SWEENEY & ANOR v COFFEY PTY LTD & ORS

LOWER COURT JURISDICTION : Supreme Court - Common Law Division LOWER COURT FILE NUMBER(S) : CL 16433/91 LOWER COURT JUDICIAL OFFICER : Hidden J

A J Meagher SC/P J Dowdy (Appellant) COUNSEL : P R Callaghan SC/D M Lowenstein (1st Respondent) F C Corsaro (2nd Respondent) G M Watson (3rd Respondent) James A Moustacas & Co (Appellant) SOLICITORS : Hickson Wisewolds (1st Respondent) Tress Cocks & Maddox (2nd Respondent) Colin Biggers & Paisley (3rd Respondent) CATCHWORDS : Contracts ; torts; negligence ; breach of duty to take reasonable care; Supreme Court Rules Part 72; referee's report; damages for loss of use of house DECISION : Appeal dismissed

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GERALDINE SWEENEY & ANOR v R & D COFFEY PTY LIMITED & ORS

1 MASON P: A substantial house in Wentworth Avenue, Point Piper was under repair in late 1987. It was the home of the appellants and their children, the owner being the first appellant Mrs Sweeney. 2 The first respondent ("the contractor") had contracted with Mrs Sweeney to perform repairs to the flat roof. The contractor was a specialist roofing contractor that had been retained on the recommendation of Mr Heyko-Porebski ("the architect") who is the first of the second respondents. 3 In the week of 26 October 1987 the contractor's employees commenced work. They removed the weatherproof membrane thereby exposing the totality of the roof surface. This disclosed that the topping to the slab was not structural. There was lightweight coke-like cement. The contractor submitted an amended quotation for the removal of the lightweight concrete topping as a preliminary to a different type of repair work than had originally been contemplated. 4 On 30 October a hole of 3-4 inches diameter was cut in the roof for the purpose of confirming its nature and structure. It was ascertained that the roof did not consist of a solid concrete slab with a lightweight concrete skin as had been believed, but was in fact composed of terra- cotta blocks and concrete forming a lightweight slab. Permission to cut the hole had been conveyed to the architect from Mr Sweeney. Having determined the state of the roof, the architect directed the contractor to cease work, to plug the hole and to have the area covered with tarpaulins. It would be up to the engineer in the first instance to determine what should be done next. 5 A strike of concrete workers had commenced on 28 October. Although expected to last for only one or two days, it continued much longer. On 10 and 11 November torrential rain caused extensive damage to the premises and their contents. Much water entered through the hole that had been cut and not been plugged in a careful or appropriate manner by the contractor. Water also penetrated through other parts of the roof, which was held to have had inadequate tarpaulin coverage. 6 On 11 November the members of the Sweeney family vacated the Wentworth Avenue premises and moved into premises owned by the second appellant, Mr Sweeney at Wunulla Road, Point Piper. 7 In 1991 the appellants commenced proceedings in the Common Law Division against the contractor, the architect, and the fourth respondent, a consulting engineer ("the engineer"). They also sued the third respondent J & R Grant (Pools) Pty Limited. However, that company went into liquidation and the claim against it was not pursued. The second of the second respondents was added at some stage in the proceedings, but the claim against it was dismissed and is no longer pursued. 8 As pleaded, the appellants' claim against the contractor was that it failed to provide adequate temporary waterproofing of the premises, particularly in a situation where it knew or ought to have known of the strike. As against the architect, the appellants claimed a failure properly to supervise the temporary waterproofing of the premises by the contractor. As against the engineer, the appellants claimed a failure properly to advise the architect in relation to the plans to renovate the roof. There were several cross claims. 9 In 1993 the matter was referred for enquiry and report, pursuant to Part 72 of the Supreme Court Rules, to the Honourable D A Yeldham QC. The hearing before the referee spanned 11 days during which many amendments were sought to the pleadings, some of them granted and some refused. 10 The referee furnished a 90 page report on 28 October 1994. He made findings of fact and law and addressed most issues of costs. 11 In December 1995 the proceedings came before Hidden J for judgment under Part 72 r13. For the most part, the parties sought the adoption of the report. To the extent that it was contested by the appellants, their challenge was based on the findings in the report or the evidence before the referee. There was no attempt to tender any new evidence. 12 Before Hidden J, the contractor did not challenge the referee's conclusion that the contractor was liable to the appellants in contract and tort for its negligence in failing to take reasonable care in relation to the temporary waterproofing of the premises. A verdict for the plaintiffs was entered against the contractor. Verdicts were entered in favour of the architect and engineer, in accordance with the referee's recommendations. 13 The Amended Notice of Appeal challenges three of the orders made by Hidden J:

1. the verdict for the architect against the plaintiffs;
2. one aspect of the assessment of damages; and
3. the order that the plaintiffs pay the costs of the engineer. (It is contended that these costs should have been borne by the contractor.) 14 It is common ground that this appeal is governed by the principles stated in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 and Nine Network Pty Ltd v Kennedy Miller Television Pty Ltd CA unreported 8 June 1994. The challenge to the verdict for the architect 15 The architect had been sued in contract and tort for failure properly to supervise the temporary waterproofing of the premises by the contractor. 16 There was never any dispute that the architect had been retained by the appellants, the first appellant in particular, to provide certain architectural services in relation to the Wentworth Avenue premises. Hourly fees had been agreed. At issue was the extent of the retainer and the allegation that it had been breached in connexion with the water damage. 17 The case was apparently fought before the referee on the basis that identical duties were owed by the architect in contract and tort to the two appellants, notwithstanding the fact that the Wentworth Avenue premises belonged to Mrs Sweeney. 18 The facts as found by the referee and not contested before Hidden J included the following: (a) The contractor was a well-known specialist waterproofing contractor; (b) The architect had obtained a quotation for the roof repairs, met with the contractor on site, and recommended to the appellants that the contractor carry out the work; (c) The hole in the roof was made by the contractor following a direction by the architect and in the latter's presence; (d) The architect knew on 30 October when the hole was made that extra care was required in taking precautions to see that the roof was waterproofed in case storms occurred; (e) After the hole was made, the architect instructed the contractor that work should cease and that the hole should be "refilled" or "plugged" and the area covered with tarpaulins. He phoned back a few days later to check that this had been done; (f) On 10 November the contractor informed the architect that the tarpaulins had been re-fixed the previous day to make the roof waterproof; (g) The architect returned to the site late on the morning of 11 November after the heavy rain of the preceding night. Having become immediately aware of the inadequacy of the waterproofing, he instructed the contractor to use larger tarpaulins and more men. 19 There were no express terms of the architect's retainer that addressed the matter in issue. The referee heard expert evidence about the normal practice of architects where specialist contractors had been engaged. Accepting that evidence (which is set out at AB 1581-3) he concluded that: In this case, where the work in question was to be carried out by a well-known specialist waterproofing contractor, the principal obligation of the architect was to carry out such periodical inspections, to be charged on a time basis, as would ensure that the work contracted to be carried out - ie the end result - was properly performed and achieved. I have come to the conclusion that the architect did not contract to, nor was he obliged to, supervise the temporary protection of the building during the course of the work, this being the obligation of the builder whose knowledge and experience in this regard were obviously considerably superior to that of this architect, and indeed I would think, of any architect. But even if my view as to this should be erroneous, and if Mr Porebski was obliged to periodically inspect the work of temporary waterproofing, such an obligation would not extend beyond taking reasonable steps to see that what appeared on the face of it to be adequate equipment (eg tarpaulins etc) was available to be used if necessary, and to giving instructions in relation to any particular matter if, during a periodical visit to the site, he observed a situation which to him called for remedy. Again his obligation must be looked at against the fact that the first defendant was a well known waterproofing expert. In relation to the reputation of the first defendant the architect said (and in this respect I accept him), that "they are considered one of the few firms who are leaders in the field of installation of membranes, doing repair works to rusting concrete, spalling concrete and sophisticated maintenance work type of repairs and roofing operations". I agree with the submission of counsel for the architect that, so far as any periodical inspections were concerned, the duty was to follow the progress of the work and take reasonable steps to see that the works complied with the general requirements of the plans and specifications (if any). I agree also that it was not part of the architect's duty to tell the first defendant how the work was to be done.

20 Hidden J referred to this material in the report in some detail. He observed that it was the appellants' contention that, in all the circumstances, the architect's duty extended to satisfying himself by inspection that the steps taken to waterproof the home until work could be resumed were adequate. The same argument was repeated before us by senior counsel for the appellants. Particular reliance was placed upon the fact that it had been the architect who had given instructions for the hole to be cut and later for it to be plugged. It was submitted that this made the plugging of the hole part of the contract work for which the architect had, by his retainer, assumed a duty of administration by inspection. It was submitted that the proper plugging of the hole had become an aspect of the job the proper performance of which it was the duty of the architect to satisfy himself by personal supervision. The case was said to be analogous with Florida Hotels Pty Ltd v Mayo (1965) 113 CLR 588 where it was held that architects should have inspected the placement of reinforcing mesh and formwork before the pouring of concrete for a swimming pool; and that they were not entitled to rely upon the expertise of the workmen and their foreman. 21 Hidden J rejected this submission, in the following terms: For present purposes, it is important to observe that his Honour was there speaking of an essential step in the process of construction, rather than a measure designed to preserve an existing building during the course of renovation. Nothing in the judgment suggests that an architect's duty extends to supervision of the latter, particularly when the work is being performed by a contractor who is an expert in the field. The referee's assessment of the architect's duty was entirely in accord with the statements of principle in Florida Hotels, as is apparent from a passage from the report to which I have already referred: …the principle obligation of the architect was to carry our such periodical inspections … as would ensure that the work contracted to be carried out - ie the end result - was properly performed and achieved. (my emphasis) Insofar as the referee supported his conclusion by the evidence of the expert witness, Mr Chapman, it should be borne in mind that the standard of care required by a professional person is a matter to be determined by a court and is not defined by evidence of the usual practice of members of that profession. So much is clear from Florida Hotels in the judgment of Barwick CJ at 593 and Windeyer J at 601, and from the more recent decision of the High Court, dealing with medical negligence, in Rogers v Whitaker (1992) 175 CLR 479. Here, the referee had regard to Mr Chapman's evidence, as he was entitled to do, but it is clear that the evidence did not circumscribe his determination of the architect's liability, which was assessed by the application to the evidence of appropriate legal principles. In effect, the referee determined that the liability of the architect was no different from that at general law, as elucidated in Florida Hotels. I can detect no error in this conclusion. There does not appear to me to be anything in the particular circumstances of the case, upon which counsel for the plaintiffs relied, which would lead to a contrary view. I have already dealt with the fact that it was the architect who suggested the method of plugging the hole. I cannot see that his involvement in determining the method of repair of the roof, his recommendation of the first defendant as the contractor to undertake the work, his presence at the site, his availability to the plaintiffs as an intermediary between them and the contractor, or the circumstances of the making of the hole and his involvement in them, created a responsibility not only to supervise the production of the "end result", but also to inspect measures taken for the temporary preservation of the premises.

22 In my view this analysis reveals no error. The learned judge (like the referee before him) appreciated the issue as to the scope of the architect's retainer and its application to any personal obligation to inspect the site during the period immediately after the hole had been plugged. It is clear that the plugging was viewed by all parties as a temporary measure to await a decision as to what further work was appropriate, being a decision that depended in part upon input from the engineer. The evidence established that there were a number of ways in which a hole of this nature could be plugged satisfactorily. I detect no error in the judge's acceptance of the referee's conclusion that the exact way that the contractor would go about this task and the exact way in which the contractor would use the tarpaulins at its disposal (of which the architect was aware) were matters upon which, in the circumstances of this case and having regard to the architect's retainer, the architect could reasonably rely upon the contractor. In the passage I have quoted from the referee's report it is clear that the referee was in no way denying the capacity or even the obligation of the architect to give directions to remedy defects actually coming to his attention. But, in the light of the expert evidence and the particular informal retainer of the architect, there was no error in holding that the duty did not go as far as contended by the appellants. Indeed, it would appear that some of the appellants' submissions about the scope of the architect's duty depart from a concession made before Hidden J (see AB 1628). 23 Likewise, there was no error in the conclusion that it had not been established that the architect had breached the standard imposed by the relevant duty. 24 There is also much force in the submission by the architect that it is misleading to concentrate upon a breach alleged to stem from the architect's involvement with the making of the hole and the instruction to plug it. The referee found that, although a considerable amount of water did come through the hole, the latter was not the real and substantial cause of penetration, because the removal of the membrane and the consequent exposure of the topping allowed water to pour through the porous roof over an extensive area (AB 1587-8). On this basis, the real cause of the appellants' loss could be said to have been the inadequate placement of tarpaulins. Viewed in this way, the architect could not be said to be at fault in not doing more than he did in relation to giving instructions for the temporarily exposed roof area to be covered, and checking by telephone that they had been carried out. 25 The challenge to the verdict in favour of the architect therefore fails. Damages for loss of use of house 26 The appellants could not occupy their Wentworth Avenue house for nine months from 11 November 1987. They could have claimed general damages for that loss, measured by reference to the rental value of that property (The Mediana [1900] AC 113 at 116; Westwood v Cordwell [1983] Qd R 267 at 278-9). But they did not seek to calculate their damages for this head of loss in this way until final addresses before the referee. The rejection of this claim is the second ground of appeal. 27 In their summons filed in 1991 the appellants gave particulars of the damages which were then claimed by Mrs Sweeney alone. Relevantly, damages were claimed because the premises were not habitable. It was asserted that Mr and Mrs Sweeney incurred a liability to pay rent of $99,642.86 for alternative accommodation at 35 Wunulla Road Point Piper. 28 The details of this claim were amended during the hearing of the reference (AB 177-8, 196), but there was no change in substance with regard to this head of damage. The amended summons contained a claim by the two plaintiffs for rent foregone by reason of the occupation by the family of the premises at 35 Wunulla Road Point Piper. All parties were apparently content to conduct the reference on this basis, even though it involved eliding the first appellant's ownership of Wentworth Avenue and the second appellant's ownership of Wunulla Road. In fact the rent foregone at Wunulla Road was actually the sum payable by a licensee or tenant who had contracted with Ringen Pty Limited. Ringen Pty Limited was the trustee of a family trust. The trust was obviously under the control of Mr Sweeney, who had deposed in his statement: I had a tenant coming into a house in Wunulla Road, Point Piper. He was coming in on a 12 month tenancy and he was 3 days late in his rent so I elected to terminate the tenancy and take over the house myself so that the family could live there. As a result, I lost the benefit of the 12 month tenancy of Wunulla Road. (AB 1135-6)

29 The referee allowed the appellants' claim for rent foregone at the Wunulla Road premises ($10,800 per month for nine months, a total of $97,200). Save that nine months were allowed, not ten (something about which no complaint is made) this was everything the appellants sought in their initiating process as amended. 30 One of the heads of damage claimed by the appellants in the reference was diminution in the value of the house at Wentworth Avenue . Assessment of the value, undamaged, was complicated by the fact that it had been demolished some time after its sale by auction in February 1989. Evidence as to its probable value came from a number of sources, including a valuer, Mr K P Norris. Mr Norris was called as a witness in the reference by counsel for the architect. A report and a statement containing his evidence on various matters (not presently material) were tendered (AB 576, 1450). He was asked some questions in chief by way of elaboration. 31 The land had been sold by auction in February 1989 for $6.075m. One of the adjustments made by Mr Norris in arriving at his assessment of the loss of value consequent upon the water damage was an adjustment for "alternate (sic) rental accommodation for the period of the repair" (AB 1450Q). Included in the questions asked in chief by counsel for the architect was what in Mr Norris' opinion would have been the adjustment that one would make for this item. His answer (AB 577) was: Well I would allow a weekly rental there for the period of repair. I think the period quoted was in the order of 3 months and I would have thought a property in the order of $6million, you would be looking at a minimum rental there for alternate premises of about $5,000 a week, $20,000 a month.

32 Two things can be said at once about this evidence. First, it was given in elaboration of Mr Norris' view as to the value of the premises as damaged. The question in context gave no warning to any party that the answer might offer a springboard to the appellants to depart from their case in relation to valuing the months of lost occupation of Wentworth Avenue. Secondly, the answer was an extrapolation of a rental value derived from the sum realised in February 1989 from the sale of the (damaged) premises by auction. That figure was $6.075m. There were obvious difficulties in projecting this figure back to November 1987, particularly when it is noted that Mrs Sweeney had purchased Wentworth Avenue in April 1986 for $1.55m. It is inconceivable that this matter would not have been explored had the appellants signalled the use to which they wished to put the answer. 33 Mr Norris was asked no further questions on this issue either by Mr Corsaro or by counsel for the appellants who cross-examined him briefly. No other party questioned him. 34 In final addresses before the referee the appellants propounded for the first time an alternative basis for calculating the value of the lost use of the Wentworth Avenue premises. In the words of counsel for the appellants in the reference, the alternative basis "[had] been provided to us by the kindness of Mr Corsaro" (AB 767). He referred to the answer that I have set out above. It was contended that this material could be relied upon, notwithstanding the particulars in the pleadings. Reliance was placed upon Dare v Pulham (1982) 148 CLR 658. 35 Mr Corsaro sprang to his feet, asking whether the appellants were seeking to amend their summons. Counsel for the appellants in the reference (Mr Dowdy) indicated that he did not seek to amend, but that he relied upon the principle in Dare at 666. The referee indicated that he was unimpressed with this late attempt to change this aspect of the case (AB 768-9). There was further discussion along the same lines later in addresses (AB 841-2). 36 In his report, the referee awarded, for this component of the appellants' loss, the rental lost from the premises at Wunulla Road Point Piper, amounting to $97,200 (AB 1619-1621). He rejected the appellants' attempt to extend this claim by reference to the abovementioned evidence of Mr Norris. The learned referee described the particular answer given by Mr Norris as having been given without adequate consideration. He also appears to have thought it appropriate that the appellants should be held to the claim as particularised, describing it as reflective of "the reality of the situation". The precise reasoning is a little unclear although the referee distinguished the case before him from "The Mediana" which was the principal authority relied upon by the appellants. There was a passing reference to "the requirements of justice" (AB 1620) which suggests that the referee had concerns stemming from the way the case had been fought before him on this issue. 37 It is in my view significant that, when the matter came before Hidden J, the appellants made no attempt to tender further evidence on this issue. I am not saying that they would have been entitled to do so. But it is sufficient to observe that they did not. The matter was argued on the basis that Hidden J should reject this portion of the referee's report and substitute the figure of $180,000 (ie 9 x $20,000) simply on the basis of Mr Norris' evidence. 38 Hidden J considered the circumstances in which Mr Norris gave the answer that he did, and in which the appellants sought to rely upon that evidence in final addresses before the referee. 39 His Honour detected no error in the approach adopted by the referee. As I read the judgment on this point, it stands on two separate bases. 40 The first basis related to the manner in which issue had been joined before the referee. The new claim had never been particularised notwithstanding numerous applications for amendments. Hidden J distinguished the present case from Dare v Pulham because the evidence of Mr Norris had been led by counsel for the architect without objection on behalf of any other defendant and in circumstances where it was not foreseen as the foundation for a claim for damages in a higher amount and on an alternative basis to that which had previously been particularised. 41 Secondly, Hidden J held that the referee had correctly distinguished The Mediana. 42 His Honour's reasoning on the latter point was challenged by senior counsel for the appellants. I think there is considerable force in that challenge (cf Clerk and Lindsell on Torts, 17th ed para 27-61). But it is unnecessary to address the point further because I agree with his Honour on the first point and because an appeal lies from an order and not merely from the reasoning upon which it is based. 43 An application to adopt a referee's report is not an appeal by way of rehearing. The principles are different. Nevertheless, it was in my view entirely appropriate for Hidden J to have regard to the way in which the proceedings had been conducted before the referee and the absence of any new material on the critical topic in the evidence placed before him. (I am not inferring that it would or would not have been proper to have received additional evidence on this point.) 44 The second ground of appeal fails. The burden of the engineer's costs 45 The third ground of appeal challenges the trial judge's refusal to make a Bullock or Sanderson order in relation to the engineer's costs, which his Honour ordered to be paid by the appellants. 46 The referee indicated that he had not heard argument on the topic. Nevertheless he expressed the view that there was no basis for ordering that the appellants receive indemnity in relation to costs ordered to be paid to the engineer "against whom there was no evidence at all". 47 The matter was debated before Hidden J on the basis of acceptance of the principles discussed in Gould v Vaggelas & Ors (1985) 157 CLR 215. Hidden J concluded that the referee's finding that there was no substance in the allegations of negligence against the engineer was clearly well open to him, and that it was not reasonable for the appellants to have joined the engineer as a defendant. He held that the engineer's cross-claims against the contractor and the architect did not alter the position. 48 The appellants submit that additional matters should have been taken into account: namely, the presence of the engineer when the hole in the roof was made, the absence of the appellants on that occasion, and the fact that the architect and contractor denied any liability to the appellants and eventually cross-claimed against the engineer. 49 None of these matters persuade me that there was any error in the exercise of the discretion. Nor do they tempt me to wish to be in a position to exercise the discretion afresh were that open to me. 50 Senior counsel, with his customary frankness, acknowledged that there was no evidence indicative of some conduct on the part of the engineer known to the appellants which may have played a part in the appellants' decision to join the engineer along with the other parties sued. In my view this concession was properly made. 51 The challenge to the exercise of the judge's discretion on the matter of costs has not been made good. 52 In my view the appeal should be dismissed with costs. 53 POWELL JA: I agree. 54 FITZGERALD AJA: I agree.

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