Sherson & Associates Pty Ltd v Bailey & Ors

Mr A J Sullivan QC/Ms E A Cheeseman (Appellant) COUNSEL : Mr I D Faulkner (1st and 2nd Respondents) Mr G P McNally (3rd Respondent) Corrs Chambers Westgarth (Appellant) SOLICITORS : Henry Davis York (1st and 2nd Respondents) Colin Biggers Paisley (3rd Respondent) CATCHWORDS : Torts - negligence - economic loss - causation - novus actus interveniens - failure to mitigage loss - aggravation of loss - contributory negligence - reasonableness of failure to remedy building defect - Torts - negligence - limitation - knowledge of damage - capacity, with reasonable diligence, to discover damage - Limitation Act 1969 ss 14 and 63 - Practice and procedure - pleadings - defence - amendment applied for after close of evidence - D LEGISLATION CITED : Limitation Act 1969 Driver v War Services Homes Commissioner (1923) 44 ALT 130 TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 The Soholt [1983] 1 Lloyd's Rep 605 In re a Solicitor [1945] KB 368 Adams v Eta Foods Ltd (1987) 78 ALR 611 Plenty v Argus [1975] WAR 155 Hawkins v Clayton (1988) 164 CLR 539 Pullen v Gutteridge Askins & Davey Pty Ltd [1993] 1 VR 27 Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1 Cartledge v E Jopling & Sons Ltd [1963] AC 758 Djordjevic v Australian Iron & Steel Ltd (No 2) [1966] 2 NSWLR 634 Pammet v Pawelski (1949) 79 CLR 406 Paff v Speed (1961) 105 CLR 549 CASES CITED: Todorovic v Waller (1981) 150 CLR 402 Sutherland Shire Council v Heyman (1985) 157 CLR 424 Bryan v Maloney (1995) 182 CLR 609 Backhouse v Bonomi (1861) 9 HL Cas 503 Darley Main Colliery Co v Mitchell (1886) 11 App Cas 127 Bowen v Paramount Builders Pty Ltd (1977) 1 NZLR 394 Mount Albert Borough Council v Johnson (1979) 2 NZLR 236 Jobbins v Capel Court Corporation Ltd (1989) 26 FCR 226 Magman International Pty Ltd (1991) 32 FCR 1 Sheldon v McBeath (1993) Aust Torts Reports 81-208 Registrar-General v Cleaver (1996) 41 NSWLR 713 Wardley v WA (1992) 175 CLR 514 Kenny & Good Pty Ltd v MGICA (1992) Ltd (1998) 163 ALR 611 Hetherington v Mirvac Pty Ltd (1999) Aust Torts Rep 81-514 DECISION : See para 103

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

PRIESTLEY JA FITZGERALD JA HEYDON JA

SHERSON & ASSOCIATES PTY LIMITED v BAILEY & ORS

1 PRIESTLEY JA: I have had the benefit of reading in draft the opinions of both Fitzgerald JA and Heydon JA in this appeal. They reach the same result, and for the same reasons, except as to one step concerning the limitation point. 2 As to the reasoning upon which they are in agreement, I also agree. As to the point upon which they differ, I agree both with the step taken by Heydon JA, and, in the alternative, the different step taken by Fitzgerald JA. 3 I can see that there is room for argument against the position taken by Heydon JA, but in my opinion his approach is acceptable and should be acted on. If I am wrong in that, I am persuaded that in any event Fitzgerald JA's method is sound. 4 I therefore agree with them that the appeals should be dismissed. 5 FITZGERALD JA: The circumstances giving rise to this appeal are set out in the reasons for judgment of Heydon JA. I will adopt the terminology used by his Honour. 6 In mid-1989, the plaintiffs engaged the Architect to design a building comprising 7 industrial units on property at Unanderra. For financial reasons, the building was to be constructed in two stages. The first stage consisted of 3 units. The western wall of the first stage was required to function as an external wall until the second stage was built. 7 Early in January 1990, the Engineer was engaged by the Architect to design the structural engineering component of the project. The Architect's plans were provided to the Engineer later that month. 8 In November 1990, an agreement was entered into with a builder for the construction of the first stage, which was completed late in 1991. The second stage was never constructed. 9 The plaintiffs were concerned with the structural adequacy of the roof but their concerns were allayed by the Engineer. The trial judge said: "Towards the end of 1991 the First Plaintiff became concerned as to the adequacy of the elements used to fix the roof supports in place. The Engineer assured the First Plaintiff of the adequacy of roof support in a letter of 27 September 1991. However, the First Plaintiff made further inquiries about the roof supports from Lysaght Building Industries, the firm that manufactured the metal components for the roof. Lysaghts reported that '[a]additional bolts are required at the lap as detailed in [an accompanying drawing]. Attention drawn to lack of fly bracing'. The results of that inquiry were communicated by the First Plaintiff to the Engineer. The Engineer assured the First Plaintiff that the roof was satisfactory." (Judgment para. 18). 10 Early in 1992, a dispute arose with the builder. The first plaintiff sued the builder in the Campbelltown Local Court. 11 The plaintiffs obtained a report dated 9 May 1992 from Stephen Maber of Building Consultancy Service (the "May report") for the purpose of the dispute with the builder. The May report contained a number of recommendations for further engineering assessment and the following passages: " II. ROOF … the roof may not withstand the wind forces placed upon it in the future. The roof requires extra bracing and stiffening … It is recommended that a full report/investigation by a structural engineer be undertaken for the roof … X. BRICKWORK : Brick wall at the end of the factory has been erected as a temporary wall until the 2nd stage of the factory complex has been completed. The wall is only 230mm thick and should be checked for stability by a structural engineer … ENGINEER TO ASSESS ROOF BRIDGING AND WESTERN WALL." 12 The plaintiffs were aware of the contents of the May report prior to 21 May 1992. 13 A report dated 9 July 1992 was obtained from Mr Aplin of K F Williams & Associates Pty Ltd (the "July report"). The July report criticised the western wall and the roof structure of the building which were considered inadequate for potential wind loads, and recommended that remedial work be undertaken. A series of calculations and drawings of the recommended work were provided in August 1992. 14 On 2 August 1992, Mr Maber assessed the cost of the work recommended by Mr Aplin at approximately $7,800. 15 Further reports were obtained from K F Williams & Associates Pty Ltd on 4 December 1992 and 15 January 1993 for the purpose of the dispute with the builder, which was compromised in the first half of 1993. 16 The plaintiffs did not have any remedial work carried out on the building which collapsed on 6 November 1994 in extraordinarily windy conditions. 17 On 21 May 1998, the plaintiffs sued the Architect and Engineer, ultimately limiting their claim to negligence and abandoning their claim for breach of contract against the Architect. 18 The first plaintiff, the owner of the property, claimed: "(i) Cost of rebuilding (Alternatively, diminution in value) $437,486.00 (ii) Demolition costs 20,000.00 (iii) Interest pursuant to Section 94, Supreme Court Act, to 30 April 1998 137,100.00 594,586.00" 19 The second plaintiff, the lessee of the property, claimed:

"(i) Damage to building stock and contents 56,723.00 (ii) Repairs and maintenance of equipment 59,804.00 (iii) Repairs to test bench 30,252.00 (iv) Loss of business income (net) 220,000.00 (v) Interest pursuant to Section 94 Supreme Court Act to 30 April 1998 109,800.00 $476,599.00" 20 The trial judge held that the building collapsed because it had been negligently designed. His Honour made the following findings: "On 6 November 1994 the western wall of the building works the subject of this dispute collapsed under the force of strong winds. As a result, a large part of the rest of the building, being of brick construction with a metal roof, also collapsed. The Plaintiffs bring an action, now solely in tort, against both Architect and Engineer, having abandoned an earlier action in contract against the Architect." (Judgment para. 5) "The owner Mr Bailey and his related lessee company (First and Second Plaintiffs respectively) each claim damages solely in negligence against their architect and their engineer (First and Second Defendants respectively) for loss from the collapse under high winds of an industrial complex of three units at Unanderra. I shall refer to the First Defendant Redebi Pty Limited as "the Architect" and to the Second Defendant Sherson & Associates Pty Limited as "the Engineer". This collapse led to the complete demolition and rebuilding of the complex. Responsibility for the collapse can be attributed at least in a "but for" sense to a wall being erroneously treated by Engineer and Architect in its engineering design and construction as an internal wall. It had to serve structurally as an external wall, due to the construction being staged and the wall was insufficiently stabilised to do so. This staging was known to the Architect and was sufficiently made known to the Engineer. The amount of the damage for consequential economic loss is agreed at $662,680 (plus any further interest). The claim against the Engineer is for failure in design of the structural elements. That against the Architect focuses on the Architect's procurement and supervisory role in relation to engineering design, including an alleged communication failure on the Architect's part vis a vis the Engineer and in allowing the builder to leave the wall as an internal wall. The case throws up the issue of where an architect's responsibility ends and a structural engineer's begins, but in circumstances where it is said that the Architect's role and responsibility as a "design and building consultant" extended at least to the functions just described." (Judgment para. 1) "The western wall, being the wall that later collapsed, was designed and built as an internal wall notwithstanding the fact that it had to function as an external wall during such time as the second stage of the building project remained incomplete. … had units 4 to 7 been erected at the same time, there would have been additional lateral stability provided for by the brick walls of those other units. In addition the roof bracing as a whole would have been far more adequate than the roof bracing as it was for just three units." (Judgment para. 15). "Clearly enough, the defective engineering design did as a matter of fact and common sense result in increased risk of economic injury to the Plaintiffs which did eventuate when the building collapsed under high winds. Thus the defective design materially contributed to that economic injury." (Judgment para. 149). 21 His Honour was also satisfied that the remedial work recommended in the July report ".. would not have saved the building from collapse..". (Judgment para. 140) 22 The first plaintiff was awarded damages of $636,244.26 and the second plaintiff was awarded damages of $286,998.74 against both the Architect and the Engineer. 23 Appeals by the Architect and Engineer raise the following issues:

(a) Was the plaintiffs' action The argument in this Court did not differentiate between the claims of the plaintiffs. However, there was no evidence that the second plaintiff, who was the lessee, not the owner of the property, suffered any loss prior to the collapse of the building. Further in the absence of evidence that the second plaintiff was responsible for remedial work, there was no basis for a conclusion that it omitted to take any action reasonably required of it prior to the collapse of the building. barred by ss 14 and 63 of the Limitation Act 1969, and, if so, should the trial judge have permitted the Engineer to amend its defence to plead the Limitation Act when it applied to do so at the conclusion of the parties' oral addresses more than a month after the evidence had closed?

(b) Was the sole material cause of the collapse of the wall the plaintiffs' unreasonable failure to have the defects in the building remedied?

(c) Alternatively, should the plaintiffs' damages be reduced because their unreasonable failure to have the defects in the building remedied:

(iii) constituted a failure to mitigate their loss?

(a) Limitation Act 24 A number of matters were common ground; Accordingly, it has been unnecessary for the Court to consider these issues. namely:

(a) the plaintiffs' cause of action for negligence was complete and time started to run for the purpose of the Limitation Act as soon as more than negligible damage was sustained; Cartledge v E Jopling & Sons Ltd [1963] AC 758; Djordjevic v Australian Iron & Steel Ltd (No 2) [1966] 2 NSWLR 634

(b) all damages for the same cause of action must be recovered in a single action; Pammet v Pawelski (1949) 79 CLR 406; Paff v Speed (1961) 105 CLR 549, 559; Todorovic v Waller (1981) 150 CLR 402.

(c) the losses for which the plaintiffs recovered damages were "mere economic loss in the sense that [each] was distinct from, and not consequent upon, ordinary physical damage to person or property"; Sutherland Shire Council v Heyman (1985) 157 CLR 424, 503-505, 512; Bryan v Maloney (1995) 182 CLR 609, 617.

(d) the cause of action on which either plaintiff successfully sued was not separate from any cause of action which he or it had prior to the collapse of the building for the costs of remedying the defects; Cf Backhouse v Bonomi (1861) 9 HL Cas 503; Darley Main Colliery Co v Mitchell (1886) 11 App Cas 127; Bowen v Paramount Builders Pty Ltd (1977) 1 NZLR 394, 424-425; Mount Albert Borough Council v Johnson (1979) 2 NZLR 236. (e) the cost of remedying the defects prior to the collapse of the building was loss of the same character as the losses for which the plaintiffs were awarded damages;

(f) each plaintiff's cause of action for negligence was complete when he or it first became, or with reasonable diligence would have become, aware that he or it had sustained loss because of the defective design of the building. Cf the statements of Deane J in Hawkins v Clayton (1988) 164 CLR 539, 587-588, which were agreed to by Mason CJ and Wilson J at p.543. See also per Gaudron J at pp 600- 601 and, in this Court, per McHugh JA (1986) 5 NSWLR 109, 143-144; Sutherland Shire Council v Heyman (1985) 157 CLR 424, 503-504, 512; Jobbins v Capel Court Corpoartion Ltd (1989) 26 FCR 226, 228; Magman International Pty Ltd (1991) 32 FCR 1, 11; Sheldon v McBeath (1993) Austr Torts Reports 81-208, 62081; Registrar General v Cleaver (1996) 41 NSWLR 713, 719; Wardley v WA (1992) 175 CLR 514, 532-533, 540; Pullen v Guteridge Haskins & Davey (1993) 1 VR 27, 65-71; Kenny & Good Pty Ltd v MGICA (1992)Ltd (1998) 163 ALR 611, 618. 25 The trial judge concluded that the plaintiffs' knowledge concerning defects in the roof structure and western wall of the building at 21 May 1992 was confined to the contents of the May report. I agree with Heydon JA that, for the reasons his Honour has given, that conclusion was correct. 26 The Architect and Engineer submitted that, even if the plaintiffs did not know that the building was materially defective from the contents of the May report, they could, and with reasonable diligence would, have obtained any necessary additional information by 21 May 1992. I also agree with Heydon JA that that submission should be rejected for the reasons given by his Honour. 27 The onus was on the Architect See, e.g., Hetherington v Mirvac Pty Ltd (1999) Aust Torts Rep. 81-514. (and the Engineer if it was permitted to rely on the Limitation Act) to prove that the plaintiffs had sustained damage due to its negligence from the contents of the May report. The trial judge held that that had not been established for two reasons. 28 The first reason given by the trial judge was that the May report did not inform the plaintiffs that the building was defective. His Honour said: "A fair reading of the critical passages of the BCS Report of 9 May 1992 is that the wall is described as a temporary wall and the report advises that it should be checked for stability by a structural engineer. There is a similar reference to the roof which it is said 'may not withstand the wind forces placed upon it in the future' and the recommendation is for a full report/investigation by a structural engineer. I consider that the Report, by itself, does not put the Plaintiff in the position, without more, that the defect is actually discovered; …" (Judgment para. 83) 29 As Heydon JA has stated, it is necessary to read the May report as a whole. I agree that there is no unequivocal statement in the report that the western wall is defective. However, I doubt whether the references in the report to the appearance of the roof, the possible consequences if it is not stiffened and braced and the need for further engineering assessment, including the recommendation that ".. a full report/investigation by a structural engineer be undertaken for the roof", qualify in any significant respect the categorical statement "The roof requires extra bracing and stiffening..". In particular, I incline to the view that the recommendation in relation to the roof merely indicated that a more comprehensive and accurate determination of assessment of the nature of the problems with the roof structure and the associated risks and the precise work which should be carried out would require the services of a structural engineer. 30 However, the trial judge also held that it had not been proved that the negligent design of the building had caused the plaintiffs loss, or more than negligible loss, prior to 21 May 1992. His Honour's reasoning is disclosed by the following passages from his judgment: ".. a plaintiff can recover compensation only for actual loss or damage, as distinct from potential or likely damage. Thus where, for example, a plaintiff enters into an agreement which proves to be disadvantageous, induced by misleading or deceptive conduct, although detriment, in a contingent sense, is suffered on entering into the agreement, no actionable damage is suffered until the loss becomes actual rather than prospective - in the case in question through fulfilment of a contingency; see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514. … " (Judgment para. 74)

"What is to be discovered is whether and when "damage has been sustained ", in the economic sense. The word "defect" is clearly used by Deane J in Hawkins v Clayton in that sense. The fundamental point made by the Plaintiffs is that the design defect in the present context gave rise to no damage at the point of receipt of the BCS report or indeed later reports. Rather it gave rise to the potential for future damage as occurred when the wall eventually collapsed, this being a potential that depended upon the fulfilment of a contingency of the kind described in Wardley Australia Limited v Western Australia … . The contingency is the application of strong wind forces prior to completion of stage 2 causing the destruction of the building. …" (Judgment para. 86) "Another way of putting the Plaintiffs' argument is derived from the following passage of Handley JA in Sheldon v McBeath at 62,081: These authorities establish that where latent building defects later cause consequential damage to the structure economic loss does not occur until the defect is so discovered or visible consequential damage occurs. Until then the owner can honestly sell the house for its market value, and if he did would suffer no loss. These cases also decide that the owners did not suffer economic loss when they acquired the houses without knowledge of the defective foundations.

In the present case the Defendants have not refuted that the Second Plaintiff could sell the property with full disclosure of the internal wall and its requirement for additional expenditure and be paid its market value, reflecting expenditure still to be made for the temporary strengthening of the western wall and temporary stiffening of the roof bracing, or leaving it to the purchaser to build stage 2 straight away taking the risk of any wind damage during the construction period.

Summing up Any defect was not reasonably discoverable or discovered before 21 May 1992 as evinced by the date of the second report. The Architect has not refuted the proposition that this damage could have been avoided, as would any rectification work, if stage 2 had been built straight away - or before the wall collapsed, such that the building could have been sold with loss on that basis. Certainly, the Architect has not satisfied the onus to demonstrate that the initial so-called damage was more than "what can be regarded as negligible". Finally, the relevant damage claimed here is, as the Plaintiffs contend, economic loss for the collapse of the building. That damage to be sustained depended upon the fulfilment of a contingency which only occurred during the limitation period." (Judgment paras. 88-90) 31 The trial judge elaborated in paras. 86-87 of his judgment, which contain the following propositions: (a) the only loss sustained by the plaintiffs due to the negligence of the Architect and Engineer prior to the collapse of the building was the difference between the costs of the remedial work (including associated engineering costs) and the additional cost of construction if the first stage had been competently designed so as to be self-sufficient until the second stage was constructed;

(b) there was no evidence of the amount of the difference in cost which "… would have been likely to be wholly insignificant in amount, compared to the actual claim of $662,680."

(c) "[t]hat cost was never a specified part of the Plaintiffs' claim (see the Plaintiffs' summons at C23 and the accompanying particulars), and not necessarily recoverable in any event for the reasons elaborated below, ..". (Judgment para 86 (a)) (d) "[t]hat cost even if recoverable was distinct, in causal if not obligation terms, from the actual claim resulting from collapse of the building, ..". (Judgment para 86(b)) 32 Not all of what was stated by the trial judge can be accepted. However, it was open to his Honour to conclude that it had not been established that the cost of the additional work to remedy the defects in the building would have been greater than the additional cost of constructing the building without the defects. No more was known that that the cost of the work recommended in the July report It is unnecessary to consider the trial judge's finding that the remedial work recommended in the July report "… would not have saved the building from collapse..". (Judgment para. 100) was approximately $7,800. The additional cost of constructing the building if it had been satisfactorily designed was not the subject of evidence. 33 Further, there was no evidence that the defects in the building according to the May report reduced the market value of the property. 34 I therefore agree that it was not proved that the plaintiffs (or either or them) had suffered damage due to the negligence of the Architect and the Engineer prior to 21 May 1992. 35 Accordingly, I agree that the plaintiffs' claims were not statute-barred. That being so, the trial judge's refusal to allow the Engineer to rely on the Limitation Act is of no significance.

(b) & (c) Reasonableness of the plaintiffs' omission to remedy defects in the building 36 It is unnecessary to consider the legal consequences which would follow from a conclusion that the plaintiffs' omission to remedy the defects in the building was unreasonable unless the trial judge should have concluded that the plaintiffs' omission was unreasonable, or, according to the submissions for the Architect and Engineer, that the plaintiffs had not established that their omission was reasonable. 37 Heydon JA has comprehensively discussed this aspect of the appeals by the Architect and the Engineer. My reasons for agreeing with his Honour, which do not depend upon the onus of proof of reasonableness or unreasonableness, can be stated briefly. 38 It is not in dispute that there was ample time for remedial work to be carried out on the building, which did not collapse until 2 ½ years after the May report. For most of that period, the plaintiffs had additional significant information, including the July report. Nonetheless, although aware that Mr Aplin considered that the western wall and roof supports were inadequate to withstand potential wind loads and that the consequences might be more serious than mere cracks in the wall, the plaintiffs did not expect the building, or even the wall, to collapse. Nor did the Architect and the Engineer when they lacked the advantage of hindsight. 39 The response which was reasonably required of the plaintiffs was related to the risk which they confronted. Broadly stated, the Architect and the Engineer submitted that a reasonable person with the information which the plaintiffs had would have appreciated that the risk of collapse of the building or the western wall was such that they should obtain ".. a professional and complying design" and undertake "associated upgrading of the building", apparently irrespective of the cost. As the trial judge noted, there was no evidence concerning the cost which would have been involved other than Mr Maber's estimate that the cost of the work recommended by the July report (which his Honour held would not have prevented the collapse of the building) was approximately $7,800. However, it could not be concluded that the cost of remedial work was so high that the plaintiffs could reasonably have done nothing if there was a significant risk of collapse of the building. 40 Conversely, the plaintiffs' inaction was plainly reasonable on their understanding of the risk. The Architect and Engineer cannot succeed if the plaintiffs' view was reasonably open to them. 41 There is no basis for a conclusion that the plaintiffs did not have ordinary concern for their own safety and the safety of those for whom they were responsible or for their property and financial interests. Although the Architect and the Engineer now contend that the plaintiffs should have obtained a "professional and complying design" and remedied the defects in the building, "professionals", namely the Architect and the Engineer, had designed and approved the building which had been constructed. None of the critical expert opinions which the plaintiffs had obtained in connection with their dispute with the builder clearly indicated that there was a serious risk that the building would collapse or that remedial work was urgent. When the plaintiffs did nothing, a lengthy period elapsed without even any cracking in the western wall. 42 In my opinion, the plaintiffs' assessment of the risk and their inaction were reasonable in the circumstances as was their inaction. 43 In summary, I agree with Heydon JA that the arguments for the Architect and Engineer should be rejected and their appeals should be dismissed with costs. 44 HEYDON JA: Background This is an appeal against orders of Santow J in favour of the plaintiffs below. The orders were made against a company providing architectural services and another company providing engineering services in relation to the construction of a building owned by the first plaintiff and occupied by the second plaintiff. 45 At all material times the first plaintiff, Mr Bailey, was the owner of land at 36 Investigator Drive, Unanderra; and the second plaintiff, Baileys Diesel Services Pty Ltd, was lessee of that land. 46 The first defendant (who is the cross-appellant), Redebi Pty Ltd, trading as PR Design Co, was a design and building consultant engaged to carry out architectural services in relation to the building of seven industrial warehouse units on the land at 36 Investigator Drive. The second defendant (who is the appellant), Sherson & Associates Pty Ltd, was a firm of chartered structural engineers engaged to provide engineering services in relation to the building of the units. It is convenient to adopt the trial judge's descriptions of the first defendant as "the Architect" and the second defendant as "the Engineer". 47 Throughout 1990 steps were taken to obtain development approval and building approval for the erection of the units. In the period from late 1990 to a time towards the end of 1991, three of the units were constructed by a builder, Kenna & Brown Pty Ltd, as the first stage of construction; the second stage of four units was only to be completed when the financial affairs of the plaintiffs permitted this. The western wall of the three units completed in the first stage was designed and built as an internal wall, but it had to function as an external wall until such time as the second stage was completed. 48 Early in 1992 a dispute arose between the second plaintiff and the builder which led to litigation in the Local Court. The builder sued the second plaintiff for unpaid sums owing on the building contract, and on 21 August 1992 the second plaintiff filed a cross claim based on defects in the carrying out of the building work. In the course of preparing for that litigation, the first plaintiff's solicitors obtained a building consultancy report dated 9 May 1992 from Mr Maber, trading as Building Consultancy Services. To the knowledge of the plaintiffs, that report at least raised questions about the satisfactoriness of the roof purlins and the stability of the western wall. In four places Mr Maber's report recommended further investigation by a structural engineer (Blue 1/67J, 68F, 69G and 71R). 49 Pursuant to that recommendation, a one page report dated 9 July 1992 by a structural engineer, Mr Aplin of KF Williams & Associates Pty Ltd, made criticisms of the western wall and the roof and recommended that certain work be carried out. 50 On 2 August 1992 Mr Maber, to whom Mr Aplin's report had been sent, reported that the work recommended would cost the better part of $7,800 (Black 64-65; Blue 1/81-82 and 84-91). 51 Mr Aplin provided further reports on 4 December 1992 (one page) and 15 January 1993 (one and one half pages) in relation to the western wall and the roof which, like their predecessors and like Mr Maber's reports, were for the purpose of the litigation against the builder. 52 On 6 November 1994, by which time stage two had not been completed, the western wall of the building collapsed under high winds. 53 Subject to various contentions propounded by the Architect and the Engineer, it was agreed that the first plaintiff was entitled to damages of $636,244.26 against both defendants, and that the second plaintiff was entitled to damages of $286,998.74 against both defendants. 54 At the trial, the Engineer admitted liability for negligence, and on appeal the Architect did not challenge a finding of liability for negligence made against it by the trial judge. 55 The only contentions of the Architect and the Engineer at the trial which remained alive on the appeal were as follows. 56 First, both contended that the plaintiffs had not behaved reasonably in failing to act on Mr Aplin's reports in 1992 and 1993. This omission was said to be an act intervening between the defendants' breach of duty and the plaintiffs' loss which negated or limited the plaintiffs' rights to recover damages on the basis that it could be characterised as one or more of the following: aggravation of damage; failure to mitigate damage; breaking the chain of causation; and contributory negligence. 57 Secondly, the Architect submitted that the plaintiffs' claims were statute-barred because the proceedings were only commenced on 21 May 1998, more than six years after 9 May 1992, on which date it was said that the latent defect in the three units became known to the plaintiffs, or discoverable if the plaintiffs had used reasonable diligence, by reason of Mr Maber's first report of that date. 58 Thirdly, the Engineer said that the trial judge had erred in refusing it leave to amend its defence after the completion of final addresses so as to plead the limitation defence which the Architect had already pleaded.

First Issue: Reasonableness of the Plaintiffs' Behaviour 59 The trial judge made a number of findings of fact which are relevant to this issue. 60 He said (Red 70N-W): "(a) the Plaintiffs relied on the Architect in the procurement of the necessary engineering design and in particular relied on the Architect as regards supervision and communication with the Engineer as required, including ensuring that the western wall was insufficiently stabilised as an internal wall given that it was required to perform as an external one, (b) the Plaintiffs also relied on the Engineer to carry out the necessary engineering decision to ensure such stability, and (c) the Architect failed properly to supervise and communicate to the Engineer concerning the inadequately stabilised western wall when he should have appreciated that it was constructed as an internal wall but required to function as an external one, while the engineer failed to provide proper engineering design to stabilise that wall in those circumstances." 61 The trial judge also said (Red 76E-S): (i) [the Plaintiffs] did commission a building consultancy report from Building Consultancy Services dated 9 May 1992, doing so prompted by litigation with the builder, (ii) [the Plaintiffs] did, as recommended by the BCS report consult a structural engineer, namely Mr Aplin of K F Williams & Associates Pty Limited and thus were not guilty of any failure in that regard. (iii) the Plaintiffs received three reports and a set of calculations and drawings from K F Williams & Associates Pty Limited, namely a report of 9 July 1992 (PX1, 74), then a series of calculations and drawings of work to be carried out dated August 1992 (D2X12 and D2X13), a document entitled 'Additional Comments to the Scott Schedule' dated 4 December 1992 (PX1, 95, 96) and finally, a structural report of 15 January 1993 (PX1, 97, 98). (iv) on 8 August 1992, using the plans and a quotation information sheet, BCS costed the rectification work as proposed by Mr Aplin at $7,800. (v) Mr Bailey did not implement the Aplin/BCS proposal and in particular stated that he did not recognise that the building might collapse, based on his understanding of the Aplin report of 9 July 1992." 62 The trial judge found that "it is clear that Mr Aplin was of the opinion that the building was in dangerous condition and at risk of collapse, but deliberately chose not to state such opinion in those terms in his [first] report [of 9 July 1992]" (Red 77M-N). The trial judge set out Mr Aplin's evidence as to his reasons for this silence: they boiled down to a refusal to criticise another engineer's work. Mr Aplin said: "I probably certainly did have the thinking that the structure would collapse, but I was not going to say that in a report". 63 The trial judge said (Red 78E-Q): "Mr Bailey's evidence as to his understanding of the problem is fully summarised by the Plaintiffs as follows: '(a) He did not think the building might collapse. ' There is no mention of that anywhere '. T,46(24). He did not believe that there were any safety implications because '… I would have thought that he [Mr Aplin] would have told me first off because it is very concerning ': T 46(53).

(b) ' If I was told that the wall would fall down or was in danger of falling down, I would have done something about it straight away. I would have called in another engineer to do an assessment on it and, with that, I would have fixed it. ' T, 48(26). (c) As to his understanding of lateral stability, he believed that the expression meant that the building could move, and that ' maybe we would get cracks in the wall … probably for one or two years ': T, 45. ' My interpretation of stability is the wall moving, not falling down or in danger of falling down … that the wall would move, it would create cracks visible by me .': T, 49(26). (d) He was aware that the building had been constructed to the design of Sherson, and he considered Mr Aplin's report as being the opinion of one engineer against another: '… this is an engineers report against another engineers report .' T, 45(55); and see further cross-examination T, 75(18-32), 84(16-85(10)), and re-examination T, 89(16)."

The transcript references are to the trial transcript, not the Black Book. In context, the trial judge was making an implicit finding that he accepted that evidence. 64 At Red 79H-T the trial judge said: "… a fair reading of Mr Bailey's evidence is not that he professed expertise; rather that he eschewed any structural engineering expertise, not professing more than a lay understanding. His own business was not in that field of structural engineering. He interpreted the report's reference to lateral stability as simply a warning to check for stability to see whether there were cracks, rather than to expect any unforewarned collapse. Although with the wisdom of hindsight, that proved a wrong judgment, Mr Bailey was a layman, and the advice was opaque, guarded and given in the context of a dispute with the builder. There is no suggestion he disregarded the advice of the Defendants whom he had paid to avoid just this sort of risk, when none was forthcoming from them, save that advice which proved deficient. Thus the muddle brought about by Mr Bailey's inadequate appreciation of risk as a layman, coupled with the later engineer's inhibition in commenting on another's work adversely, could fairly be said to be, in the ordinary course of events, 'the very kind of thing likely to happen', as a result of the Defendants' negligence. The Plaintiffs engaged and paid for the Defendants precisely to obtain the protection of their advice, with each professing expertise in their respective roles." 65 At Red 86P-87C the trial judge said: "(1) The Defendants have failed to establish that adopting the BCS/Aplin proposals would more probably than not have enabled the building to withstand the wind loads which led to its collapse, the onus being upon them to do so. Indeed I am satisfied that it is more likely than not that the additional strengthening would not have saved the building from collapse, based on Mr Low's evidence which I accept in preference to that of the other experts, where in conflict. (2) The Defendants have failed to substantiate that it would have been reasonable, taking proper care for the Plaintiffs' own protection, for the Plaintiffs, and in particular Mr Bailey, to 'commission a professional and complying design and associated upgrading of the building', having failed to articulate what such complying re-design and associated upgrading of the building would entail both as to specification and cost and in particular having failed to put any such matters to Mr Bailey in cross-examination."

The quoted words in paragraph (2) were taken by the trial judge from an expert's report dated 10 May 1999 supplied by Mr Jensen, who was called by the Engineer. That was the second of Mr Jensen's reports. The trial judge held that Mr Jensen, in his second report and in cross-examination, retreated from the position adopted in his first report that: "all that the owner had to do to avoid the collapse was to carry out building works for about $7,800" to the position that the plaintiffs should have commissioned "a professional and complying re-design and associated upgrading of the building". 66 Finally, the trial judge said (Red 90G-P): "… the very kind of thing which was likely to happen as a result of the Defendants' failure to provide an adequate structural design was what did occur, namely that Mr Bailey would be faced with having to make a decision which as a layman he was ill-equipped to make, being a decision as to what remedial action if any to take when adventitiously confronted with the later muted and inefficacious advice which was received. The Plaintiffs were confronted with having to decide on whether to carry out recommendations, in circumstances where, had they carried them out, there was no demonstrated prospect that the damage that occurred would have been averted. Failure to do so cannot in such circumstances make the Plaintiffs the true author of their own harm as a novus actus interveniens nor contributors to it for purposes of contributory negligence." 67 The submissions of the Engineer and the Architect on appeal commenced by drawing attention to certain passages in the 9 May 1992 report. These passages were to the effect that the brick wall at the western end of the factory should be investigated by a structural engineer, because it had been erected as a temporary wall only and, being only 230 millimetres thick, needed to be checked for stability by a structural engineer. The report also said that the roof "may not withstand the wind forces placed upon it in the future" and "requires extra bracing and stiffening". For those reasons it was recommended that a structural engineer should report on and investigate the roof. The Engineer and the Architect pointed to admissions by Mr Bailey that he read the report on or about 9 May 1992 carefully; that he knew it was important to be fully aware of what defects might exist in the building; that after he read the report he became aware that there might be a problem with the western wall; that the western wall had been erected as a temporary wall; and that the western wall was only 230 millimetres thick. They also pointed to evidence of Mr Bailey that he had done nothing except check for cracks. 68 The Engineer and the Architect then noted that Mr Aplin's report of 9 July 1992 stated that the wall did not comply with the requirements of the brick work code in terms of lateral stability, and was considered inadequate for the wind loads imposed on it. The report proposed measures to ensure the stability of the wall. The report pointed to deficiencies in the angle bracing in the plane of the roof, which meant that there was a possibility that under wind load the top courses of brick work might be dislodged. The report also said that the purlins were not fully capable of sustaining wind load. 69 The Engineer and the Architect then pointed to further admissions by Mr Bailey that he had read the report on or around 9 July 1992 carefully; that he was concerned about his business which was being conducted in the building; that he was aware at the time he read the report that there existed, for the purpose of safety, building industry standards and codes; that he was aware that the western wall was only 230 millimetres thick and as such did not comply with the brick work code; that he was aware that lateral instability meant that the western wall could move sideways; that he was aware that Mr Aplin was saying that the western wall as built was not adequate for wind loads that might be imposed on it; that he did not at any time discuss the contents of the report with Mr Aplin; and that he knew that the report indicated the possibility of something other than mere cracking. They pointed to Mr Bailey's evidence that after the report he did nothing but look for cracks in the wall to enable him to mount an argument against the Engineer in the event of damage because until cracks emerged, all he had was one engineer's report complaining about another. He did this even though he knew the western wall was not stable, though he did not believe that it might collapse. It was noted that Mr Aplin had said to Mr Bailey that the work done by the Engineer was "not up to standard" (Black 81W) and that Mr Bailey shared that view (Black 48N-S). 70 The Engineer and the Architect submitted that the plaintiffs failed to give instructions to have the Engineer joined in the Local Court proceedings against the builder, and in fact settled those proceedings. Mr Bailey decided to leave open the possibility of a claim against the Engineer and to claim only if anything happened to the building. They pointed to the fact that Mr Bailey had decided not to fix the defects identified by Mr Aplin, though he could have afforded to do so. 71 The Engineer and the Architect, referring to Red 79J-M, said that the finding of the trial judge: "as to the reasonableness of Mr Bailey's conduct relied primarily on the finding that the advice which Mr Bailey received was 'opaque' and that he misapprehended the nature of the defect as a possibility of movement of the wall that would be evidenced by cracks rather than a sudden collapse of the wall. The trial Judge's finding in this respect is not supported by the evidence."

Despite what might otherwise have been inferred from this submission, it was apparently not intended to be an attack on the credibility of Mr Bailey's evidence that the advice received did not cause him to expect the wall to collapse. The point made was rather that Mr Bailey's conduct, based on his belief, did not meet an objective criterion of reasonableness as between the plaintiffs on the one hand and the Engineer and the Architect on the other. That is, whatever Mr Bailey's belief, "an objectively reasonable person" would have concluded from the 9 July 1992 report in particular that the wall was at risk of being blown over. 72 The Engineer and the Architect made two concluding submissions. One was put thus. It was said that Mr Bailey's evidence that Mr Aplin's report was simply the report of one engineer about another's work: "does not ring true. Mr Bailey had no reason to doubt the accuracy of the advice that he received from Mr Aplin. He did not question the adequacy of the rectification works proposed by Mr Aplin. In July 1992, Mr Aplin informed Mr Bailey that the work done by the Engineer on the first stage was 'not up to standard'. Mr Bailey believed that the work was 'not up to standard' and he would not have believed the Engineer as to whether he said the work was good or not. By November 1992, Mr Bailey had discussed with Mr Aplin the need to 'completely re-do' the Engineer's work. He could afford to undertake the remedial work which he was advised would remedy the defects. He had a period of in excess of two years in which to effect the recommended remedial works." 73 The other concluding submission attacked the trial judge's conclusion that there was "no demonstrated prospect" that Mr Aplin's repairs would have averted the damage that occurred in 1994. The submission was: "With respect, there is no factual foundation for this conclusion. At the time of being confronted with this decision (in or about July 1992) the plaintiffs did not know that there was no demonstrated prospect that damage to the building would not be averted if they carried out remedial work. On the contrary, they had a capable and responsible engineer in the form of Mr Aplin advising them that the rectification works would make the wall sound. The fact that subsequent expert opinion proffered in the course of litigation offered a different view (that was accepted by the trial Judge) cannot affect what was reasonable or not for Mr Bailey to do in July 1992 confronted with credible advice as to how to solve the problem." 74 It is convenient to deal with this last submission first. If, as the Engineer and the Architect contended at some points, the relevant test is purely objective, it cannot be unreasonable to fail to undertake steps which, in the light of all the evidence, would not have averted the damage. The present submission depends on criticising the plaintiffs for not acting on advice from Mr Aplin (who deliberately concealed his perception of the true extent of the peril from them) which in fact would have been useless. But since it is not essential that the finding under attack be called in aid to support the trial judge's conclusion that the plaintiffs behaved reasonably, it need not be dealt with further. 75 So far as the penultimate submission is concerned, it consists of an attack on evidence of Mr Bailey on which the trial judge did not explicitly rely, though he did refer to it with apparent favour (Red 78N-P). Even if the trial judge relied on it, it is not essential to support his reasoning. In any event, there is no finding at all by the trial judge critical of Mr Bailey's credibility in any respect, and no convincing reason is assigned by the Engineer and the Architect as to why the evidence in question should be rejected. Hence, if the trial judge did take account of the evidence in arriving at his conclusions, it was not erroneous of him to have done so. 76 The other submissions of the Engineer and the Architect do not indicate that the trial judge's conclusion on reasonableness was wrong. It is supportable for numerous reasons, not all of which were advanced by the trial judge. 77 A plaintiff "cannot be said to have really incurred any loss which might have been avoided by his taking such steps as a reasonably prudent man in his position would have taken to avoid further loss to himself": Driver v War Services Homes Commissioner (1923) 44 ALT 130 at 134 per Irvine CJ (emphasis added). A plaintiff cannot recover damages for losses "which he would not have incurred had he acted reasonably in the ordinary course of his business": TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 162 per Priestley JA (emphasis added). Subject to the criterion of reasonableness, the plaintiff "is completely free to act as he judges to be in his best interests": The Soholt [1983] 1 Lloyd's Rep 605 at 608 per Sir John Donaldson MR (emphasis added). "The word 'reasonable' has in law the prima facie meaning of reasonable in regard to those existing circumstances of which the actor, called on to act reasonably, knows or ought to know": In re a Solicitor [1945] KB 368 at 371 per Scott, Lawrence and Morton LJJ; see also Adams v Eta Foods Ltd (1987) 78 ALR 611 at 621 per Gummow J. 78 Hence the question is what was reasonable for persons in the position of the plaintiffs, and in particular for a person in the position of Mr Bailey, consulting his own interests in relation to his own building project. Mr Bailey was not a structural engineer. By 9 July 1992, the Engineer and the Architect had completed all their duties in relation to stage one, and had been paid. The plaintiffs owed the Engineer and the Architect no duties and had no continuing relationship in connection with stage one. Short of suing them, he had no power over them. All the reports from 9 July 1992 on (like that of 9 May 1992) were obtained for the purposes of litigation against the builder (Blue 1/163T; 79N; 81M; and 96S). All of the reports were supplied for that purpose (the 4 December 1992 report was headed "Additional Comments to Scott Schedule" (Blue 1/98)). All the reports were brief. Thus all were angled towards recovery of monies in litigation against the builder; none were angled towards the issue of whether extensive damage might be caused by the problems identified, and how much. None of them suggested that there was any urgency in carrying out the steps recommended in relation to a building which human beings would from time to time enter. In short, they described what steps should be carried out, and what those steps would cost, not because any person was suggesting that an acute practical problem had to be met urgently, but in order to permit the quantification of the second defendant's cross claim against the builder. Though the Engineer and the Architect contended that Mr Bailey ought to have inferred from the 9 July 1992 report that Mr Aplin thought the wall would collapse, his failure to do so is excusable in view of Mr Aplin's deliberate non-disclosure of that probability and deliberate decision to use language not suggesting it. There is no evidence that either Mr Bailey's solicitor or Mr Maber, to whom the 9 July 1992 report was sent (Blue 1/79), read it as indicating a possibility of collapse. Thus Mr Bailey's belief that the wall would not collapse may have been wrong, but it was not unreasonable. Mr Bailey was not told anything about what chance there was that wind might damage the building, and to what extent, beyond the general remarks in the 9 July 1992 report about the wall being "inadequate for the wind loads" and about a "possibility" that the "top courses of brick work may be dislodged". 79 It was open to a reasonable man in the position of Mr Bailey to take the view (though this view did not entirely correspond with Mr Bailey's actual view (Black 78B-79J)) that if he spent the $7,800 in carrying out (inter alia) Mr Aplin's recommendations, he would not be able to recover that sum from the builder if it stemmed from a deficiency on the part of the Engineer or the Architect; that he certainly would not be able to recover it from the builder after the second defendant settled its proceedings against the builder on 6 April 1992 on terms that the former pay the latter $3,750 (Blue 1/101); and that instituting fresh proceedings against the Engineer or the Architect to recover the $7,800 would be an imprudent and not very useful step. Mr Bailey, though appreciating that the advice to him was that the wall was unstable (Black 42N-P and 46U-W), did not think that "the wall may not be safe" (Black 42L-M) or was in danger of falling down (Black 45N-R) but only thought that cracking in the wall was a possibility (Black 42R-T) arising from the instability. It was open to a reasonable man in the position of Mr Bailey to assume that if he kept an eye on the units to observe the progress of any cracking (Black 42X-43E and 46J-P), the remedial work and any argument with the Engineer could be postponed until the severity of the problem became clear; and since no cracks did appear in the two years or so before the storm (Black 43N-S, 57N-P and 72M-S), the wall did not require remedial work. A reasonable man in Mr Bailey's position might also take into account the fact that an estimate of $7,800 for the cost of building work might well turn out to be less than what actually would have to be spent, in the light of common experience of the tendency of building costs to rise rather than to fall. While Mr Bailey may well have been able to find $7,800 or even some larger sum, he was under sufficient financial pressure to cause him to postpone stage two of the project. It was open to a reasonable man in Mr Bailey's position to take the view that once his plans to build the other four units proceeded, any deficiency in the existing units could be repaired without having to pay out $7,800 immediately in circumstances which would make it difficult to recoup the money from any other person. While a reasonable man in Mr Bailey's position might well be held to have behaved unreasonably if he failed to spend $7,800 or some higher sum on repairs if he thought a collapse was probable or possible, the conclusion may legitimately be quite different if the only perceived risk was instability producing cracking. 80 The Engineer and the Architect conceded that at least so far as mitigation and contributory negligence were concerned, they bore the burden of proving unreasonableness, and appeared to make the same concession in relation to causation so far as novus actus interveniens doctrines were concerned. Wherever the burden of proof lay in relation to aggravation, once the trial judge made findings that the plaintiffs had not behaved unreasonably, the Engineer and the Architect on appeal had to demonstrate not merely that some other judge might have come to a different conclusion, but that the view to which this trial judge came was appellably wrong. While the trial judge's decision as to reasonableness was not discretionary in character, it was a decision turning on matters of judgment and degree, and on an evaluation of competing considerations; it was lengthy and detailed; it was the product of an apparently careful approach; and it depended on analysing Mr Bailey's actual and possible attitudes on a question in relation to which he was the best judge and in relation to which, subject to the overriding criterion of reasonableness, he had considerable freedom of judgment, namely the question of where his best interests lay. It is not easy to overturn on appeal a judgment having those characteristics. In my opinion the present attempt to do so does not succeed for the reasons just set out. 81 The Engineer and the Architect accepted that if their challenge to the trial judge's findings about reasonableness did not succeed, then it was not possible to reduce the damages awarded by the trial judge. This makes it unnecessary to decide several controversies about whether the plaintiffs could be said to have aggravated damage, about where the burden of proof lay if that could be said, and about the relationship between aggravating damage and not mitigating damage. It is also not necessary to decide whether the Engineer and the Architect successfully made out a challenge to the trial judge's conclusion that even if Mr Aplin's recommendations had been carried out, the collapse would probably have occurred. Nor is it necessary to consider submissions based on a passage in the reasons for judgment of Burt J (delivered on behalf of the Full Court consisting of himself, Jackson CJ and Lavan J) in Plenty v Argus [1975] WAR 155 at 158 dealing with the relevance of the prospects of success in medical treatment of the plaintiff's injury to the question of whether the plaintiff reasonably refused treatment; compare 159, where the discounting of damages once unreasonableness has been found is discussed. The case was referred to below by both Engineer and Architect. However, it was said below by the Engineer not to be relevant where the plaintiffs had aggravated damages, as according to the Engineer they had (Engineer's written submissions dated 9 July 1999, paragraph 2.10 (4)). Indeed the oral address went further in saying that Plenty v Argus had no application to the present case "in any way shape or form" and that it had "no work to do in this case" (Black 211W-212X). On appeal the Engineer took the opposite tack, submitting, after quoting page 158, that the plaintiffs' "conduct was an aggravation of the pre-existing damages and that damages should be reduced to reflect the chance that if Mr Bailey had acted reasonably the damage would have been averted in whole or in part" (Engineer's written submissions dated 13 September 2000, paragraph 34). The Architect both below and on appeal relied on the case as part of its argument on aggravation of damages. The differences between the positions of the Architect and the Engineer at trial, and between the Engineer's position at trial and the Engineer's position on appeal, do not create a promising background for the submission made orally that the trial judge's treatment of Plenty v Argus (Red 87D-T and 90V-X) was "confused" (transcript page 7 line 52). In any event, even if the remedial treatment would probably have succeeded, or enjoyed a chance of success which though it was less than probability, was significant or more than trivial, it has not been demonstrated that it was unreasonable in all the circumstances in which the plaintiffs found themselves for them not to spend the money on remedial treatment. Plenty v Argus is thus not determinative of the present case and its significance, if any, in some other case need not be explored here.

Second Issue: Was the Claim Against the Architect Statute-Barred? 82 The trial judge found that the Architect had not established that it was. Although the Engineer did not plead the point, the trial judge found in addition that had the Engineer been permitted to plead the limitation point, the Engineer would also have failed to establish it. 83 It was common ground that the test enunciated in Hawkins v Clayton (1988) 164 CLR 539 at 587-8 and applied in Pullen v Gutteridge Askins & Davey Pty Ltd [1993] 1 VR 27 was to be applied, not that stated in Pirelli General Cable Works Ltd v Oscar Faber & Partners [1983] 2 AC 1. That is, the claim against the Architect would be statute-barred if it demonstrated that before 21 May 1992 the plaintiffs knew or could with reasonable diligence have discovered the fact that damage had been sustained in the sense that there was a latent defect in the building. 84 The Architect contended that it demonstrated that by proving the plaintiffs' receipt of Mr Maber's report of 9 May 1992. It contended that that report notified the plaintiffs of defects in the western wall and in the roof, and that the collapse of the building in November 1994 was the result of one or other or both of these defects. Particular attention was devoted to the following words in the report: " II. ROOF … the roof may not withstand the wind forces placed upon it in the future. The roof requires extra bracing and stiffening …. It is recommended that a full report/investigation by a structural engineer be undertaken for the roof … X. BRICKWORK :- Brick wall at the end of the factory has been erected as a temporary wall until the 2nd stage of the factory complex has been completed. The wall is only 230mm thick and should be checked for stability by a structural engineer …. ENGINEER TO ASSESS ROOF BRIDGING AND WESTERN WALL." (Blue 1/68C-F, 169E-G and 171R) 85 The Architect also drew attention to the following evidence of Mr Bailey (Black 49C-H): "Q. After you read this report you became aware, didn't you, that there was something wrong with the western wall? A. Yes. Q. That was in May 1992? A. Yes. Q. And you believed that the western wall had been defectively designed in so far as it was an internal wall that was being used as an external wall? A. I was made aware of that, yes. Q. You knew that in 1992, didn't you? A. Yes." 86 The Architect submitted that a fair reading of Mr Bailey's cross-examination suggested that at the time Mr Bailey read the report, he believed that the western wall had been defectively designed in so far as it was an internal wall that was being used as an external wall. The Architect made a similar submission that the report identified a defect in the roof requiring extra bracing and stiffening. 87 The trial judge's ultimate findings were (Red 66H-R): "A fair reading of the critical passages of the BCS Report of 9 May 1992 is that the wall is described as a temporary wall and the report advises that it should be checked for stability by a structural engineer. There is a similar reference to the roof which it is said 'may not withstand the wind forces placed upon it in the future' and the recommendation is for a full report/investigation by a structural engineer. I consider that the Report, by itself, does not put the Plaintiff in the position, without more, that the defect is actually discovered; the question is rather when it could have become manifest, in the sense of becoming discoverable by reasonable diligence. That, I am satisfied, required further reasonable enquiry of a structural engineer to constitute what is necessary for the exercise of 'reasonable diligence' in rendering the defect manifest. I am further satisfied on the evidence before me and recognising the onus is on the Defendant, that such an enquiry would reasonably take at least a month and thus would have delayed discovery till after 21 May 1992." 88 So far as the trial judge concluded that the report had not imparted knowledge of defects to the plaintiffs, the underpinning reasoning appears elsewhere. It rested on two propositions: that the evidence of Mr Bailey had not made it clear precisely what he appreciated on reading the report before 21 May 1992 (as distinct from what he appreciated later in 1992 after receiving other reports); and that the report itself did not distinctly communicate the existence of defects. 89 At Red 46M-U the trial judge said: "Thus while Mr Bailey became aware 'on about' 9 May 1992 that the wall had been erected as a temporary wall: T, 41(38), at T, 52(1-6) he agreed in cross-examination that it was in 'May '92' that " After you read this report you became aware, didn't you, that there was something wrong with the western wall' [emphasis added] [by trial judge]. At T, 52(8-14) he agreed that 'in 1992' he knew the western wall had been defectively designed in so far as it was an internal wall being used as an external wall. As to anything being defective, except for T, 52(8-14) the questioning did not go further than that after he read the BCS report he 'became aware that there might be a problem with the brick wall': T, 41(32). Thus it can be seen that while he acknowledges he had the report on 9 May 1992, imprecise cross-examination left the time of his awareness of what was in the report to be inferred. This is in circumstances where the onus must be on the defendant who invokes the limitation defence; see para 82 below." 90 At Red 47J-O the trial judge said: "It will be appreciated that Mr Bailey is warned to consult a structural engineer for the roof, as the roof ' may ' not withstand future wind forces and that a wall erected 'as a temporary wall' should be checked for stability by a structural engineer' - it is not stated that the wall is unstable at that point. His concessions in cross-examination as to what he knew in 'May 1992' or 'in 1992', quoted above, do not establish that he knew anything more, immediately before 21 May 1992, than was in the BCS Report of 9 May 1992. Nonetheless, I am satisfied that he did know at that date what was in the BCS report. The BCS report stops short of saying that the building suffered from defective design." 91 At Red 65D-S the trial judge said: "It is convenient that I set out the relevant transcript references as fairly summarised by the Plaintiffs in their written submissions dated 12 July 1999: 'Mr Bailey said that he received the BCS document 'on about' 9 May 1992: T, 41(57)-42(5). 'He became aware 'on about' 9 May 1992 that the wall had been erected as a temporary wall: T, 41(38). At T, 52(1-6) he agreed that it was in 'May 192' that ' After you read this report you became aware, didn't you, that there was something wrong with the western wall'. At T, 52(8-14) he agreed that 'in 1992' he knew the western wall had been defectively designed in so far as it was an internal wall being used as an external wall. As to anything being defective, except for T, 52(8-14) the questioning did not go further than that after he read the BCS report he 'became aware that there might be a problem with the brick wall': T, 41 (32). A re-reading of the Transcript page 41-50 reveals that the questioning as to receipt of the BCS report and knowledge of defects did not rise above the fact that it contained a recommendation to have a structural engineer check it for stability. The only evidence as to his appreciation, in May 1992, that there was a defective design was at T, 51(1-14), which was left by the cross-examiner as ' in 1992 ' and ' in May 1992 '. There was no attempt to clarify what was the date ' After you read the report ' nor when he 'became' aware, beyond 'May 1992', and ' in 1992 '. I would conclude that it is more probable than not that Mr Bailey received the BCS document prior to 21 May 1992 and thus can be taken to have been aware of its contents prior to that date also." 92 Whether or not the cross-examination of Mr Bailey was "imprecise", as the trial judge described it, it is difficult to be sure from reading Mr Bailey's answers what specific impact the report had on him before 21 May 1992. His answers about his perceptions appear more likely to be reliable on issues of reasonableness, where precise timing considerations do not matter, than on the issue of knowledge before 21 May 1992. In part this is because Mr Bailey's answers about the specific impact of the 9 May 1992 report were based on recollection seven years after he received it. In part it is because his evidence on this subject was not given in chief, and there are signs that he was not familiar with the report when he entered the witness box. One example of this is that he could not remember that the report advised that the wall should be checked for stability by a structural engineer, and his memory was not refreshed in this respect when he was shown the report (Black 39P-U). Another example of this is that he thought Mr Aplin inspected the site before Mr Maber, not the other way around (Black 40C-J). Accordingly, in assessing what Mr Bailey knew before 21 May 1992, it is safer to rely on what the terms of the report were likely to have communicated to him than on his recollections of what they communicated to him. What were the terms of the report? 93 The Architect's submissions concentrate on specific parts of the report. In determining what the "contents" of the report were of which, the trial judge said in a finding not complained of by the plaintiffs, Mr Bailey "can be taken to have been aware of", it is necessary to read not only the specific parts of the report identified, but the document as a whole. So read, the "contents" of the document communicate the following propositions.

(a) "Overall the condition of the building is in a good to fair state" (Blue 1/67H). This, the first statement made in the document under the heading " GENERAL SUMMARY ", is of importance in establishing a context for the whole of what follows.

(b) "However, the structural side and finish in some areas could have been finished in a more 'tradesman like' manner" (Blue 1/67I). This is the second statement made. None of the complaints to which it refers and which are set out later in detail could support a cause of action against the Architect (or the Engineer) - certainly not a cause of action based on the collapse of the building in high winds.

(c) "The building has several areas which should be investigated further by a structural engineer" (Blue 1/67J). In context the "several areas" referred to, which are the four areas identified as "A)-D)", said to be discussed in paragraphs II, III and "IX" (a slip for X), are areas distinct from the work which was not "tradesman like". The advice that there should be further investigation by a structural engineer suggests that Mr Maber was not stating that there were undoubtedly defects in the roof purlins and the western wall; rather he was raising a question about that, being a question to be answered not by him but by a structural engineer. That advice, given at the outset, is repeated in paragraph II in relation to the roof (Blue 1/68F: "It is recommended that a full report/investigation by a structural engineer be undertaken for the roof") and in paragraph X in relation to brick work (Blue 1/69G: "The wall is only 230mm thick and should be checked for stability by a structural engineer"). It is repeated again in the second last sentence of the report (Blue 1/71R: "ENGINEER TO ASSESS ROOF BRIDGING AND WESTERN BRICK WALL"). Its appearance at the end is a further indication of its significance in diluting any construction of what goes before as asserting the definite existence of defects rather than the possibility of defects.

(d) The relevant parts of the report are generally couched in such a way as to suggest that matters are being raised for inquiry rather than that unequivocal and dogmatic statements of the existence of problems are being made. Thus it is said that the roof purlins "appear" to have excessive amounts of deflection (Blue 1/68C); the roof "may" not withstand wind forces (Blue 1/68D); stiffeners "may" reduce the amounts of deflection which "appear" to exist (Blue 1/68E). The one assertion which is in form dogmatic is that the "roof requires extra bracing and stiffening". When read in the context of paragraph II (which contains statements before and after that statement in the indeterminate language just set out, which involves recourse to the first three sentences of the report and to the second last sentence, and which also involves recourse to the recommendation at Blue 1/68F that a "full report/investigation" should be undertaken), that statement in substance is not a communication that a problem actually exists, but rather a communication that it may exist and that expert inquiry is necessary to determine whether it in fact does. 94 In short, it has not been shown that the trial judge was wrong in concluding that a reading of the report caused the plaintiffs to discover the defect. 95 Was he wrong in concluding that the defect could not have been discovered in the period between when the report of 9 May 1992 was read and 21 May 1992, which was at most twelve days? The trial judge expressed satisfaction that "on the evidence" an inquiry into whether the defect existed could reasonably have taken at least a month. In the appeal the plaintiffs were not able to identify any specific evidence to that effect (other than the fact, as the Architect conceded, that it actually took the plaintiffs "about a month" to obtain the first Aplin report dated 9 July 1992 - the actual period was two months). There was a quantity of evidence, however, from which a circumstantial inference could have been drawn by the trial judge using his background knowledge of ordinary life that in a world of busy engineers the plaintiffs would have had difficulty in compelling an answer in much less than a month. Thus Mr Aplin's second report was asked for on 13 November 1992 (Blue 1/96) but was not provided until 4 December 1992 (Blue 1/95-96). Mr Aplin's third report, which was supplied in answer to the 13 November 1992 request, did not arrive until 15 January 1993 (Blue 1/99-100). In its address in reply the Engineer submitted that the Aplin report of 9 July 1992 "was provided very promptly" because a letter of 23 February 1995 from the second plaintiff to Mr Rix, a chartered loss adjustor, signed by the first plaintiff's secretary (Black 84D), stated that in "July 1992" their solicitors asked for that report. It would seem unsafe to infer from a document composed two and a half years later which appears to have been based on nothing more than the 9 July 1992 report itself that the document was actually asked for within nine days of its provision. It is particularly unsafe to do so when the letter in question, though based on Mr Bailey's instructions (Black 84N-Q), consists of multiple hearsay, since it rests on Mr Bailey's secretary telling Mr Rix what Mr Bailey told her he had been told by his solicitor. Mr Bailey also said that the letter was incorrect in another respect (Black 84W-85C), though he was not cross-examined on its correctness in relation to when the 9 July 1992 report was sought. 96 Has it been demonstrated that the trial judge fell into error in the following passage (Red 66M-R)? "the question is … when [the defect] could have become manifest, in the sense of becoming discoverable by reasonable diligence. That, I am satisfied, required further reasonable enquiry of a structural engineer to constitute what is necessary for the exercise of 'reasonable diligence' in rendering the defect manifest. I am further satisfied on the evidence before me and recognising the onus is on the Defendant, that such an enquiry would reasonably take at least a month and thus would have delayed discovery till after 21 May 1992."

In my opinion no sufficient reason for doubting those conclusions has been demonstrated. 97 In short, the submissions attacking the trial judge's conclusion that the plaintiffs did not know before 21 May 1992 of the defect, and that reasonable diligence would not have revealed the defect before 21 May 1992, fail. 98 The trial judge had additional reasons, which the Architect challenged, for rejecting the submissions of the Architect on limitation (Red 63B-L and 67H-69M). In the circumstances it is not necessary to evaluate their validity.

Third Issue: Refusal by Trial Judge to Grant Leave to the Engineer to Amend to Raise a Limitation Defence 99 The limitation defence pleaded by the Architect was introduced by amendment on 28 August 1998 (Red 24K), more than eight months before the trial began on 11 May 1999. The disparity between the defences was alluded to in the plaintiffs' opening (Black 26Z-27C). The evidence closed on 19 May 1999. The matter was adjourned for oral address to 9 July 1999. Five sets of written submissions were filed by the parties on or before that date. In the afternoon of 9 July 1999, at the end of the Engineer's address at a time when the other parties had completed their addresses (save for the plaintiffs' reply: see Black 228M) and with virtually no notice to the plaintiffs (Black 223F), the Engineer indicated that it wished to seek leave to amend its defence to raise a limitations point so as to make its defence conform to the defence of the Architect. Oral argument on that question was stood over to 12 August 1999. Before that date, the relevant parties exchanged three sets of written submissions on the amendment question. The trial judge delivered an ex tempore judgment on 12 August 1999 refusing leave to make the amendment. 100 In view of this Court's conclusion that the limitations defence raised by the Architect fails, it would be futile to consider in detail whether the trial judge erred in refusing the amendment sought by the Engineer, since even if the amendment had been allowed the Engineer's contentions in support of the new matter pleaded would fail in this Court (as they would have done before the trial judge had they been permitted: Red 70C). 101 It is accordingly unnecessary to deal with the arguments advanced about the refusal of the amendment, and the grounds of appeal directed at this point are rejected. However, without deciding the matter finally, this outcome should not be taken to give any support to the view that anything urged by the Engineer validly suggests that the trial judge was wrong in the discretionary decision which he made in this matter of practice and procedure. The application was made as late as it could possibly have been made; the reasons for delay (both the delay up to 11 May 1999, and delay between 11 May 1999, when Mr Bailey gave evidence that he had read the 9 May 1992 report, and 9 July 1999) were at best only partly explained; the extra strain likely to have been caused to Mr Bailey as a natural person had the amendment been allowed pointed against allowing it; and the plaintiffs may well have been otherwise prejudiced (had the application been granted) in a manner not compensable in costs. For example, the plaintiffs may have reasoned as follows: "The Engineer has admitted liability and has taken no point on limitation; the Architect has not admitted liability and has in addition pleaded a limitation point; but we need not worry unduly about the limitation point in view of the fact that it has not been taken by the Engineer, against whom we must inevitably recover a verdict." There were factual issues about "reasonable diligence" which the plaintiffs may well have fought differently had the Engineer raised the defence in good time. An example is thrown up by the Engineer's reliance in its address in reply on the appeal on the second defendant's letter of 23 February 1995 to Mr Rix, the chartered loss adjustor, which it was said suggested that the first Aplin report was sought and obtained in a period of no more than nine days (Blue 1/163T). The relevant passage of the letter stated: "In July 1992, our solicitors at the time, Peedom Brodie & Ward, asked [Mr Aplin] to prepare a [structural] engineer's report as part of [preparation] for a cross claim against the builder … (see Document 11)."

Document 11 does not appear to be attached. The Engineer's point is that since Mr Aplin's report was dated and hence probably provided on 9 July 1992, and since the quoted passage said the plaintiffs' solicitors asked for it in July, it cannot have been asked for earlier than 1 July, and hence was supplied in no more than nine days. That reasoning depends on the correctness of the statement that the solicitors asked for the report in July. The assertion by the writer of the letter that it was asked for in July may have been based only on a process of hazy inference from the fact that the report was dated 9 July 1992. Had the Engineer been raising a limitation defence, counsel for the plaintiffs may well have sought evidence from the solicitor for the plaintiffs on the question of when in fact he asked for the report: that evidence might well have revealed that the 23 February 1995 letter was wrong and that in truth significantly more than nine days had passed between the time when the report was sought and the report was received.

Orders 102 The appeal and cross-appeal should be dismissed with costs. 103 Accordingly, the following orders are proposed.

2. The appellant is to pay the respondents' costs of the appeal.

4. The cross-appellant is to pay the respondents' costs of the cross- appeal.

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