Springfield Land Development Corporation v Melisavon Pty Ltd [2013] QSC 228

**[1] This application by the defendant for summary judgment, pursuant to Uniform Civil Procedure Rules r 293, turns on a discrete question as to whether the plaintiff's claim in this proceeding is statute barred.

[2] The proceeding was commenced by a claim and statement of claim filed on

16 June 2011. The claim is for damages for negligence, and accordingly, by operation of s 10 of the Limitation of Actions Act 1974, the claim will be statute barred if the cause of action arose prior to 16 June 2005 (i.e. the date six years prior to the commencement of the proceeding).

[3] The plaintiff's claim, as pleaded in the amended statement of claim filed 21 May 2012 ("the ASOC"), can be summarised as follows:**

(a) The plaintiff is, and has at all material times been, the lessee of certain land at Springfield described in the ASOC as "the Clubhouse Site";

(b) The defendant was in the business of providing civil and structural engineering consultation services;

(c) In 2000, the plaintiff and another company, Medallist Golf Holdings Pty Ltd ("Medallist"), entered into a joint venture for the development of a residential golf course community;

(d) In 2000, the plaintiff and Medallist engaged the defendant to provide structural engineering consulting services and project management services associated with the development of the residential golf course community;

(e) In 2000, the plaintiff and Medallist engaged the defendant "to design a premier, two-storey golf clubhouse ('the Clubhouse') and surrounding pavements, to be constructed on the Clubhouse Site ('the Design Contract')."[1]

(f) The Design Contract had express or implied terms that:

(i) the defendant would perform its obligations under the Design Contract to the standard of a reasonably competent civil and/or structural engineer exercising reasonable care and skill;

(ii) the design of the Clubhouse would be fit for the purpose of operating a premier golf club;

(iii) the defendant would design the Clubhouse in accordance with good and sound engineering practices and principles.

(g) In 2000, the defendant commissioned, and subsequently received, a geotechnical report which informed the defendant, inter alia, that the soil beneath the proposed building area for the Clubhouse was susceptible to high to extreme amounts of "ground heave" due to varying moisture conditions, that the estimated movement of soil in the area due to seasonal moisture variation was between 15 millimetres and 120 millimetres, that it was essential for the design of the Clubhouse that the slab on ground be supported by high level strip footings which could tolerate potential movement of up to 85 millimetres, and that the design should include drainage measures to ensure the sub-grade and pavement surrounding the Clubhouse did not become saturated.

(h) The defendant completed its design of the Clubhouse in mid-2003.

(i) The Clubhouse was constructed materially in accordance with the defendant's design.

(j) In breach of the duty of care owed by the defendant to the plaintiff, the design failed to specify, inter alia, a design for the lower slab that could tolerate "ground heave" beneath the Clubhouse exceeding about 40 millimetres. (Numerous other allegations of negligence in connection with the design are particularised in the ASOC, but it is sufficient to refer only to this one for present purposes.)

(k) On the termination of the joint venture in November 2006, Medallist transferred all of its interest in the joint venture, including its interest in the Clubhouse, to the plaintiff.

[4] The loss and damage said to have been suffered by reason of the defendant's breach of duty is then relevantly pleaded in the ASOC as follows:

"17. Since the construction of the Clubhouse, the reactive soil beneath the Clubhouse has expanded by up to 80mm ("the Ground Heave").

18. In 2009 and 2010, the lower level slab, adjoining non-structural walls and services of the Clubhouse, and surrounding pavements were damaged or failed, and continue to be damaged or fail, as a consequence of the Ground Heave, the further particulars whereof are as follows:

(k) the lower level slab shows various areas of heaving, particularly through the buggy parking bays and the spike bar, and at points parallel and midway between the strip footings (where cracking is evident); (Collectively "the Defects")

(a) caused the lower level slab of the Clubhouse, adjoining non-structural walls and services of the Clubhouse, and surrounding pavement to be susceptible to damage or failure by:

(b) in the premises of the allegations contained in this paragraph, caused the Defects.

20. As a consequence of the allegations contained in paragraphs 1, 3, 4 and 16 of this pleading, the plaintiff will be required to, and will, rectify the Defects."

**[5] It is then alleged that "the plaintiff has suffered, or will suffer, loss and damage rectifying the Defects in a sum not less than $866,258".

[6] The limitation point is expressly raised in para 18(b) of the Amended Defence, which contends that "the damage first occurred in late 2003/early 2004 and as such the claim is out of time more than six years having passed since the cause of action arose". (See also para 23 of the Amended Defence.)

[7] In its Reply, the plaintiff joined issue with this limitation defence, contending (para 16(b)) that:**

(a) The Defects did not become manifest until 2009 and 2010;

(b) The plaintiff did not, and did not reasonably, discover the Defects until 2009 and 2010.

[8] Counsel for the defendant argued that this was the "clearest of cases" for the summary determination of a limitation defence. Two arguments were initially advanced:

(a) Insofar as the plaintiff's pleaded case is for rectification of certain visible defects, it is clear on contemporaneous documents that some of those visible defects had appeared in 2004. This marks the point when the limitation period started to run, and the claim in this proceeding, which was commenced in 2011, is out of time;

(b) Even if the plaintiff's case is one for economic loss arising as a consequence of the discovery of a latent defect, the evidence is clear that cracking was occurring more than six years before the claim was filed, it was known that this was due to the Clubhouse not coping with "ground heave", and the cracking, of itself, was sufficient to start time running for the six year limitation period.

(a) The claim for the rectification work required to the Clubhouse is a claim for pure economic loss;

(b) The cause of action in such a claim accrued when the plaintiff first became aware, or with reasonable diligence would have been aware, that it had sustained loss because of the defective design of the Clubhouse and surrounds;

(c) There is no evidence that any of the plaintiff's representatives actually knew that the plaintiff had sustained loss because of the defective structural design of the Clubhouse and surrounds prior to 16 June 2005;

(d) There is a factual inquiry for trial as to whether the plaintiff, exercising reasonable diligence, ought reasonably have become aware prior to 16 June 2005 that the plaintiff had sustained loss by reason of the defective structural design of the Clubhouse and surrounds.

**[10] In oral argument before me, counsel for the defendant usefully focused the argument to one question - whether a cause of action for negligence in respect of economic loss suffered as a result of a latent defect arises when the loss first occurs or whether it arises at a later point when a plaintiff becomes aware that loss has been suffered, and that the loss has been caused by the defendant's defective design. In posing this question, the defendant accepted that, notwithstanding the way in which the ASOC was framed, the plaintiff's case was one of loss resulting from a latent defect caused by the defendant's negligence.

[11] In support of its application for summary judgment, the defendant relied on affidavits by Mr Gary Nagel and Mr Clayton Bray.

[12] Mr Nagel is a civil engineer and between 1 July 1986 and 30 June 2005 he was a director of Karamisheff Nagel Pty Ltd as trustee for the Karamisheff Nagel Unit Trust. (Karamicheff Nagel Pty Ltd is the defendant's former name.)

[13] In his affidavit, Mr Nagel noted that one of the key issues in the proceeding relates to "ground heave" which he described as referring "to the swelling or upward movement of the soil as a result of an increase in the moisture content of the soil".[2]

[14] He said that the defendant was engaged to design the civil and structural aspects of the Springfield Golf and Country Club and, under a separate retainer dated 16 June 2000, to provide structural engineering consultancy services with respect to the Clubhouse. Mr Nagel was the defendant's project director and was responsible for the overall project delivery. He also had a direct role in the civil design for the project. He was on site on a regular basis during construction, either as requested by the builders, the plaintiff or the architect, or on random inspections. Mr Andrew Boyce, a structural engineer, was an associate director of the defendant who was responsible for the structural works related to the Clubhouse.

[15] Mr Nagel referred to obtaining a geotechnical report from Bowler Geotechnical Pty Ltd in relation to the soil conditions on site. He then described the process of producing the civil drawings for construction of the Clubhouse, saying that during the construction he dealt with Mr Dayan Jayasekera, who was the plaintiff's project manager, and Mr Andrew Whitson, who was the plaintiff's project director. He also referred to a letter of appointment dated 5 April 2000 by which the plaintiff engaged Ainsley Bell & Murchison Architects Pty Ltd as the architect for the project. Leighton Contractors ("Leightons") were engaged by the plaintiff to construct the Clubhouse, but Mr Nagel did not know the date on which Leightons were appointed.

[16] Mr Nagel described the progress of site meetings, noting that the defendant, as a secondary consultant, was not required generally to attend the site meetings, and only did so if invited.

[17] Mr Nagel said that one of the first things that occurred during construction of the Clubhouse, before the slab could be poured, was to prepare the ground profile ready for piling and ground beam trenching. He referred to site minutes in that regard dated 29 April 2003. He also said that the plaintiff was provided with a copy of the geotechnical report which had been supplied by Bowler Geotechnical and said that he was "aware at the time that Andrew Boyce had ongoing discussions with Bowler Geotechnical and the plaintiff about the soil conditions". He said that all of the parties were aware of the soil conditions and potential for ground heave, and referred in that regard to minutes of Site Meeting No 5 dated 16 June 2003. Mr Nagel then stated:**

"29. Based upon the Minutes of Site Meeting No. 11 dated 11 September 2003 which record that KN had undertaken an inspection of the service yard and associated suspended slabs to date, I believe that the slab for the Clubhouse was poured in September 2003. I do not know the exact date. I know that it was prior to October 2003, however, because by November 2003, cracking was identified to the ground floor slab in the buggy storage area, so it must have been poured before then. Now produced and shown to me and marked Exhibit G is a true copy of the Minutes of Site Meeting No. 11 dated 11 September 2003.

1. In particular, as set out in paragraphs 31 to 48 of my affidavit, by November 2003, it was apparent to me, and also Andrew Boyce who informed me and I verily believed that it was apparent to him, that following a joint site inspection by the Plaintiff, Architect, Builder and KN of the identified cracking in the slab that the consensus of the parties was that the ground had heaved causing the basement slab to crack. I recall that the cause of the cracking being due to ground heave was identified due to the levels in the slab confirming an upward movement in the area of the cracking."

(a) an email from Mr Bray of the architects to Mr Boyce of the defendant on 10 November 2003 in which Mr Bray asked Mr Boyce to telephone him as soon as possible to discuss a long crack which had presented itself down the middle of the lower floor of the golf cart store. The email said:

"[Leightons] believed that once the carpark/Porte Cochere [sic] is sealed the land will dry out and maybe even shrink. However, we need your expertise, as we need to seal the Lower Floor slab and need to know what to use to allow for any anticipated shrinkage/cracking."

(b) the minutes of site meetings held in November 2003 in which there was express reference to the lower floor slab "heaving", with an arrow then pointing to the word "shrinkage" (meeting of 10 November 2003) and there being a large crack through the lower floor cart store which had been inspected by Mr Boyce and which was "most probably heave related - remediation plan to be resolved" (site meeting on 17 November 2003).

**[19] Mr Nagel said that on 24 November 2003, Mr Bray sent an email to Mr Nagel and Mr Boyce regarding the lower floor slab crack and asking for a report on its likely cause. Mr Nagel said that he did not think they ever provided such a report because the issue was addressed in a series of site inspections and meetings.

[20] Mr Nagel then referred to a site meeting on 24 November 2003, which again referred to the large crack through the lower floor cart store. The remedy proposed was a concrete seal "to be light grey colour to disguise [the] crack" and that remediation was proposed when the wet season was finished.

[21] The minutes of a site meeting held on 1 December 2003 again referred to that large crack through the lower floor cart store, saying it appeared to be stable and referring to the concrete seal re-application.

[22] Mr Nagel said that construction of the Clubhouse was completed in December 2003, in time for its official launch, and on 19 December 2003 the architect issued a certificate of practical completion. On 17 December 2003 the architect had issued a preliminary defects list to Leightons and the plaintiff's project director, Mr Whitson, and its project manager, Mr Jayasekera. That preliminary defects list included references to cracking to the walls at the corner of the bag store and to the fact that the sealing of the crack to the floor in the cart park was to be reviewed.

"55. On or about the 28 June 2004, I undertook a site inspection with the plaintiff's Project Manager, Dayan Jayasekera, Vic Bloomfield of Leightons and other project consultants.

1. We confirmed the following at the site inspection:-

(a) uplift in the ground below the Clubhouse had occurred causing extensive cracking in the basement slab in the golf cart storage area;

(b) the cracking occurred generally in the midspan of the slab between the columns and generally along the east - west axis;

(c) uplift in the external lower terrace members area at the north east corner of the Clubhouse had occurred causing:-

(i) extensive uplift and cracking in the external exposed aggregate concrete slab; and

(ii) internal cracking in the stairwell to the left of the front entry and club room near the porte cochere [sic] area;

(d) uplift in the external slabs within the porte cochere [sic] had occurred causing:-

(i) surface cracking and significant level difference near the loading bay; and

(ii) diagonal cracking to the servery off the kitchen wall.

1. The reason for the uplift and resultant cracking which was observed was discussed. I can remember saying words to the effect that:-

'... all of the cracking appears to be a result of the ground heaving underneath the slabs as it is saturated and has swelled. It looks like this is due to the extensive irrigation as all of the gardens adjacent to these areas are saturated. The irrigation is obviously excessive and the subsoil drainage is not allowing the water to get away. The subsoil drainage needs to be checked for damage and to make sure they all have free outlets to drainage structures. It is possible that the drainage paths to the subsoil drainage have been blocked when the landscaping was carried out at the end of the Project as it is essential that the drainage material is carried up to near the surface so that the water can drain away and not blocked by the landscaping works. This is all similar to the garden bed along the northern face outside the buggy storage area where the garden was totally saturated and ponding water because the subsoil drains had not been completed properly which led to the build-up of water under the ground slab as I identified in my civil defects inspection.'

'I recommend that all of the subsoil drainage needs to be checked to ensure it is working and hasn't been affected by the landscaping works or the final works prior to the opening. Until these have been checked, I think it is essential that the irrigation be turned off to most of these areas until the drainage is checked, the gardens certainly don't need any more water at this time.'"

[24] Mr Nagel referred to a site inspection he conducted on 24 November 2004 with the plaintiff's project manager, Mr Jayasekera. Mr Boyce of the defendant was also in attendance, and after the site inspection Mr Boyce sent the plaintiff a letter in relation to the crack in the lower level slab to the buggy parking area which relevantly stated:

" - We believe that the crack has resulted from swelling in the expansive soils under the slab due to an excessive wetness from the adjacent landscaping area.

- Subsoil drainage to these landscaping areas has been in place for approximately six months. In this period the width of the crack has not changed significantly suggesting that the soil has reached an equilibrium moisture content."

**[25] In his affidavit, Mr Nagel also referred to email correspondence he had with the architect in December 2004 in which reference was made to the slab cracking and other cracking which had appeared in the structure, and also referred to references to such cracking in an architect's inspection report dated 24 November 2004.

[26] Mr Nagel said that the 12 months defect liability period for the project was due to expire on 19 December 2004. In December 2004, towards the end of the defects liability period he attended the architect's "off maintenance" inspection, as did representatives from Leightons. Following that inspection, the architect issued a defects liability period expiration inspection notice to Leightons, which included confirmation of cracking in the slab, cracking in the entry/porte-cochère area and cracking in the block external wall. The notice stated with respect to the buggy parking area: "Crack between rows of columns has heaved (crack width appears to have remained similar during 2004) - to be buffed and resealed".

[27] In March 2005, Leightons wrote to the architect advising that they had rectified the majority of the defects included in the notice, but that there were a number of items which Leightons did not consider were caused by defective workmanship or materials and should be treated as variations. These latter items included "works to make good render in loading dock area (render damaged by undue structural movement)", and suggested rectification of cracks in the buggy park by coverage with a high build trafficable membrane.

[28] Mr Nagel's affidavit then set out further correspondence which passed particularly between Leightons and the architect with respect to these works. On 2 June 2005, Mr Nagel sent an email to the architect stating:**

"Putting aside the ongoing movement at the asphalt / concrete interface where the level difference is increasing (apparently due to heave of the concrete) the defects previously identified for the civil works are definitely considered to be Leightons' responsibility to repair and we note that these items have not been attended to. We consider that these items should be addressed as a matter or urgency.

With respect to the asphalt / concrete interface ... [i]t is considered that the level difference is predominantly due to heave of the concrete slab and a much lesser impact of settlement / subsidence of the flexible pavement. It is also considered that the most likely cause of the heave is due to continual water penetration into the subgrade soils, either from irrigation, leaking service and / or failure of the subsoil drainage ..."

[29] On 21 June 2005, Leightons advised Mr Nagel that, inter alia, Leightons "do not accept any responsibilities relating to the 'ground heave' which is a design and maintenance issue". Mr Nagel responded to that email, and copied his response to Mr Jayasekera, stating that it was Mr Nagel's view that:

"The ground heave is due to penetration of water from irrigation and/or leaking watermains or services. This also indicates that the subsoil drainage is not working or has been affected by the landscape. Accordingly, we have recommended investigation by Bowler Geotechnical to advise on the matter."

**[30] Mr Nagel went on to identify further correspondence and meetings in which he says, in brief, that it was identified by the parties (including the plaintiff) that the ground heave was a result of excessive water under the slab causing expansion of the reactive soils.

[31] Mr Nagel also said that he had a meeting with Mr Whitson on 24 May 2006 in which Mr Whitson advised, inter alia:**

- that he had signed off on the Clubhouse construction and that the plaintiff had adopted the view that the ground heave was far greater than anybody had anticipated;

- that the plaintiff had released the bond to Leightons and would be treating any further issues as maintenance issues and would not be worrying about minor cracking.

**[32] Specifically in response to the allegations made in the ASOC, Mr Nagel said that, to the best of his knowledge, all of the ground heave under the Clubhouse "occurred very early on, during or immediately following construction in 2003/2004" and that "the ground heave caused the lower level slab to uplift in turn causing it to crack" and that "this was first identified in November 2003".

[33] Specifically in relation to the allegation made in paragraph 18(k) of the ASOC, Mr Nagel said:**

"This damage was first observed by the Plaintiff, Builder, Architect and the Defendant in November 2003 and identified as having been caused by greater than anticipated ground heave. Repairs were carried out and no further damage has occurred.

The cracking to the buggy storage area was attributed at that time to the large landscaped area along the northern face which was saturated with no provision for subsoil drainage. Subsoil drainage was installed by Leightons and the cracking was sealed and the area noted for ongoing monitoring by the Plaintiff.

My inspections of the lower level slab in October 2010 and June 2011 indicate that no further ground heave movement has occurred since 2003 / 2004."

[34] Mr Clayton Bray is an architect who was employed by the architects retained by the plaintiff in early 2000 to provide architectural services with respect to the construction of the Clubhouse. Mr Bray also referred to the site meetings which were held, and says that he attended most if not all of those meetings. Mr Bray said:

"6. Because of the nature of the site and the ground conditions, I recall that even before the slab was poured Andrew Boyce of [the defendant] was concerned because it was raining a lot and he was concerned about the ground becoming saturated causing the soil to expand and lift. This is what the [defendant] commonly referred to as "ground heave". This concern is recorded in Minutes of Site Meeting No. 5 dated 16 June 2003."

[35] Mr Bray recalled being notified of the appearance of a crack down the middle of the lower floor golf cart store of the Clubhouse. He said:

"13. It was a very large crack. It must have happened very quickly because by this time we were holding weekly site meetings and it was not there during the previous inspection.

1. The crack was massive, and ran almost the entire length of that section of the slab. Not only had the slab cracked but it had also lifted at the edges of the crack - the slab had basically cracked and opened up. I would say that the crack was about 10mm wide and that the slab, at the edges of the crack, had lifted about 20mm from the level at the columns either side.
2. Concrete cracks all the time and it is not unusual to see hairline cracks appear. In fact, it's unusual not to. This was no ordinary crack however - I have never seen a crack that large. I recall that all of the parties were immediately very concerned. It was considered a major issue and it was the subject of a lot of emails and was discussed and monitored at every site meeting thereafter."

[36] Without reciting at length the detail contained in Mr Bray's affidavit, it is sufficient to note that he referred to the same minutes of site meetings, emails and other correspondence as referred to in Mr Nagel's affidavit. He described significant cracking occurring in the structure saying (at para 33):

"The slab cracking was the first thing that happened. The next thing that happened was zigzag cracking through the block work in the golf cart buggy wash area. I can't remember the sequence from there but basically cracking and opening of joints started to occur around various parts of the Clubhouse over the next 3 - 4 months. It seemed as though it was working its way outwards."

**[37] Mr Bray also described the inspection and issuing of the notice prior to the expiration of the defects liability period and the dealings with Leightons after those defects had been notified.

[38] The plaintiff relied on an affidavit by Mr Whitson, who is now no longer employed by the plaintiff but who was, relevantly, the plaintiff's project director in respect of the construction of the Clubhouse. Mr Jayasekera reported to him.

[39] Mr Whitson reviewed the defendant's involvement in the project - it is sufficient for present purposes to note that he disagreed with any suggestion that the defendant's "involvement on the site or in respect of structural elements was anything less than significant".[3]

[40] Under the heading "Dealing with Ground Heave Generally", Mr Whitson said:**

"13. We knew from the beginning of this project that the site would be subject to ground heave. Consequently, the mention of heave in the site meeting minutes of 16 June, 2003 (Nagel affidavit paragraph 27) is not unexpected. A key element of KN's services was designing for and accommodating this heave, which was an inevitable characteristic of the site.

14. I refer to paragraphs 29 - 48 of Mr Nagel's affidavit in respect of cracking to the floor of the cart barn. This area is a suspended slab built on bored piers, with the void former underneath. The intent of KN's design is to provide sufficient separation between the slab and the underlying ground so that the inevitable movements in the ground level, due to the reactive nature of the soil, will not impact upon the slab itself."

[41] Mr Whitson described the course of construction, and said that on completion, the quality of the Clubhouse building was "reasonable". He did not recall any major issues at that time, and said that the first defect issues he recalled arising were cracks in the buggy parking area and movement in the driveway joins. He said:

"19. Neither of those issues initially caused me to be concerned about any defects in the design or construction of the clubhouse. They just appeared to be normal minor settlement and shrinkage issues. Concrete shrinks and cracks - that is what it does. Reinforcing steel normally controls the width of the cracks. Those issues arose late 2003 or early 2004."

**[42] He then referred to the defect liability period, saying that in his experience it was typical for a building project to be handed over with minor defects and for minor defects to arise over the first few months of the new building's life. Mr Whitson described the process which was followed for the rectification of such defects.

[43] In his affidavit, Mr Whitson referred in some detail to the cracking which had occurred. He said that insofar as Mr Nagel suggested that the plaintiff was aware of "underlying defects to the building" from 2003-2004, this was just not the case. He said:**

"22. As noted above, there was a standard defects process. The range of defects at the clubhouse, both on completion, and at the end of the defects liability period, were not out of the ordinary. Neither their nature nor their number caused me any concern. All of the matters covered in the Nagel affidavit were just defects amongst others that we treated in the normal way. From my own inspections over time, there was nothing that rang alarm bells. We got ABM and KN to list and consider the defects, and secure remediation by the contractor. I mainly had Dayan monitor this for me and for SLC.

23. Taking an example, the fact that there may have been loose stones around some of the clubhouse pillars was not something that would make me concerned about an underlying defect. Although I cannot recall that item in particular, I would have expected us or ABM to simply require the contractor to investigate and repair those loose stones.

24. Although there was the occasional mention of heave related to the lower floor slab, nobody was clear about this initially. The advice we got on this was direct from KN. In respect of this defect and others, I remember Gary Nagel always blamed these on construction issues (eg void former failure during construction, drainage not installed properly or at all), operational issues (mainly overwatering), but never did he suggest that there was any underlying problem with structural design of either the lower slab or the external elements.

25. He always put this back on the contractors. I remember the dispute arising with them denying responsibility for these issues. We followed Gary's advice in having him investigate with Leighton, and particularly his shift of focus to subsoil drainage issues. I recall the fact that Leighton proved through those inspections that they had completed works in accordance wit the drawings and specifications. It was after this time that we gave final sign off and released their bond."

[44] Mr Whitson then described the process which was followed with respect to remediation of the cracking in the cart barn floor, and of the correspondence which passed between the defendant, the builder and the plaintiff in connection with that cracking in 2004 and 2005. He said, in effect, that ultimately the builder rejected any liability for investigation and remediation of cracking or movement related issues, and this caused further investigation, led and directed by the defendant, stretching on for a period of time. Mr Whitson said that the "only focus was inadequate drainage and overwatering, which was being blamed on the contractor, and investigated by [the defendant] for direct remediation".[4] He continued:

"At no time up to this point did I believe that there was an underlying defect in the construction of the building related to defective design. I recall that the damage to the slab and the complex generally was relatively minor at this time, and not of a nature than [sic] caused me to think further steps should be taken. We were following a normal defects resolution process, albeit that there was some ongoing dispute. We had KN managing the matter, which was blamed on the contractor due to irrigation and drainage issues. Those ongoing investigations were non-urgent, and were directed at ensuring the contractor had performed their duties, and that the final fix was adequate and permanent. Even then, these potential causes appeared satisfactory following investigation."

**[45] Mr Whitson's affidavit then dealt with other specific areas of cracking referred to in the defendant's material. It is not necessary to deal with Mr Whitson's comments in detail - it is again sufficient to note that he said that at no time were these regarded as design issues, but were dealt with by the defendant as contractor issues related to drainage or overwatering.

[46] Mr Whitson's response to the allegation in para 18(k) of the ASOC was as follows:**

"Springfield had KN investigate these cracks. They were considered minor and, after monitoring, stable and not an ongoing issue. KN was advising Springfield that cracking damage was likely caused by defects other than inadequate design. A remedial investigation process was undertaken after Leighton rejected responsibility for these cracks on 31 March, 2005, and was ongoing until at least October, 2005."

**[47] Mr Whitson conceded that he had had a conversation with Mr Nagel regarding the finalisation of Leighton's works after the end of the defects liability period, but denied that there was any conversation with Mr Nagel "to the extent that the ground had heaved far more than anybody had anticipated; that nobody would be held responsible for that heave issue; and that future issues regarding drainage would be dealt with as maintenance issues".[5]

[48] The plaintiff also relied on an affidavit by Mr Robert Sharpless, who is the deputy chair of Springfield Land Corporation. Mr Sharpless had relevantly high level overview of the Clubhouse construction, being the plaintiff's representative at a joint venture level. Mr Sharpless did not, for example, attend any site meetings nor undertake any inspections in the course of Clubhouse construction. Mr Whitson was responsible for day to day matters. Mr Sharpless said that he expected to be advised by Mr Whitson if Mr Whitson had any concerns that there were underlying structural issues with the building or its surrounds. No such concerns were raised with Mr Sharpless. He recalled being aware that there was some minor cosmetic cracking in some of the concrete, but understood that this was simply the nature of concrete. He said that at the time, no-one suggested that this indicated an underlying defect or ongoing issue.

[49] Mr Sharpless described the ongoing degeneration of defects at the Clubhouse, and the fact that matters came to a head in about 2010. At that time, Mr Sharpless undertook an inspection of the building, and agreed with the manager that the issues affecting the Clubhouse were more than minor cosmetic matters. It was at that time that further investigations were undertaken with respect to the underlying issues.

[50] Counsel for the defendant acknowledged the conventional reluctance by the courts to determine limitation questions summarily on interlocutory applications except in the clearest of cases,[6] but submitted nevertheless that this is such an exceptional case. The central planks of the defendant's argument (on the basis that the plaintiff's case is truly one of damage caused by latent defect) were that it was clear, even on the plaintiff's evidence, that cracking was apparent more than six years before the proceeding was commenced, that it was known that this was caused by ground heave, and that it did not matter that the plaintiff did not know that the Clubhouse was not coping with ground heave because of a design defect. The defendant's argument was that, as a matter of law on the uncontentious facts, the cause of action had accrued, and time started to run, when the cracking became apparent shortly after the Clubhouse was built.

[51] The defendant relied particularly on the New South Wales Court of Appeal decision in Sheldon v McBeath.[7] In that case, the plaintiff had engaged the defendant architect in relation to the construction of a house. The foundations were constructed by a builder in December 1982 and January 1983. The defendant architect certified for practical completion in September 1983. Shortly afterwards, cracks appeared in the house, and the plaintiff commenced proceedings against, inter alia, the defendant architect in June 1989. The matter was initially referred to a referee, who found that the cause of the defects was that the building's footings had not been properly constructed. At trial, it was found that the defendant architect had a duty, inter alia, to ensure that the footings had been constructed in accordance with the engineering plans and that the defendant had breached this duty when the footings were constructed in December 1982 or January 1983. It was held at trial that, whilst this breach occurred more than six years before the proceedings were commenced, the defendant had a continuing duty which continued at least until the time of practical completion, and therefore the plaintiff's claim was not statute barred.

[52] In the Court of Appeal, Handley JA (who dissented in the outcome) examined the matter from the perspective of the plaintiff owner's claim in negligence, noting that the cause of action was complete and time started to run as soon as some damage had occurred. The question was, "when did the owner first suffer damage?". Handley JA said[8]:**

"The relevant principles were summarised in Jobbins v Capel Court Corp Ltd & Anor [1989] FCA 538; (1989) 25 FCR 226 at 228 in a passage later approved in Magman International Pty Ltd & Ors v Westpac Banking Corp [1991] FCA 41; (1991) 32 FCR 1 at 11:-

'... where the incurring of damage is an essential element of a cause of action, the suffering of some damage (the other elements of the cause of action having already occurred) will in general start time running even although the damage continues to grow. The running of time is not suspended until all the damage which will be suffered has ceased to flow, nor does further damage constitute a fresh cause of action.'

Time commences to run when the cause of action is complete even if the plaintiff is not aware of the damage. Cartledge v Jopling & Sons Ltd (1963) AC 758, Pirelli General Cable Works Ltd v Oscar Faber & Partners (1983) 2 AC 1 and Hawkins v Clayton & Ors (1988) 164 CLR 539.

In the present case the owner suffered damage because his house was erected on inadequate foundations and differential settlement later caused consequential damage to the house. However this was economic and not physical damage. See The Council of the Shire of Sutherland v Heyman & Anor [1985] HCA 41; (1985) 157 CLR 424 at 503-505, 512; Hawkins v Clayton & Ors (1988) 164 CLR 539 at 543, 587-8, and Murphy v Brentwood D.C. [1991] UKHL 2; (1991) 1 AC 398 at 466-8, 475, 480-1, and 484. These authorities establish that where latent building defects later cause consequential damage to the structure economic loss does not accrue until the defects are 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 decided that the owners did not suffer economic loss when they acquired the houses without knowledge of the defective foundations. I agree with the Appeal Division in Pullen & Anor v Gutteridge Haskins & Davey Pty Ltd [1993] VicRp 4; (1993) 1 VR 27 at 68-69 that no distinction is to be drawn for this purpose between an original owner and a subsequent owner such as the plaintiffs in Sutherland Shire Council v Heyman and Murphy v Brentwood D.C.

Where a building has been properly constructed in accordance with a faulty design the owner will not suffer economic loss until the faults are discovered or visible consequential damage occurs. Pullen v Gutteridge Haskins & Davey was such a case and so were Pirelli v Oscar Faber and Murphy v Brentwood D.C. However there was no claim here of negligent design."

**[53] Handley JA was the only one of the judges in that case to consider the plaintiff's case in tort - Priestley JA, with whom Mahoney JA agreed, considered the matter under the rubric of contract, and examined the nature and extent of the architect's contractual obligations to the plaintiff.

[54] Handley JA found that the defendant architect's continuing failure after February 1983 to inspect the footings was nothing but a failure to remedy the past breach and was not the commission of any further breach of duty. His Honour considered, however, that the architect was guilty of fresh breaches of duty when he negligently advised that practical completion had occurred and approved final payments to the builder. His Honour said:[9]**

"[The architect's] negligence in failing earlier to properly inspect the foundations caused him to commit breaches of his duty of care at this later time. It follows that the owner's causes of action in tort are statute barred except for those that accrued in September 1983."

**[55] Counsel for the defendant in the present case relied heavily on Handley JA's explanation of the reason why economic loss is not suffered until a latent defect manifests itself, and his Honour's references to defects being discovered or visible damage occurring. This, it was argued, was precisely what happened in this case when the cracking became visible shortly after the Clubhouse was constructed.

[56] There is, however, an important distinction. In Sheldon v McBeath, there was no allegation of defective design by the defendant architect; the present case is expressly one of negligent design by the defendant.

[57] The determination of the time when the present plaintiff's cause of action against the defendant accrued is not, in my view, as cut and dried as is suggested by the defendant.

[58] In Pullen v Gutteridge Haskins & Davey Pty Ltd,[10] the Victorian Full Court was concerned with a case in which the respondent engineers were engaged to investigate and submit reports on designs and specifications for reconstruction of a swimming pool complex. There were particular known issues with the ground under the complex, and the engineers provided, amongst other things, designs for the structure and then supervised construction. Work on the project commenced in 1978 and was completed in 1980. Problems occurred soon after the centre was put into commission and increased over the following years. At the request of the appellant, the engineers investigated each series of problems and reported that the majority of the building faults were as a result of differential settlement of the structure, but were within the predicted range. By November 1985, the appellants had engaged an independent expert, and the proceedings against the engineers were commenced in 1987. One of the engineers' defences was that the claim was statute barred.

[59] The Victorian Full Court (Brooking, Tadgell and Hayne JJ) applied the general proposition, derived from Sutherland Shire Council v Heyman[11] and Hawkins v Clayton,[12] that in cases of pure economic loss due to a latent defect in design, time begins to run when the latent defect first becomes known or manifest. Their Honours observed that time began to run in that case when the latent defect first became known or manifest, and that the latent defect was the inadequacy or unsuitability of the footings. [13] Their Honours emphasised the point that it is the latent defect which must become known or manifest, saying:[14]**

"Another important matter to be borne in mind, whether one is considering knowledge or manifestation, is that what must be known or made manifest is the inadequacy of the footings, and that on the facts of this case settlement in general and differential settlement in particular does not necessarily bespeak inadequacy of the footings."

[60] In Cyril Smith & Associates Pty Ltd v The Owners - Strata Plan No 64970[15] the New South Wales Court of Appeal observed that Pullen's Case: [16]

"... is authority for the proposition that even where actual damage caused by the latent defect in the building has been suffered more than six years before the commencement of the litigation, the cause of action does not accrue until the link between the physical manifestation and the underlying defect is known or ought to be known. Such a principle would constitute an exception to the rule that a cause of action in negligence accrues when material damage is first suffered." (emphasis added)

[61] The New South Wales Court of Appeal went on to consider the potential consequences of the existence of such an exception, but relevantly concluded:[17]

"Despite considerations of this kind, it is necessary for this Court to follow the decision of the Appeal Division in Pullen, unless satisfied that it was clearly wrong. Not only is it not clearly wrong, but it is not necessarily wrong in any sense: all that can be said is that it appears to involve a development of the general law which may not find unequivocal support in the authorities upon which it relied."

**[62] Given that, as has expressly been observed by the New South Wales Court of Appeal, the test propounded in Pullen's Case is not clearly wrong, it cannot be said that, on the facts on the present case, determination of the time when the limitation period commenced is simply confined to an identification of the time when the cracking first appeared. The further questions which arise under the Pullen test call for a factual investigation as to when the present plaintiff first became aware, or ought to have become aware, that it had sustained loss because of the alleged defective design of the Clubhouse and surrounds. That sort of factual determination is clearly not one which is amenable to determination on a summary judgment application. That is even more so given the conflicting evidence, which I have outlined above, as to what was known when by the parties with respect to the nature and cause of the cracking in the Clubhouse.

[63] It necessarily follows that this is not a case in which it can be said, for the purposes of r 293, that the plaintiff has no real prospect of succeeding on all or part of its claim because its claim is necessarily statute barred. Nor can it be said that there is no need for a trial of the plaintiff's claim.

[64] Accordingly, the application for summary judgment should be dismissed.

[65] In my view, it is appropriate for the costs of this application to be reserved. Notwithstanding that this is not an appropriate case for summary judgment, the question of the availability of the limitation defence will necessarily turn on, amongst other things, questions of fact to be determined at the trial. In those circumstances, I think it appropriate in the present case simply to reserve the costs of the summary judgment application.

[66] Accordingly, it will be ordered that the defendant's application for summary judgment be dismissed, with costs reserved.**

[6] Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 533.

[7] (1993) Aust Torts Reports 81-209.

[10] [1993] VicRp 4; [1993] 1 VR 27.

[11] [1985] HCA 41; (1985) 157 CLR 424.

[15] [2011] NSWCA 181.