying asphalt. 96 Rickard Constructions secondly submitted that the trial judge had failed to attribute sufficient weight, or even refer, to evidence of Mr Hulbert inconsistent with there having been defective workmanship on its part. 97 It is correct that the trial judge referred to Mr Hulbert's evidence only to say that he gave no evidence of supervision, direction or instruction by Mr Castle or anyone else speaking on behalf of Rickard Partners, as distinct from Rickard Constructions; and the trial judge said, in connection with Rickard Constructions' appreciation of good construction practice - "135 As I have mentioned, Rickard Constructions' personnel on site, apart from Mr Rickard, were not called. I draw the usual inference from the failure to call them in relation to a matter that was in contest." 98 Mr Woodworth and Mr Potts were not called to give evidence, but Mr Hulbert was. By the time Mr Hulbert commenced on the site a good deal of the asphalt wearing course had been laid. The trial judge may have failed fully to recognise Mr Hulbert's evidence, but I do not think it provided any real support for appropriate attention to the areas to which the CSR memoranda referred, or more generally for rectification of wet and soft areas prior to laying asphalt. 99 In his oral evidence Mr Hulbert agreed that there were small areas where asphalt was laid over soft base area, but said that it was only on one occasion. 100 He was taken to the CSR memorandum of 3 August 1999 (04733), which he identified as the occasion, and gave the evidence - "Q. I want to suggest you instructed CSR Emoleum to lay asphalt over the areas set out in that memorandum which were deflecting under construction equipment? A. Simple answer is Chris Potts, myself had a problem that day. It was couple of small areas and we told CSR to proceed looking at the valued judgment on it, did not see - it wasn't large area, it didn't seem - it wasn't large areas. Q. You discussed the matter with Mr Potts, did you? A. Yes, he was in attendance at the time. Q. Was it he who made the decision to instruct CSR Emoleum to asphalt over these areas? A. Best I [sic] my recollection, yes." 101 Mr Hulbert was then taken to the CSR memorandum of 11 August 1999 (07717). He agreed that he gave instructions to lay the asphalt, but said he thought it was the same area as on the memorandum of 3 August 1999. He was taken to the CSR memorandum of 12 August 1999 (07721), which he said related to the same area. It is clear from the sketches that in these answers Mr Hulbert was incorrect, and when re-examination returned to the subject he said he could really not recall and would need more time and to "draw up grid lines and references to do that". The trial judge was entitled to give his evidence little attention. 102 Rickard Constructions also relied on a memorandum from Mr Potts to Mr Rickard dated 22 September 1999, after the failure of the pavement. I infer that, with the finger-pointing then under way, Mr Potts had been asked to comment on the CSR memoranda 04731, 04732, 04733, 07717 and 07721, which he did. In his memorandum he said that one area in the memorandum of 29 June 1999 (04731) was re-worked prior to asphalt being laid, and that the remaining areas in that memorandum were "not worked as areas only small and showing minimal heaving under loads of construction vehicles". He said that all other areas in the memoranda were re-worked prior to asphalt being laid and that the re-working of the areas "was observed by Terry [Isedale] the CSR Site Supervisor". 103 The substance of the memorandum was put in a letter dated 23 September 1999 from Rickard Constructions to CSR. Someone, I infer Mr Potts, noted on copies of the CSR memoranda particulars of the reworking with references to the letter; these particulars were thus well after the event, after the failure, and no more valuable than the assertions in Mr Potts' memorandum. 104 In the finger-pointing game, the letter of 23 September 1999 had been preceded by a letter from CSR to Rickard Partners dated 1 September 1999, which drew attention to the CSR memoranda and the letter of 1 July 1999 as raising "continual concerns that the softness of the base would be a causal factor in the event of pavement failure"; and by a letter from CSR to Rickard Partners dated 10 September 1999 which included - "As you are aware during construction of the works we frequently sought your direction re soft spots and deflections in the base and were advised to pave over these areas by your site representative in most instances. Some of the soft areas were reworked whilst we were on site prior to asphalt being placed and our site team did not observe compaction testing of the reworked areas. These soft and deflecting areas covered a significant proportion of the job as evidenced by the gross failure of the pavement as soon as it was opened to traffic." 105 The assertions in Mr Potts' memorandum do not carry much weight. It should be remembered that Mr Rickard gave the evidence earlier set out, that Rickard Constructions took a commercial decision to go ahead with laying asphalt despite the "very suspect state" of areas of which CSR warned. 106 The trial judge referred to what he called warnings by CSR not only for knowledge in Rickard Constructions of good construction practice, but also as part of the empirical evidence for sealing over wet basecourse material, see his [142] set out above. As a third strand, Rickard Constructions submitted that the trial judge was in error in seeing a correlation between the areas described in CSR's warnings and the failed sections of some of the pavement, and that the support his Honour found in his [142] was incorrect. 107 Mr Peter Waddell, a geotechnical engineer, plotted in hatching on a plan of the site the "areas of concern" in the CSR memoranda 04731, (two areas), 04732 (three areas), 04733 (seven areas), and 07721 (one area). There was inevitable approximation in the areas. The trial judge did not in his [142] specifically identify his source for the greater but correlative failed sections of some of the pavement. Rickard Constructions suggested, I think correctly, that it was a plan of the site prepared by Rickard Partners on which were marked Benkelman beam tests made after the failure of the pavement and, by hatching, "damaged pavement". There was a significant correlation between the hatched areas on the Waddell plan and the hatched areas on the Rickard Partners plan. 108 Rickard Constructions submitted that, from a tabulation by Dr Brian Burman of the Benkelman beam test results, the Rickard Partners hatching was not a correct representation of the areas of failure as revealed by the Benkelman beam tests. Dr Burman marked on a plan of the site greater areas as the areas revealed by the tests as areas of failure. 109 The Rickard Partners hatching was not explained beyond what appeared on the plan, but "damaged pavement" does not suggest areas of failure as revealed by the Benkelman beam tests. It suggests perception of damaged areas, the immediate and visible damage. The plan contained two sets of information, the perceived damaged areas and the results of the Benkelman beam tests from which underlying failed areas could be derived. The Rickard Partners hatching was evidence of the perception, perhaps by Mr Hails as the person named on the plan, of the damaged areas, even if the Benkelman beam tests indicated more widespread failure, and although the person who perceived and marked the hatching on the plan was not expressly identified it was entitled to some weight. It was an available basis for the correlation seen by the trial judge, a correlation from perception apart from the test results. The trial judge recognised that the failures were greater in extent that the areas identified by CSR, and did not rest his decision on the correlation but described it as supportive. He was entitled to do so. 110 Rickard Constructions' submissions did not grapple with the trial judge's finding that there was defective workmanship in sealing over the basecourse without re-testing. The last compaction testing by Jeffery & Katauskas of basecourse for the pavement area was on 21 June 1999. At least half the asphalt wearing layer was laid after that date, and on Rickard Constructions' own case parts were laid after re-working suspect areas by tyning and aerating or after removal and replacement of material. The original compliant compaction would have been disturbed. There was no assurance, without testing, that the correct compaction had been re-achieved. There was no re-testing. 111 The Jeffery & Katauskas letter of 3 May 1999 did not expressly refer to re-testing of saturated or disturbed sub-base, and so was not a pointer to re-testing of saturated or disturbed basecourse. Rickard Constructions was nonetheless obliged to achieve the specified compaction, and the overriding obligation of good workmanship meant that it could not rely on a satisfactory compaction test when the material had thereafter been disturbed; that would be absurd. And the circumstances were not just of disturbance; they were of water-affected basecourse, known to Rickard Constructions to impact on the strength of the material and to make sealing by the asphalt wearing layer bad practice. 112 On the evidence as a whole, the trial judge was well entitled to find that Rickard Constructions permitted the asphalt wearing layer to be placed over the basecourse while it was excessively wet, creating the conditions for the failure. No error has been shown in his finding, which in my opinion was sound. 113 As the remaining strand, Rickard Constructions drew attention to evidence given by Mr Thom that with DGB 20 basecourse a very modest amount of water increasing the moisture content following compaction could cause "pore pressure problems", even the slight moisture increase of an overnight dew. At least so far as relevant to defective workmanship, I think its submission was to the effect that it therefore could not be reasoned from the failure of the pavement by the mechanism found by the trial judge that the basecourse had been excessively wet when the asphalt wearing layer was applied; and also that it could not be accused of defective workmanship if it had dealt in a normal manner with material which it could not be expected to know was particularly susceptible to moisture. 114 There was other evidence that DGB20 was susceptible to moisture, although Mr Jeffery pointed out that all materials were susceptible to moisture; this was hardly unknown to Rickard Constructions, particularly when Mr Rickard had relevant expertise. Mr Jeffery also said that he had "never heard or read of" an overnight dew case, and that it would need to be a substantial amount of dew and "[y]ou would need to be in a relatively moist condition in the first instance". Indeed, Mr Thom's evidence when placed in context was less impressive than might at first sight appear; he explained that the dew of which he spoke was added to an already high moisture content and "was sufficient to put it over the edge". 115 The evidence before the trial judge was not of basecourse pushed over the edge by a minor increment in moisture, but of basecourse wet, sometimes described as saturated, by rainfall and excessively wet or soft. Rickard Constructions itself said that it reworked or removed and replaced basecourse because it was too wet for the laying of asphalt. The trial judge's finding can not reasonably be undermined by contemplation of a heavy dew, and the defective workmanship found against Rickard Constructions did not lie in dealing in a normal manner with material of whose particular susceptibility to moisture it was unaware. 116 In my opinion, no error has been shown in the trial judge's finding of defective workmanship. Clause 1 of the exclusions was engaged, because there was defect in workmanship creating the conditions that caused the failure.

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(b) Application of the exclusion 117 Rickard Constructions' written submissions did not overtly contest the trial judge's construction of cl 1 of the exclusions, and only addressed proof of costs. Its oral submissions effectively contested the construction of the exclusion. 118 Rickard Constructions accepted that a finding of defective workmanship in the pavement would mean that it could not recover the "cost of repairing, replacing or rectifying" the pavement ("costs A"), and would leave it with only the recovery expressed by the "costs of loss or damage caused directly by" the defect in workmanship ("costs B") less the "costs which would have been incurred in" rectifying the defective workmanship immediately prior to the loss or damage occurring ("costs C"). 119 It submitted that costs B could be the same as costs A, and in the present case were. And it submitted that costs C were less than those costs because immediately prior to the failure of the pavement it could have been repaired or rectified simply by allowing the materials to dry out (at no cost) or by removing the asphalt wearing layer, working the material so as to reduce the moisture, re-compacting and re-asphalting (at less cost, or so Rickard Constructions said). 120 The policy was a contract works policy. The insuring clause indemnified Rickard Constructions against loss of or damage to Insured Property, being the contract works and relevantly the pavement. It did not insure defective workmanship by the contractor, with recovery for the costs of making good the defect in workmanship in the Insured Property. That was made plain by the exclusion of costs A and the deduction of costs C. There could be different recovery of costs B, that it was different being made clear by the restriction to loss or damage "caused directly by" the defect in workmanship. The loss or damage the subject of costs B was not that there was the defect in workmanship in the Insured Property. 121 An illustration may assist. The contractor is to construct a building. Apart from any question of defective workmanship, if storm activity breaches the building after lock-up and rainwater causes damage, there may be indemnity against that loss or damage. Bringing in a question of defective workmanship, if the window flashing is defectively installed and rainwater enters the building and causes damage, the contractor can not recover the costs of rectifying the building (costs A), but may be able to recover the costs of the loss or damage from water entry (costs B) less the costs which would have been incurred in rectifying the faulty flashing (costs C). Why less costs C? Lest in recovery of costs B the contractor is paid for doing what it should have done to rectify the defective flashing. 122 Rickard Constructions did not assert an equivalent to the water damage, but said that it could recover for the equivalent of the costs of rectifying the building less a costs C. I do not think that is correct. It is not necessary, as Rickard Constructions' submissions seemed to assume, to give the exclusion clause a construction whereby a costs B had to be found - in its submission, the costs of repairing, replacing or rectifying the pavement. Rickard Constructions' difficulty was that, on the facts of this case, there was not a costs B, or at least none which it put forward. 123 It is not necessary to consider whether the trial judge was correct in not accepting for costs C drying out as a method of rectifying the defective workmanship immediately before the occurrence of the loss. 124 In my opinion, the appeal against the judgment for Allianz should be dismissed.

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The claim as assignee of Mayne's causes of action against Rickard Partners 125 As I have indicated, because the trial judge held that the assignments on which Rickard Constructions relied were ineffective, and refused the application by Rickard Constructions to join Mayne Nickless as a plaintiff claiming in its own right, the trial judge did not deal with liability of Rickard Partners to Mayne. The prior question is whether Mayne had a cause of action to assign. 126 The contractual position vis-à-vis Mayne must first be ascertained. 127 Rickard Partners was engaged to design the pavement by Container Park. The design had been completed before the Business Purchase Agreement of 4 January 1999. However, it is plain enough that Rickard Partners' role in connection with the construction of the pavement did not come to an end with the design as it was as at early December 1998. It thereafter reviewed the design; it had engineers on site; it received the Jeffery & Katauskas test results; and, whether or not in relation to the work of laying the layers of the pavement, it must have been exercising some kind of supervision over what was occurring on the site - otherwise it would not have had engineers on site. There was, of course, work other than the laying of the sub-base, basecourse and asphalt wearing layer, such as the buildings, drainage and retaining walls. That Rickard Partners' role went beyond design of the pavement is to be expected when in the beginning Mr Rickard was asked by Mr Sweeney to organise design and construction; although how it came about was unclear, that brought some kind of "package" of design and further involvement by Rickard Partners and construction by Rickard Constructions.. 128 It should be concluded, in my view, that as at 4 January 1999 there was an executory agreement between Container Park and Rickard Partners within the transfer obligation in the Business Purchase Agreement. It was a contract for design still being performed to the extent of review in the light of the testing of the elastic modulus of the sub-base, and for an ongoing role in the construction of the pavement. 129 There was no evidence of an assignment or formal novation, as contemplated by the Business Purchase Agreement, catching a contract between Container Park and Rickard Partners (or indeed the Rickard Constructions contract of 23 April 1998). Assignment was not proved; at best an agreement to assign was proved, but Container Park was not a party to the proceedings and that was insufficient for Mayne (strictly, Mayne Nickless) to sue on the contract in its own name, let alone for Rickard Constructions to sue as assignee from Mayne. 130 Rickard Partners knew that Mayne Nickless had replaced Container Park, at the least through Mr Rickard and, as I would infer, from the attendance of representatives of Mayne Nickless at the site meetings, and continued to perform the contract. There was no evidence of Rickard Partners charging Mayne Nickless, or anyone else, for its services, but in my opinion it should nonetheless be found that from their conduct there came into existence a contract between Mayne Nickless and Rickard Constructions. The evidence was scanty, but it should be inferred that Mayne Nickless was treated by all of Container Park, Rickard Partners and itself as having stepped into the shoes of Container Park, and that Rickard Partners was not acting gratuitously as regards Mayne Nickless but on a basis that it was to be paid. 131 There could have been no more than a simple contract between Rickard Partners and Mayne Nickless, leaving the fate of the contract with Container Park obscure, or there could have been a tripartite novation. However, a novated contract is a fresh contract, distinct from a contract by transfer of rights and obligations by assignment (see Olsson v Dyson (1969) 120 CLR 365 at 388 per Windeyer J). I do not think it matters whether there was a simple contract or a novation, and will call it a novation. I do not think the novation put Mayne in the shoes of Container Park for all purposes. The design had been completed, notwithstanding that there was the later review. The contract for performance of the Works had been entered into, and the specification and the quality control document for the performance of the Works were in place. The novated contract was a contract for Rickard Partners' ongoing role in the construction of the pavement, relevantly taking up the rights and obligations which remained to be discharged. 132 Rickard Constructions' submissions were in regrettable generality. They amounted to submissions that Rickard Partners was in breach of contract or in breach of a duty of care because - (a) the specification and the quality control document did not provide for a required moisture content (in the sense of degree of saturation) for the sub-base or base course, or require testing for moisture content immediately before the asphalt wearing layer was laid ("the specification case"); and

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(a) The specification case 134 There arise for consideration specification cases - · of breach by Rickard Partners of a contract with Mayne; · of breach by Rickard Partners of a duty of care owed to Mayne. 135 For the reasons which follow, in my opinion breach of contract was not established, and neither a relevant duty of care nor breach of a duty of care was established. 136 Going first to breach of contract, it may be accepted that it was a term of the contract between Rickard Partners and Container Park, and of the novated contract between Rickard Partners and Mayne Nickless, that Rickard Partners would exercise reasonable care and skill in the provision of the engineering services which it undertook to provide. 137 The novated contract came about no earlier than 4 January 1999, probably at a later time. The specification and quality control document were in place, and governed performance of the Works, prior to any novation. Although there was the review of the design in the further design document dated February 1999, when by a memorandum dated 22 April 1999 Rickard Partners sent to Rickard Constructions "final design of Asphalt pavement" the pavement composition was as it had been as at December 1998; there was no re-design, and there was no further attention to the specification or the quality control document after the novation. If there was a failure in the exercise of an engineer's reasonable care and skill in relation to moisture content or testing for moisture content in the specification and the quality control document, it had occurred prior to the novation. 138 I doubt that there was a continuing obligation to consider and rectify any deficiency (if there were a deficiency) in this respect. The contract had been let and the works were under way, and the review which occurred was because in the course of the works testing of the elastic modulus of the sub-grade brought a particular need; it was not an occasion of general review of the specification for the construction of the pavement or testing by way of quality control. Thus I doubt that, under the novated contract, Rickard Partners was under an obligation to Mayne Nickless to consider and rectify any deficiency in the specification or the quality control document in relation to moisture content or testing for moisture content. 139 Even if there were such an obligation, I do not think it was established that there was failure in the exercise of an engineer's reasonable care and skill in this respect; and so there was no failure as regards Mayne Nickless. Rickard Constructions' submissions at the trial included a specification case, but the trial judge did not clearly deal with it in relation to Rickard Constructions' direct causes of action against Rickard Partners. It is appropriate to go to the evidence in a little detail. 140 Rickard Constructions relied on the evidence of Dr Burman, whose report included that moisture problems had been experienced in the 1980s with highway pavements of unbound basecourse construction, and - " 3.2.2 Current Practice for Highway Pavements The outcome has been that design for unbound granular bases has become more aware of the effect of elevated saturation levels on pavement performance. Stricter controls of moisture condition for unbound pavements were introduced by Main Roads Department of Queensland from the early 1990's and, for example, include the following ( Ref 16 ): · All points in the pavement shall have a moisture content such that the degree of saturation is less than 65 to 70%, depending on the particular material type · A section of a pavement may have a moisture content greater than that represented by the relevant degree of saturation limit for the purpose of construction only, provided that the section of pavement is dried back to the requirement prior to covering with the next layer of pavement or surfacing · The degree of saturation test shall be performed within a period of 6 hours prior to the placement of the next pavement layer or the surfacing Roads and Traffic Authority of New South Wales (RTA) also introduced moisture controls for unbound pavements with the following requirements applicable since 1991; · The moisture content of the material shall be adjusted so as to permit the specified compaction to be attained at a uniform moisture content which is within the range 60-90 percent of the standard optimum moisture content (C13.3) · Compaction … shall be completed promptly after spreading to minimise the possibility of rain damage (Cl3.3) · The Contractor shall maintain adequate draining of all working areas throughout the period of construction to ensure run-off of water from pavement areas without ponding (Cl 3.6) · Any pavement layer which has been placed by the Contractor to the specified compaction but subsequently wets up so that the moisture content exceeds the standard optimum moisture content shall be dried out and uniformly re-compacted and re-trimmed to achieve the specified compaction and tolerances (Cl 3.7) The provisions of these specifications apply to normal highway loadings and it would be prudent that they be considered in designs where the higher intensity loading conditions associated with container storage facilities are involved. In general these provisions would apply not only to DGB20 base course material but also to the sandstone sub base material." 141 Later in the report Dr Burman said - "From the documentation provided to me, I have formed the view that the design process carried out by R & P was generally satisfactory except for the specification of moisture control for base and sub base materials. In respect of the design generally, there are probably a number of issues of detail that might be queried but it is unlikely that, even taken together, they could have impacted the design significantly. At worst, the working life of the pavement may have been reduced or the level of maintenance excessive.

[38]

Specification of moisture conditions, for compaction of base and sub base materials, appears to have received little consideration as part of the design process. The base course moisture specification was not included in the initial design documents but at the time of construction appears to have been simply for a value less than Standard optimum moisture content. Given the sensitivity of unbound materials to moisture as described in Section 3.2 above, this specification was inadequate. In my view this was a serious flaw in the design produced by R & P." 142 This was evidence of attention to moisture control in Queensland Main Roads and NSW RTA specifications, which it would be "prudent" to consider. The Queensland Main Roads controls of moisture conditions did address degree of saturation immediately prior to placement of the next layer of material. But the NSW RTA controls did not, and were in terms of attaining specified compaction at a given standard optimum moisture content and thereafter maintenance of drainage and recompaction if the material subsequently "wets up". This was, as another of the experts agreed, in any event good construction practice. The NSW RTA moisture controls did not go as far as the specification case required; as evidence of acceptable practice, they told against the Queensland Main Roads controls being the measure of what reasonable care and skill required. 143 Dr Burman's references to the two sets of controls of moisture in any event fell short of evidence of engineering practice in this respect in the design of and specification for pavements, highway or otherwise. Dr Burman agreed in cross-examination that it was generally good construction practice - in context, even if unspecified - that if moisture level increased such as by rainfall and inadequate drainage, action should be taken to reduce it. 144 There was other evidence going to engineering practice in relation to specification of attention to moisture control. 145 Rickard Constructions relied on evidence in the cross-examination of Mr Thom. It was a mixed bag; overall, I do not think it supported the specification case. 146 Mr Thom said, after reference to "the RTA standards" measure of moisture, that it was "normal not to deal with a degree of saturation, it is normal to deal with a percentage of the optimum moisture content because those two numbers are related". 147 His evidence continued - "Q. And if the designer wants the moisture limited because the material is sensitive to volume characteristics, the specification should say so, correct? A. They don't normally say to [sic]. Q. But it should say so, correct? A. Yes. Q. And they don't normally say so because in the typical run of the mill, pavement which does not deal with very heavy loads, it usually doesn't matter, correct? A. Well what do you mean by 'heavy loads'? You talking about container terminals or just ordinary --- Q. This forklift? A. This forklift okay. Q. Do you agree? A. Heavy loads, yes. Q. So that's why usually it's not done, correct? A. Well it is done on highway --- Q. I'll come - you're referring are you to the RTA specification? A. Yes. Q. But you agree that if the designer considers the base or subbase or some other material chosen for the design is sensitive to the volume characteristic, it would specify a limit to the moisture? A. Yes." 148 And again - "CORSARO: Q. You agree with me, bearing in mind the designer has to take into account how sensitive the material might be to moisture change, if the designer is concerned about moisture change following compaction, the specification should limit the moisture following compaction, correct? A. Yes." 149 And again - "Q. It is clear to you that something more should have been inserted in the specification if the designer considered the DGB to be sensitive to pore pressure built up by subsequent wetting after compaction of the base? A. It is not always done. It is not a standard practice.

[43]

Q. A measure of the degree of saturation? A. You get that when you do the density testing. It comes with the moisture content, because you need to do the moisture content testing to be able to determine the dry density, so it comes as a matter of course." 152 And again - "Q. When you have been talking about limiting moisture, that's the sort of specification that one finds, namely compact 2X, and then limit the moisture to plus or minus something? A. Not for fine crush rock [sic], no." 153 The effect of this evidence, in my view, was that Mr Thom thought it prudent to specify control of the degree of saturation, but said that it was not the practice to do so because the moisture content revealed in the compaction testing enabled the degree of saturation to be ascertained ("it comes as a matter of course"); and it was not the practice even to limit moisture content after compaction. 154 When asked about a testing regime, Mr Jeffery also spoke of the compaction testing giving moisture content, and regarded proof rolling prior to sealing as suitable testing (the quality control document did provide for proof rolling) - "Q. You knew, did you, that for the purposes of guarding against that type of failure, any testing regime should include testing of compacted DGB20 prior to sealing? A. Well, you should compact DGB20 - you should test DGB20 prior to sealing. Firstly, you need to ensure that your density is achieved, and specification density. Implicit in that you must have a moisture content to do your density test. That gives you a moisture content reading. As mentioned before, I am a strong advocate for proof rolling prior to AC placement. Proof rolling with an appropriate heavy roller, and particularly a vibrating roller if it is possible, but a load also that is comparable to the loads that have been in the pavement, because this will physically show up heaving and movement of the pavement. … "Q. It is important, was it not, that the testing regime for the pavement include tests to control moisture before sealing, correct? That's following compaction? A. They need not have been tests, they could have been proof rolling - if I can answer it. Density tests were being completed on the base course. If they were complying tests, and the tests that were completed were substantially or well dry of standard optimum moisture content, if sealing of the pavement had occurred shortly afterwards there would have been no need for any further testing, although I would have recommended that the area be proof rolled. If there be a long delay between that occurring, and particularly if there are conditions such as wet weather, one should further check. The way I would prefer to check would be heavy proof rolling, because you cover a large area rapidly, and it shows up quite obviously with heaving and movement." 155 Mr Andrew Leventhal gave evidence which was not specifically relied on by Rickard Constructions. He spoke of what the specification should tell the contractor to do, but without great definitude; it was really evidence that the contractor should be told to achieve specified requirements, rather than assistance on specification of moisture control - "Q. And may I ask you whether you'd agree that if compacted DGB subsequently wets up, for whatever reason, overnight moisture, then what has to happen is that it has to be dried out again, it has to be compacted again and it has to be tested again before sealing? A. I think that you want to have the material prior to sealing meeting the specification requirements, and therefore you have to do whatever is necessary to demonstrate that the material has met the specification requirements, and yes I'd agree with you, more than likely if it does wet up then you would have to make sure that it does dry back, and it's not only - and it's important it's the whole layer. Q. Now if you were aware that the DGB20 material in this project was going to be placed in two layers, I take it you would say to his Honour that the same procedure should follow in connection with the first layer before placing the second layer. I put that badly but hopefully you understand the thrust of the question? A. The end result is that it applies to all pavement layers. The RTA specification uses those words. It's not only one layer, and at the end of the day it's the whole structure of the pavement that has to achieve those situations prior to sealing and that's the logic. How it's achieved is obviously up to the contractor. Q. And the contractor should be told to achieve it, correct? A. Should be specification that does that, yes." 156 And again - "Q. And may I ask you to agree with the proposition that if you were giving advice in connection with how the basecourse should be placed for a pavement carrying heavy loads of the type that we know this pavement had to carry, you would have advised the contractor wouldn't you to have rolled, tested before placing the next layer, and ensured some sort of dry back, is that correct? A. And I would expect - yes, that would be an appropriate approach and I would expect a specification would run down the same lines. Q. And --- A. Particularly you will - particularly a process of rolling, testing and drying back is necessary, yeah. Q. Would you have --- A. It may not be the only way to specify how the pavement might be constructed." 157 Mr Treweek's evidence included - "Q. It would have been prudent, wouldn't it, to have the base course tested before sealing to ensure that its moisture content rather than its density, the moisture content was such that the degree of saturation was within the limit that made it not prone to failure by pore pressure build up once subject to heavy load? A. Can I answer that two ways. Firstly, in hindsight, yes, it would have been. At the time of construction it wasn't common practice to do moisture profiling on pavements on any of the jobs I have been involved in and subsequently I did a check with other constructors to see what specifications were applied on other similar pavements and they had never completed that process either." 158 On the evidence as a whole, I do not think it was established that failure to specify a required moisture content (in the sense of degree of saturation) and testing for moisture content immediately before the asphalt wearing layer was laid was contrary to accepted engineering practice, or was a failure in the exercise of an engineer's reasonable care and skill. Prudence is not the same as the exercise of reasonable care and skill, and that some engineers thought it would have been prudent did not mean that there was a failure of reasonable care and skill. The standard of care of a professional is "not determined solely or even primarily by reference to the practice followed or supported by a responsible body of opinion in the relevant profession" (Rogers v Whittaker (1992) 175 CLR 479 at 487), but there were reasons why accepted engineering practice did not go as far as the specification case required. Good construction practice required that if moisture level increased, such as by rainfall and inadequate drainage, action should be taken to reduce moisture content; and working the material meant re-compaction, for which testing would show moisture content. 159 I go then to breach of a duty of care owed to Mayne. 160 As to design of the pavement, Mayne Nickless was in the position of a subsequent purchaser. It purchased the lease of the container depot and the contract of 23 April 1998. I do not think that, as the engineer designing the pavement under a contract with Container Park, Rickard Partners owed to Mayne Nickless, let alone MPG Logistics, a duty of care in the preparation of the specification and the quality control document. 161 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2003) 216 CLR 515 did not turn on the engineer's duty of care to the original owner. Independently of that, it was held by Gleeson CJ and Gummow, Hayne and Heydon JJ at [31]-[33] that the subsequent purchaser was not vulnerable to the economic consequences of any negligence by the engineer. 162 Their Honours said of ability to protect from economic loss (at [31]) - "Neither the facts alleged in the statement of claim nor those set out in the Case Stated show that the appellant was, in any relevant sense, vulnerable to the economic consequences of any negligence of the respondents in their design of the foundations for the building. Those facts do not show that the appellant could not have protected itself against the economic loss it alleges it has suffered. It is agreed that no warranty of freedom from defect was included in the contract by which the appellant bought the land, and that there was no assignment to the appellant of any rights which the vendor may have had against third parties in respect of any claim for defects in the building. Those facts describe what did happen. They say nothing about what could have been done to cast on the respondents the burden of the economic consequences of any negligence by the respondents. The appellant's pleading and the facts set out in the Case Stated are silent about whether the appellant could have sought and obtained the benefit of terms of that kind in the contract." 163 Their Honours said that it was not alleged that the defects in the foundations could not have been discovered, or alleged or set out in the case stated that it could not have protected itself from the economic loss; the contract of purchase was silent about risk of defects; and if it was relevant, there was nothing bearing on whether the purchase represented a significant investment for the purchaser. 164 McHugh J said (at [111]) - "There are many means of protection open to first owners and purchasers of commercial buildings to cover the risk that the building may have latent defects. The first owner can enter into contractual arrangements with those involved in the construction. Those arrangements can include warranties concerning the fitness of the building for the purpose for which it was constructed. The first owner can supplement the contractual arrangements with those directly involved by obtaining similar warranties from directors and other persons connected with the construction of the building. The first owner can employ other professionals to check the work of those directly involved in the project. Subsequent purchasers can protect themselves by entering into similar arrangements with their vendor. They can take an assignment of the vendor's rights (if any) against the builders and others. They can minimise the risks of loss from physical defects by obtaining expert investigations of the building." 165 In the present case Mayne Nickless could have investigated the arrangements for the construction of the pavement under the construction contract and related executory contracts which it was acquiring together with the lease of the container depot. It could have had expert appraisal of the design. So far as appears, it did not do so. It did take an indemnity from Container Park; it could have protected itself by including in the complex Business Purchase Agreement recourse to Container Park if the container depot turned out to have defects. The acquisition of the lease of the container depot and its appurtenant contracts was but a part of a much larger purchase of Container Park's Sydney business (and also its business elsewhere). I do not think that there was the vulnerability in Mayne now regarded as an important feature of a duty of care to avoid economic loss, or any other feature sufficient for a duty of care owed to it by Rickard Partners independently of the contractual relationship which arose by novation. 166 If Rickard Partners did owe a duty of care to Mayne, discharge of the duty called for the exercise of reasonable care and skill in the design of the pavement, relevantly in relation to moisture content or testing for moisture content in the specification and the quality control document. For the reasons I have given in considering breach of contract, breach of the duty of care was not established. 167 In my opinion, Mayne did not have a cause of action against Rickard Partners by way of the specification case.

[55]

159 Thus, the evidence goes nowhere near making out the case, relating to supervision, that has been pleaded and particularised. Nor does the evidence show that the limited duties of a supervisory nature undertaken by Rickard Partners (those referred to in the preceding paragraph) were carried out negligently." 173 There is insufficient basis in the evidence for the contract requiring more than the provision of services as so described by the trial judge. It was not shown that there was want of due care and skill in the limited extent of supervision to which the trial judge referred. 174 The thrust of Rickard Constructions' submissions was that Rickard Partners' obligation in supervision of the construction of the pavement extended to advising Rickard Constructions of the sensitivity of the basecourse material to moisture content and of the need to ensure a satisfactory moisture content by testing immediately before laying the asphalt wearing layer, and to ensuring that there was such testing and that the basecourse was suitable for sealing. 175 It was not a good start for the supervision case that Mr Rickard, the person in overall charge of both Rickard Constructions and Rickard Partners and called by Rickard Constructions, said in his evidence that Rickard Partners' engineers - " … did not go to the site specifically to inspect the pavement work that was being done. The BR engineers went to the site to deal with other issues, not to supervise the pavement layer work being done. Those other issues included drainage and finished pavement levels." 176 Rickard Constructions' presence on the site was explicable from the other aspects of the Works, such as drainage. There was supervision to the extent of seeing to adherence to the testing regime in the specification and the quality control document. If Rickard Partners had undertaken a wider supervisory role, evidence of it doing so could have been given; it was not. 177 A good indicator of Rickard Partners' role, in my view, is the occasion of calling Jeffery & Katauskas to the site at the end of April 1999, leading to the letter of 3 May 1999. According to Mr Rickard, whose evidence of the occasion was not fully accepted by the trial judge, he communicated with Jeffery & Katauskas. On the evidence which the trial judge accepted, Mr Potts called Mr Treweek to ask for his attendance. Mr Castle was with them when Mr Potts and Mr Treweek spoke on the site, but Mr Treweek said that he was "basically an observer". When advice was sought because the sub-base was rain-`affected, then, it was sought by Rickard Constructions. Rickard Partners did not take up a supervisory role, even by calling Jeffery & Katauskas to the site. 178 Consistently with this, the CSR memoranda recorded instructions to lay asphalt over suspect basecourse given by Mr Potts, without any suggestion that Rickard Partners had a role in deciding what should occur. What supervisory services were required of Rickard Partners must be inferred, and when over many months it did not take a role beyond the limited extent of supervision to which the trial judge referred, when so far as the evidence shows it was not asked to do more, and when Rickard Construction made its own decisions, there is little basis for inferring that Rickard Partners had undertaken to do more. The division of responsibilities, stemming from the request by Mr Sweeney to Mr Rickard, had been set long before; and this brings a return to Mr Rickard's evidence, since he was the likely source of the division of responsibilities, that Rickard Partners "did not go to the site specifically to inspect the pavement work that was being done". 179 I do not think the "pavement certification" by Rickard Partners is to the contrary. It was a curious document; it was addressed to Rickard Constructions, and read - "RE: CERTIFICATE OF OCCUPANCY FOR HARDSTAND AREAS AT 55 FRIENDSHIP ROAD, PORT BOTANY The final pavement certification is provided though we note that certain defective work remains outstanding on the asphalt surfacing. Pending same, a final certification from the supervising geotechnical engineer Jeffery & Katauskas will be received. Hugh B Gage Pty Ltd the appointed quantity surveyors have certified that the works have achieved 'Practical Completion'. We would suggest you formally notify Port Botany Container Park Pty Ltd that 'Practical Completion' has been achieved." 180 What was being certified was unclear. Jeffery & Katauskas was not the supervising geotechnical engineer, see later in these reasons, and so far as appears did not provide a final certification. The document was not explained, other than by Mr Rickard's evidence that he decided that Rickard Partners "could certify completion of the works for [Rickard Constructions]". This suggests the end of the works, not proper performance of the works, although how it fitted in with the quantity surveyors certifying practical completion is not clear. 181 I go then to breach of a duty of care owed to Mayne. 182 Rickard Constructions submitted that Rickard Partners owned Mayne a duty to take care to avoid economic loss if the pavement failed. In my opinion, that can not be accepted. 183 Rickard Partners' obligation in contract towards Mayne under the novated contract was to exercise reasonable care and skill in the provision of the services it undertook to provide. It may have come under a concurrent duty of care owed in tort, see for example Voli v Inglewood Shire Council (1963) 110 CLR 74 at 84 and Brickhill v Cooke (1984) 3 NSWLR 396 at 401. Where the basis of the duty of care is a contract under which particular services are to be provided, the duty of care is ordinarily to exercise reasonable care and skill in the provision of the services. It may be that in some cases a wider duty of care can arise, see Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 although compare Heydon v NRMA Ltd (2000) 51 NSWLR 1, but this is not such a case. 184 While a duty of care should not be "formulated retrospectively as an obligation purely to avoid the particular act or omission said to have caused loss, or to avert the particular harm that in fact eventuated" (Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 at [192] per Gummow and Hayne JJ; see also per McHugh J at [106]), there must be something in its formulation indicating its scope. As was said by Hayne J in Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254 - "102. Because the extent of a duty falls for decision in relation to 'concrete facts arising from real life activities' it will not always be useful to begin by examining the extent of a defendant's duty of care separately from the facts which give rise to a claim. That may be possible, and useful, in a simple case (like motorist and injured road user) where the duty of care and its content are well established. In other cases, however, it may lead to an insufficiently precise formulation of the duty which obscures the issues that require consideration. That lack of precision may lie in formulating the duty too narrowly: for example, by asking did the defendant owe a duty of care to fence the part of the cliffs in its reserve from which the plaintiff fell? It may also, as in this case, lie in formulating the duty too broadly: for example, by asking did the defendant owe any duty of care to the plaintiff? 103. In Sutherland Shire Council v Heyman , Brennan J pointed out that 'a postulated duty of care must be stated in reference to the kind of damage that a plaintiff has suffered and in reference to the plaintiff or a class of which the plaintiff is a member'. Ordinarily it may be expected that it will be sufficient to state the duty of care by reference to these two matters: the kind of damage suffered and the class of which the plaintiff is a member. Even that, however, may not suffice in some cases. 104. In cases such as the present, where the extent of the relevant duty is not clear, it is useful to begin by considering the damage which the plaintiff suffered, and the particular want of care which is alleged against the defendant. Asking then whether that damage, caused by that want of care, resulted from the breach of a duty which the defendant owed the plaintiff, may reveal more readily the scope of the duty upon which the plaintiff's allegations of breach and damage must depend. 105. The complaint made by the respondents in this case was that the first respondent suffered personal injury because the appellant did not leave the car park lights on when he was leaving the shop where he worked. The complaint was not that the appellant should have, but did not, control access by the assailants to the premises it occupied. It is important, then, to appreciate that the allegation of breach (and, by necessary implication, the scope of the duty alleged) concerned the state of the premises. It was not about third parties coming on to, or remaining on, the premises. The allegation therefore invites attention to the connection between the state of the premises and the assault by those third parties."

[57]

The claim as assignee of Mayne's causes of action against Jeffery & Katauskas 190 Rickard Constructions submitted to the effect that Jeffery & Katauskas should have advised as to the susceptibility of the basecourse material to moisture and the need to control, maintain and test for moisture prior to sealing ("the advice case"). It said in particular that, having commented in relation to basecourse in the letter of 3 May 1999, Mr Treweek should have gone further in these respects. This advice case appeared to be put forward both for the claim as assignee of Mayne's causes of action against Jeffery & Katauskas, as a case that Jeffery & Katauskas should have advised Mayne, and for the direct cause of action against Jeffery & Katauskas, as a case that it should have advised Rickard Constructions. 191 Bound up in the advice case was a complaint that the trial judge had erred when, in granting leave to amend the particulars of negligence, he restricted the relevant particulars to what was said and not said in the letter of 3 May 1999. (The ground of appeal was wider; this was the complaint in the submissions.) But Rickard Constructions' submissions disregarded that the trial judge had also refused leave to add to the particulars that Jeffery & Katauskas had failed to carry out or recommend that there be carried out tests of moisture levels by reference to optimum moisture content or appropriate saturation levels (particular (d)) and had failed to carry out or recommend that there be carried out tests of moisture levels immediately before the asphalt layer was placed (particular (e)). The submissions in part took up a basis for which leave had been refused. Jeffery & Katauskas drew attention to this, while responding to Rickard Constructions' submissions. 192 As to the restriction to the letter of 3 May 1999, the trial judge said (at his [179]) that although the particulars were not in terms confined to the 3 May 1999 letter "it appeared from what was said in argument that they were intended to be so limited". It is sufficient that, for the reasons to which I will come, I do not think that apart from the 3 May 1999 letter the advice case was made out. 193 As to the refusal of leave to add to the particulars, the trial judge said - "181 The third and fourth proposed particulars are in a different category. The first of them was not foreshadowed in opening. It does not appear to be pressed. In any case, it would appear to allege an obligation to do something far beyond the terms of the retainer: a consideration of particular force bearing in mind the matters to which I have referred in para [168(3), (4)] above. The case is not one that Jeffery & Katauskas should be required to meet relying only on the evidence that has been adduced. In this, it may be contrasted with the case (limited in the way that I have just described) under the first two proposed particulars: that case was advanced in opening and was the subject of evidence. In this case, because the issue was not squarely raised, Jeffery & Katauskas has been deprived of the opportunity to consider how to deal with it.

[59]

183 For essentially the same reasons, I refuse leave to amend in respect of the fourth further particular of breach: namely, that set out in para (e) of the particulars to para 31 in the draft third further amended summons." 194 The matters in the trial judge's [168(3)] and [168(4)] were that Jeffery & Katauskas had suggested to Rickard Partners that the design be checked, and that it had been retained on a Level 2 Certification basis with the incidents earlier described. 195 No submissions were made by Rickard Constructions in support of error in the refusal of leave to add to the particulars. The application to amend the particulars was made late in the hearing, and it was refused at least in part because Jeffery & Katauskas had not had the opportunity to deal with the matters alleged in particulars (d) and (e). The trial judge was in the best position to assess the requirements of justice between the parties, and Rickard Constructions has not attempted to show that his exercise of discretion miscarried. 196 The submissions put by Rickard Constructions in this Court to which regard can be had should therefore be restricted. However, I propose to consider the submissions without restriction; they do not, in my opinion, make out breach of duty by Jeffery & Katauskas. 197 It is appropriate now to say more of the letter of 3 May 1999. There was heavy rain in the latter part of April 1999. On 29 April 1999 Mr Treweek met Mr Potts at the site, at the request of Mr Potts. Sub-base had been laid, and had been affected by the rain. Laying of basecourse had not begun; basecourse was first laid a week or so later. 198 Mr Potts said to Mr Treweek, "We have got problems here. Can you comment on what you see as being an issue", and Mr Treweek "commented on issues where he [Mr Potts] pointed". They walked around part of the site, which had a great deal of water ponding between the two buildings, apparently discharging from the stormwater outlets from their roofs, and around some drainage pits. Mr Treweek said to Mr Potts, "You are wasting your time trying to place basecourse over saturated sub-base", and recommended that Jeffery & Katauskas view proof-rolling of the sub-base. 199 There was then discussion at a meeting at the offices of Jeffery & Katauskas, following which Mr Treweek wrote the letter of 3 May 1999 addressed to Mr Potts at Rickard Constructions. 200 The letter of 3 May 1999 began - "Further to our Thursday 29 April 1999 meeting at our offices we confirm the following points from those discussions." 201 The letter dealt with backfilling around stormwater pits and manholes and installation of underground services, and then - " 3. Proof Rolling Currently in most areas the site has been constructed to finished subbase levels. Due to recent prolonged inclement weather the exposed surface materials have become saturated. J&K recommend that after all surface water has dried off and prior to the commencement of additional fill placement that the area be heavily proof-rolled to delineate potential soft zones before placement of the basecourse layer. A 10 tonne (or larger) self-propelled vibrating smooth drum roller should traffic the entire site six times with a J&K senior representative observing the final roller pass. Any soft areas identified requiring rectification should be addressed at that time. Should Rickard Construction require expediency in their approach to enable work to recommence immediately, the saturated surface materials will need to be stripped. J&K cannot currently ascertain the depth of saturation without completing a site visit but would assume the depth to be about 75mm to 100mm. At the completion of stripping, proof-rolling would be required unless J&K were confident the stripped surface was unyielding under construction traffic loads. Regardless of the approach taken all area should be rolled under J&K supervision prior to placement of the basecourse. Any stripped surface material is likely to be too sandy to permit its reuse as the upper fill layer. A more granular fill is necessary to provide a better CBR. 4. Basecourse Any imported material should comply with the requirements of the specification or RTA Form 3051. The provider of the material should supply to Rickard Construction ' current ' NATA endorsed test reports for the material being supplied to the project; alternatively J&K can complete an independent test and, in any case, a few audit checks would be wise. We understand that the thickness of base is 150mm. In our opinion this material should be placed and compacted in two layers. This will reduce the potential of material degradation due to over-rolling and effectively improve roller efficiency, which will ultimately reduce the total time of compaction. … 6. Density test Results All outstanding density ratio non-conformances should be retested and comply with the specification. 7. Asphaltic Concrete Due to the expected heavy loads which will be applied directly on the asphaltic concrete surfacing, we recommend that independent testing be completed during placement of that material. Testing should include observation, coring to confirm layer thickness, density of the compacted mix and mix analysis tests of the supplied product. Should you require additional information please do not hesitate to contact the undersigned." 202 Save to an uncertain but limited extent to which I shortly refer, Jeffery & Katauskas was not asked to observe the proof rolling of the sub-base as referred to in para 3 of the letter of 3 May 1999. It was not asked to conduct tests of material imported for the basecourse as referred to in para 4 of the letter (the tests being for the quality of the material prior to placement, see the "audit" in the quality control document earlier described, not tests for compaction or the subsequent condition of the basecourse). It was not asked to re-test outstanding density ratio non-conformances as refererred to in para 6 of the letter. It was asked to undertake testing of the asphalt layer during placement. Rickard Constructions exercised its own judgment in the former respects. 203 Rickard Constructions submitted that Jeffery & Katauskas owed Mayne a duty to take care to avoid economic loss if the pavement failed, and was in breach of the duty of care because it failed in early May 1999 or when observing proof-rolling of the basecourse and re-working of areas to give the advice the subject of the advice case. 204 A design engineer engaged by the architect was held in Bevan v Blackhall & Struthers (No 2) Pty Ltd (1973) 2 NZLR 45 to owe a duty of care to the proprietor. Beattie J held that the facts disclosed a "duty-situation", acting on Lord Atkin's neighbour principle from Donoghue v Stevenson (1932) AC 562 (at 80-81). Developments in the law thereafter led to proximity as the guide to a duty of care, and now to the principles explained in cases such as Perre v Apand Pty Ltd (1998) 198 CLR 180 and, with particular present relevance, Woolcock Street Investments Pty Ltd v CDG Pty Ltd. 205 The evidence of Mr Jeffery was that he did not know that Mayne had any interest in the container depot until late in the construction of the pavement; that did not exclude knowledge of, for example, Mr Treweek, but Mr Jeffery had undertaken the engagement on behalf of Jeffery & Katauskas and one would expect that he would have been told of a new Proprietor. 206 Jeffery & Katauskas would nonetheless have known that there was a Proprietor, even if it did not know that Mayne had come to have that status. But it was engaged by Rickard Partners, and was engaged to provide particular and limited services: relevantly, the compaction testing as a Level 2 Certification and, in the language of the engagement conditions, advice explicitly commissioned. It charged Rickard Partners for the compaction testing it undertook, and also for particular services such as Mr Treweek's attendance leading to the letter of 3 May 1999. Its limited role had been come to with clear rejection of the greater responsibilities of Level 1 Certification. 207 This could have been ascertained by Mayne if it had enquired at the time of the Business Purchase Agreement. Whether Mayne knew that Jeffery & Katauskas, or any geotechnical engineer, was providing geotechnical services was far from clear, but beyond Mr Rickard's evidence that Mayne attended site meetings there was no evidence that it showed any interest in such matters. To repeat from earlier in these reasons, Mayne Nickless received Rickard Constructions' promise to construct the pavement in a workmanlike manner and in accordance with sound engineering practice and principles. If it had supervision in mind, Rickard Partners was in that role. 208 By analogy with the observations on Bryan v Maloney (1995) 182 CLR 609 in Woolcock Street Investments Pty Ltd v CDG Pty Ltd at [28], relevant to any duty of care owed by Jeffery & Katauskas to others was the contract defining the task it undertook. The observations of Gleeson CJ and Gummow, Hayne and Heydon JJ included that at the least the contract between the builder or engineer and the original owner defined the task which the builder or engineer undertook, and - "There would be evident difficulty in holding that the respondents owed the appellant a duty of care to avoid economic loss to a subsequent owner if performance of that duty would have required the respondents to do more or different work than the contract with the original owner required or permitted". 209 I do not think it should be held, in the circumstances I have indicated, that Jeffery & Katauskas owed to Mayne a generalised duty of care to avoid economic loss from failure of the pavement; again, at most there could be a duty to take care in the provision of the services in the task it undertook. There was foreseeability of loss to the Proprietor if the particular services were negligently provided. But that was not enough. Mayne Nickless acquired the container depot and the contract of 23 April 1998 relying, so far as it relied at all, on proper performance by Rickard Constructions of a contract which required Rickard Constructions to have testing in accordance with the quality control document, and which did not provide for supervision by anyone. There was no evidence of reliance by Mayne. Nor, for similar reasons to those earlier given, was Mayne in a position of vulnerability. It came into the picture as purchaser from Container Park in a major commercial transaction in which it could protect itself against defective construction of the pavement, whether the delinquency be by engineer, materials supplier or tradesman. In my opinion, Jeffery & Katauskas did not owe even the more limited duty of care to Mayne. 210 But if Jeffery & Katauskas did owe a duty of care, it was not established that it failed to exercise reasonable care and skill in the provision of its services. As I have noted, it was no part of the proceedings that Jeffery & Katauskas made mistakes in carrying out the compaction testing required of it. 211 I return to the letter of 3 May 1999. The trial judge accepted (at his [186]) that Mr Treweek "was asked to formalise an advice on certain points, and that is what he did in the 3 May letter". Mr Treweek's evidence bore out the view his Honour took of the occasion. The "issue" from the "recent prolonged inclement weather" concerned the sub-base. Basecourse had not yet been laid. It can readily be accepted that Mr Treweek was asked to respond, and only responded, to the concerns Mr Potts expressed at the time, and that their minds were not on moisture content of basecourse at the time the asphalt wearing layer was laid or on testing immediately prior to that time. Mr Treweek did tell Mr Potts that he was wasting his time trying to place basecourse over saturated sub-base, but that was an observation upon the sub-base and did not tell Mr Potts anything new; Mr Treweek said specifically in his evidence - "Q. In the context when you understood about the significance of moisture on this site, it was important for you to make it plain that base course of this type might be prone to failure through the build up of pore pressure if the moisture was not controlled so that it was, in fact, within acceptable limits before sealing? A. It wasn't an issue for me to comment on because it wasn't raised as being a potential issue, and I didn't say anything in relation to that." 212 The trial judge accepted Mr Treweek's evidence. There was no occasion for Mr Treweek to go further. 213 The Court was not taken to evidence of engineering practice to support that he should have gone further. Its counsel did obtain evidence from Mr Thom - "Q. Would you go to the letter of 3 May, page 6135. Assume on 29 April, you had an understanding that water might flow on the base course which you would understand was particularly susceptible to moisture following compaction even to the extent of morning dew and you had written about the base course, would you have mentioned that? OBJECTION (MR DEMPSEY); QUESTION ALLOWED. A. Yes, but it is a matter of risk, contractors risk. If they let the pavement get wet then they have got to the do [sic] extra work to dry it out. Q. Would you have advised the contractor that it's running a risk? A. Yes. Q. Look at page 6137, you will see that advice has been given about the imported material complying with the RTA specification? A. Yes. Q. If you had been giving any advice about the base course and was aware of its sensitivity to moisture would you have also made some mention of that fact? OBJECTION (MR DEMPSEY). HIS HONOUR: What factor, Mr Corsaro? CORSARO: Q. That it was sensitive to moisture. A. Yes." 214 The assumption did not meet the situation, and in any event Rickard Constructions knew it was running a risk in laying the asphalt wearing layer over wet or soft basecourse (see Mr Rickard's evidence of taking a commercial decision). It also knew that, like all materials, the basecourse was sensitive to moisture. Presumably the questions were directed to particular sensitivity ("the morning dew"). Accepting that Mr Thom would have "made some mention" of the fact that the basecourse was sensitive to moisture does not make out the advice case, and in my view fell well short of evidence that Jeffery & Katauskas failed to exercise reasonable care and skill in not giving the advice the subject of the advice case. 215 There was also evidence from Mr Leventhal - "Q. If you had gone to the site and had been asked to look at the site and you were aware that it was a site which had moisture problems because of lack of drainage or other condition? A. So we're talking challenges with surface drainage? Q. Yes. If you went to the site and you saw that this was a site that had problems because of poor drainage let's say, and you were asked to advise on how the basecourse should be placed assuming that you knew it was going to be placed in two levels, you would have advised wouldn't you some sort of procedure that would have ensured testing and dry back for the first layer before placement of the second layer, correct? A. Yes, that would be a reasonable approach. Q. And then testing and dry back for the top layer immediately before the laying of the asphalt, correct? A. Yes. Q. And would you have told the contractor that in the event that it wetted up, that it should be recompacted and retested and allowed to dry back again? A. There's an intermediate step which would have been moisture condition, and then compact." 216 Mr Treweek was not asked to advise on how the basecourse should be placed beyond the separate levels; and Rickard Constructions knew that wet material should be dried back: that was why it undertook the tyning and aerating or replacement of basecourse. When the material was disturbed it did not need to be told it should be retested for compaction, although it failed to do so. This evidence did not assist the advice case. 217 I go then to advice at other times. I can see no basis for advice other than as part of a supervisory role in relation to proof-rolling. There were occasions when Jeffery & Katauskas was recorded as observing proof-rolling; these were relied on for the submission that it should as part of a supervisory role have advised in relation to moisture content. 218 A daily site report of Jeffery & Katauskas for 18 May 1999 recorded "Proof roll pavement area west of Building 2, failed inspection required tyning and aerating". Another for 19 May 1999 recorded "Talk to Chris [Potts] re: subbase material heaving nth of Line 1, base will be removed, tyne & aerate fill material compact and reproof roll. Required by J&K". Both daily site reports were of occasions of attendance for compaction testing. The technician concerned could not recall the occasions. Jeffery & Katauskas' charges to Rickard Partners, generally only for tests at so much per test, had charges at an hourly rate for tests on 18, 19 and 20 May 1999, for nearly full days (including travel) on each occasion. There was no like mention of proof rolling in a daily site report for 20 May 1999, although there had been proof rolling on that day. These occasions were most likely proof-rolling of sub-base, not basecourse. 219 Mr Hulbert's diary for 29 July 1999 recorded proof rolling of an area prior to the tack coat spray and that "J & K checked same with CP [Mr Potts]". On 4 August 1999 it recorded Jeffery & Katauskas' attendance for tests to a particular backfill area "and for proof rolling of DGB", and on 6 August 1999 that Jeffery & Katauskas "viewed proof rolling". His diary had no entries of Jeffery & Katauskas observing proof rolling corresponding to the two Jeffery & Katauskas daily site reports. 220 A number of other entries in Mr Hulbert's diary recorded that "J&K" was on site, but Jeffery & Katauskas attended the site for, for example, asphalt testing and these could not properly be taken into account. The often cryptic records were not materially filled out by oral evidence. No invoices for Jeffery & Katauskas' charges for attendance at the site on any of these occasions were in evidence. 221 It can not be concluded from these few records that Jeffery & Katauskas undertook a supervisory role in relation to the condition of the basecourse immediately before the asphalt wearing layer was laid. As I have said, the May 1999 occasions were probably sub-base rather than basecourse. There were numerous references, in Mr Hulbert's diary and elsewhere, to proof rolling without any involvement of Jeffery & Katauskas. The occasions in the records mentioned above were exceptions, readily enough explicable because the technician on site for other purposes happened to observe proof rolling and, it must be accepted, on one occasion said that the material had to be re-worked. The preponderance by far, on the evidence, was that Rickard Constructions proof rolled and decided whether or not to proceed to sealing and laying asphalt without reliance on Jeffery & Katauskas. 222 Indeed, this appears specifically from other evidence. Mr Rickard gave evidence of seeing proof rolling, after the letter of 3 May 1999, in company with Mr Potts; he said to Mr Potts "That's good", and Mr Potts said "We're getting it right now". In a note attached to a Jeffery & Katauskas field density worksheet for 2 June 1999 the technician recorded "left site still rolling & trimming DGB20 areas Lance [Woodworth] and Chris [Potts] of Rickards said they will proof roll base themselves with loaded fork prior to tack coat, and fix soft spots". Rickard Constructions exercised its own judgment as to proof-rolling and the suitability of the basecourse for sealing and laying asphalt. 223 Jeffery & Katauskas was not expected to and did not oversee the suitability of the basecourse for laying the asphalt wearing layer, notwithstanding that on a few occasions, for uncertain reasons, it observed proof rolling. It was not incumbent on it to advise in relation to the susceptibility of the basecourse material to moisture, or that testing for moisture content immediately prior to laying the asphalt wearing layer was necessary or desirable. There was no breach of duty in failing to do so. 224 In my opinion, Mayne did not have a cause of action against Jeffery & Katauskas. It is again unnecessary to consider Mayne's damages and whether there was effective assignment of a cause of action, or whether the trial judge was in error in refusing the application by Rickard Constructions to join Mayne as a plaintiff claiming in its own right.

[62]

162 Again (as with the existence of a duty of care), the position may be different when one considers the duty of care alleged in relation to supervision. However, as I have found, the duty alleged has not been proved; and the duty that has been proved has not been shown to have been breached." 227 The trial judge's reference to design did not necessarily extend to what I have called the specification case, but his reasoning would equally apply. The reasoning may be questioned, and I should not be taken to endorse it. The supervision case must also be considered, and it is sufficient to consider duty of care and breach of duty in a specification case and a supervision case. For the reasons which follow, in my opinion neither a relevant duty of care nor breach of a duty of care was established. 228 There was no contract between Rickard Constructions and Rickard Partners. There was no question of negligent certification, such as in Pacific Associates Inc v Baxter (1990) 1 QB 993, P & E Phontos Pty Ltd v McConnell Smith Johnson Pty Ltd (1993) 9 BCL 259 and John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd (1997) 13 BCL 235. Particularly as to the supervision case, the question was broadly similar to the cross-claim by Krupp against Minenco in R W Miller & Co Pty Ltd v Krupp (Australia) Pty Ltd (1995) 11 BCL 74 at 147-8, in which it was held (under the then guidance of proximity) that Minenco did not owe a duty of care to Krupp. 229 The trial judge said, after reference to vulnerability as explained in Woolcock Street Investments Pty Ltd v CDG Pty Ltd - "151 In the present case, I do not think that Rickard Constructions was vulnerable to any want of care on the part of Rickard Partners in connection with the design or specification for the pavement. That is because Rickard Constructions' duty, to Container Park and to Mayne, was to construct the pavement (using the appropriate standard of skill, competence and good workmanship) in accordance with the design and specification prepared by Rickard Partners. If Rickard Constructions complied with that obligation then it fulfilled its contract. It was entitled to be paid. If the pavement failed because of any defect in the design or specification, Rickard Constructions had no liability for rectification.

[63]

152 It might be otherwise in connection with the alleged duty to supervise. It could be argued that, in this case, Rickard Constructions was vulnerable, because a failure on the part of Rickard Partners to exercise the requisite standard of competence in relation to supervision might cause Rickard Constructions to construct the pavement otherwise than in accordance with the design and specification, and therefore to be liable for the cost of making good any loss caused thereby." 230 Although the trial judge did not clearly address what I have described as the specification case, in his [151] he referred to want of care in connection with the specification and his reasoning applied to it. His Honour was referring to exposure to loss if reasonable care was not taken, recognised in Woolcock Street Investments Pty Ltd v CDG Pty Ltd at [23] as part of vulnerability. If there is no exposure to loss, it is difficult for there to be a duty to take care to avoid the loss. 231 There is a link with vulnerability in the sense of Rickard Constructions' inability to protect itself from Rickard Partners' want of reasonable care, in that Rickard Constructions had in fact protected itself by entry into a contract under which its obligation was to carry out the Works according to the plans and specification, be they good or bad, subject of course to proper workmanship. The trial judge's reasoning was correct. 232 In his [152] the trial judge contemplated vulnerability for the purposes of what I have called the supervision case, but did not come to a conclusion. In my opinion, however, a duty of care was not owed in that respect either. Failure in proper supervision could cause Rickard Constructions to construct the pavement otherwise than in accordance with the design and specification, and to be liable for the cost of making good. But that was no more than foreseeability of loss, which was insufficient for a duty to take care to avoid economic loss. It was entirely within Rickard Constructions' power to protect itself from the loss, by carrying out the Works according to the plans and the specification and with proper workmanship. The contract of 23 April 1998 under which it had to carry out the Works did not provide for supervision by Rickard Partners - as I have noted, it did not provide for a Superintendent or anyone's supervision. The quality control document made the testing for which it provided Rickard Constructions' responsibility, subject to intervention by the Client's Representative which, even if it was Rickard Partners, was discretionary to the person holding that position. To the extent to which known reliance was part of vulnerability or a duty of care (cf Woolcock Street Investments Pty Ltd v CDG Pty Ltd at [26]), Mr Rickard asserted some reliance not on Rickard Partners but on Jeffery & Katauskas, nor could reliance on Rickard Partners be readily found consistently with the contractual framework. 233 Supervision under a construction contract is ordinarily for the benefit of the proprietor. It is ordinarily the subject of specific contractual provision, with duties and powers given to the supervisor binding on the contractor and usually also the proprietor, in order to give the proprietor greater assurance that the works will be properly carried out. It is not for the benefit of the contractor, which often kicks against the supervisor's pricks. Rickard Constructions did not have even a contractual supervisory regime. For the supervision case, it asserted a gratuitous duty owed by Rickard Partners to take care to prevent itself, Rickard Constructions from failing properly to perform the contract. It is difficult to see how such a duty of care can be justified. In my opinion, there was no duty of care. 234 If there had been a duty of care, there was no breach of duty by Rickard Partners. For the reasons earlier given, it was not established that Rickard Partners failed to exercise reasonable care and skill in relation to moisture content or testing for moisture content in the specification and the quality control document, or in the limited extent of supervision to which the trial judge referred.

[64]

The claim in Rickard Constructions' own right against Jeffery & Katauskas 235 The trial judge contemplated, as he had in his [152] in relation to Rickard Partners, that Jeffery & Katauskas might have come under a duty of care in relation to the testing services in fact undertaken, but did not come to a conclusion. On that assumption, he held that breach of duty had not been established - "173 ... It has not been suggested that its performance of the testing services that it undertook was in any way defective: that is to say, it has not been suggested that (for example) it derived wrong test results. 174 The submission that was put is that Jeffery & Katauskas should have undertaken a greater amount of testing. However, I do not think that the evidence makes this proposition good. Jeffery & Katauskas was called to site to test portions of work that were indicated to it as complete. Its obligation, under the terms of its retainer, was to perform the number of tests that it thought appropriate at places (within the overall area indicated to be tested) that it thought to be appropriate. It has not been suggested that Jeffery & Katauskas performed an insufficient number of tests within those areas or that it failed to use appropriate professional skill in selecting the locations where those tests were to be performed. So far as I understood the case to be put against it, it was that Jeffery & Katauskas should have tested, or retested, other areas of the site. 175 It may be accepted that when an area that had previously been tested (and that was not thereafter sealed) was affected by heavy rain, then it was desirable, if not necessary, for that area to be retested before it was sealed. But that was a decision to be undertaken by Rickard Constructions. Jeffery & Katauskas was not required, under the terms of its retainer, to decide that it should come to the site regardless of requests, and undertake testing other than on areas of work indicated to it. The evidence is clear that Rickard Constructions understood the significance of heavy rain on areas of work that had been completed but not sealed. (I will refer to this in discussing the claim against Allianz; but it is sufficient to note that that evidence came both from Mr Rickard and from Mr Thom, who dealt with the position of contractors generally.) In those circumstances, if Rickard Constructions did not suggest that there was a need for further testing, there was nothing in the terms of the retainer of Jeffery & Katauskas that required the latter to volunteer some different view; and I see no basis for imposing on Jeffery & Katauskas a duty of care more onerous than its obligations under its retainer." 236 There were vestiges in what I have called the advice case of the submission that Jeffery & Katauskas should have undertaken a greater amount of testing, but the advice case maintained by Rickard Constructions on appeal had been put (or sought to be put) against Jeffery & Katauskas at the trial under the particulars the subject of its application to add to the particulars. As has been seen, the trial judge saw the particulars which he allowed as confined to the letter of 3 May 1999. 237 The trial judge said of that case - "184 Jeffery & Katauskas appears to accept that it owed Rickard Constructions "a duty to advise with care in respect of the matters stated in [the 3 May] letter": written submissions dated 4 November 2004, para 27(2)." 238 The trial judge held - "193 In all the circumstances, I do not think that Rickard Constructions [sic: Jeffery & Katauskas] owed a duty of care, in relation to the 3 May letter, over and above the specific request of it to advise on the matters outlined in that letter and the advice that it gave in response. Again, the starting point must be the retainer: in this case, the specific requests for advice made in the meetings to which Mr Treweek referred. That, in turn, must be viewed against the background of the prior limited (level 2) retainer of Jeffery & Katauskas. It would be quite inimical to commercial and contractual relations to impose on someone in the position of Rickard Constructions [sic: Jeffery & Katauskas] a common law duty of care outside and greater than the scope of its obligations under precise and limited retainers, in relation to the subject matter of the requests in late April 1999.

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Judgment (69 paragraphs)

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Cases Cited (16)