Articles

By Justin Cotton, Director, co-authored by Jordan Davies, Senior Paralegal, Lovegrove & Cotton – Construction and Planning Lawyers

Having covered the elementary aspects of duty of care and pure economic loss through negligent conduct in part 1, this article considers negligent misstatements, along with claims against Councils and public authorities. The article will finally touch on the requirements of breach of duty and causation, and will consider common ‘defences’ to negligence claims.

Negligent Misstatements, Lacrosse and ‘Condescending to the Minutiae’

Negligent misstatements are equally common in building-related matters as negligent conduct is. For instance, the process of building certification for purposes of compliance with the Building Code of Australia and the Building Regulations 2018 (Vic) is a process that places a substantial onus on those carrying out certifying functions, such as building surveyors and engineers. Building surveyors and engineers make representations as to the condition and compliance of as-built product and owners commonly rely on those representations when deciding to occupy a building.

The test in Negligence concerning pure economic loss from negligent misstatements is set out in the Australian High Court matter Esanda Finance v Peat Marwick Hungerfords.[1] In that case, the Court found it especially necessary for the following to be established:-

• That there be a sufficient connection (such as a service provider – client relationship) between the parties;
• That reliance on the representation was reasonable;
• That reliance on the representation was not self-induced;
• That the plaintiff was vulnerable; and
• That there was no indeterminacy of liability.

In circumstances where a building practitioner has made representations with regards to as-built product, an owner relying on those representations will largely be regarded as reasonable, given the practitioner’s expected expertise in their chosen vocation. This knowledge disparity between consumers and building practitioners makes the consumer highly vulnerable to any negligent misstatements made by a building practitioner.

Reflecting this onus on building professionals, specifically building surveyors, in the matter of Toomey v Scolaro Concrete Constructions and Others (No.2),[2] Eames J considered that:-

“… a surveyor charged with statutory and contractual responsibility for examining plans for compliance, and being well paid to do so, is being called on to apply an expertise which condescends to examine the minutiae of plans, so as to detect error, and ambiguity which might reasonably produce error by those who will subsequently rely on those plans.” [at 311]

Similar notions of responsibilities played out in the VCAT matter Owners Corporation No.1 of PS613436T v LU Simon Builders Pty Ltd[3] (‘Lacrosse’). In that case, the building surveyor, architect and fire engineer were all sued in circumstances where combustible cladding fascia was approved to adorn the façade of a Docklands high rise in Victoria. The matter is now on appeal to the Supreme Court of Victoria Court of Appeal.

The claim against the building surveyor centred upon the argument that the RBS had failed in exercising due care in issue the building permit when the plans included combustible cladding that would allow the spread of fire in the building. In issuing the occupancy permit, the RBS had made a representation that the building was fit for occupancy and the structure was compliant with the Building Code of Australia. The Judge in Lacrosse found that this was not the case. The tribunal considered that the building surveyor relied largely on his previous experience, which was not a complete answer. A similar argument was run against the fire engineer and architect. Needless to say, there is not much by way of extended analysis that can be done with a matter subject to an appeal – this space will need to be watched.

The case, nonetheless, quite clearly highlights the way common law duties operate to afford consumers remedies in circumstances where there is neither contractual nor statutory warranties available.

Negligence Claims against Councils and Governments

Public authorities and government bodies are also commonly involved in building-related negligence claims as defendants. As with pure economic loss, there are specific factors to consider in regards to finding a duty owed by a public authority, which in building cases may often be relevant. The most likely scenario would be that there would be some claim made against a council or government in circumstances where they carried out a certifying function or had made representations as to existing or future facts that had been relied on by the plaintiff.

A key hurdle in negligence claims against public authorities such as councils or governments is whether a court actually holds the power to make determinations regarding the conduct of government. This is referred to as the ‘justiciability’ of the matter. According to Graham Barclay Oysters v Ryan,[4] decisions by public authorities regarding policy matters are not able to be decided upon by a Court. However, decisions of an administrative or procedural nature may be determined by a Court.

For example, it would be difficult for a plaintiff to sue a government for making a policy decision to allow private building surveyors to go uninsured with respect to cladding-related claims, even if that policy had a causal link to damages sustained by the plaintiff. In contrast, a procedural decision to classify a building as a “risk to the health and safety of occupants” due to cladding adorning the fascia of the building would be justiciable in a Court or Tribunal. This technicality largely arises because of the principle of separation of powers between the legislature and the judiciary.

In some cases, owners have proceeded against councils arguing that they relied on councils exercising powers to ensure buildings are built to specifications and are compliant with building regulations. In the NSW case Sutherland Shire Council v Heyman,[5] the plaintiffs purchased a home on a sloped block where the home was propped up by supporting columns whose footings had been negligently constructed during the building process. The plaintiff alleged the council had a duty to inspect the footings of the home because it had a statutory power that enabled it to do so. The council was not found to owe a duty of care to ensure that the building was constructed in accordance with specifications, in circumstances where the plaintiff made no inquiries as to whether the council had issued an occupancy permit (which it in fact had not). It followed that the plaintiffs were not vulnerable – they had simply failed to exercise due diligence.

The case also highlighted that statutory powers enabling a statutory authority to act in a certain way are not equivalent to statutory duties which place an obligation on a statutory authority to act in a certain way. In this case, the council’s statutory power to inspect the building did not legally oblige it to do so. The relevant NSW legislative provision afforded discretion to the council.

It follows that establishing a duty of care owed by statutory body or public authority is no easy task and requires significant legal skill and expertise. The same can be said for any novel situation, irrespective of the kind of defendant or the kind of harm, where a duty has not yet been found. Fortunately for consumers in the construction sector, duties owed by builders, engineers, architects and building surveyors are largely established. Much of the points of contention in negligence claims against actors in the building industry centre upon breach and causation.

Breach of Duty

Whether a defendant is likely to be found to have breached a duty depends on what a court considers the reasonable standard of care to be taken. Establishing the reasonable standard of care takes in the key considerations set out in Section 48 of the Wrongs Act 1958 (Vic) [other states have similar provisions]:-

• Whether the risk of harm was reasonably foreseeable
• Whether the risk was not insignificant
• What was the probability of harm occurring?
• What was the likely seriousness or magnitude of the harm to occur?
• How burdensome would it be to take precautions?
• Whether there was any significant social utility in the conduct that caused the harm

The latter 4 key considerations are weighed up against each other to establish whether a defendant has breached a duty. For instance conduct that has a low probability of causing harm but has significant social utility, would likely not result in a breach of duty. Whereas conduct with a high probability of causing serious harm with minimal social utility would more likely culminate in a breach of duty. Findings on the above considerations depend largely on what the Court would consider the hypothetical ‘reasonable person’ would have done in the defendant’s position.

Causation

A claim in negligence will not be made out if the negligent conduct cannot be shown to be a cause of the harm or loss. In earlier cases, this was a rigid rule, where a ‘but for’ test was applied which required courts to consider “but for the defendant’s conduct, would the plaintiff had suffered harm?”

The common law and statutory provisions in the Wrongs Act 1958 have moulded this such that if the negligent conduct cannot be shown to be a literal cause of the harm or loss (what is known as factual causation) because of some evidentiary gap, the court will consider what must have occurred on the balance of probabilities. The Court will apply a ‘scope of liability’ test to determine whether or not liability should extend to the negligent defendant.

This is a very technical aspect of the analysis for establishing a claim in negligence. One important thing to note, however, is that the negligence of the defendant does not have to be the sole factor to have caused the harm – it only has to be a material factor contributing to the harm.[6] This is particularly relevant when there are multiple defendants, as was the case with the Lacrosse example where the builder, architect, building surveyor and fire engineer were all being sued.

Defences

Interestingly, defendants cannot point to some impairment or personal shortcoming to obviate a finding of a breach of duty. The reason being that Courts cannot delve into the infinitesimally small detail of every aspect of a defendant’s capacity which may deviate from the ‘standard of the ordinary and reasonable person’.[7] It follows that the Court instead constructs an imaginary ‘ideal, ordinary and standard reasonable person’ and measures the defendant’s conduct against that standard. The clear exception is with respect to children.

Courts have also noted that severe physical impairments may alter the standard to which a defendant is held. As noted in McHale v Watson, a blind man cannot be expected to see and a legless man cannot be expected to run; it follows some precautions are entirely impossible for some people.

Professionals such as building practitioners, pursuant to Section 59 of the Wrongs Act 1958 may be found by a court not to have breached a duty of care if they acted in manner that was widely accepted in Australia by peers of good repute. This provision was considered in the Lacrosse case in respect to the conduct of the building surveyor in approving the combustible cladding. It was alleged that the surveyor did not enquire enough into the polyethylene core of the cladding and its fire properties.

The judge found that just because the surveyor had approved such cladding on previous building projects that did not mean that the approval of the cladding was suitable in the context of the Lacrosse building. Despite it possibly being common industry practice, pursuant to section 59(2) the judge found that the practice was unreasonable.

A plaintiff may also contribute through their own negligence to the harm sustained. This is known as ‘contributory negligence’. Whilst not a full defence, contributory negligence will often reduce the damages apportioned to the defendant. The principle being that everybody owes a duty of care to themselves and are thus subject to the same obligations and tests as defendants in negligence proceedings.

Conclusion

Claims in negligence are therefore highly complex. Many factors and considerations are brought into the fold depending on the circumstances. In the construction sector, the tort of negligence is important for consumers who cannot avail themselves of contractual or statutory warranties.

This field of law is constantly evolving, as is the case with most common law doctrines. It is important that litigants team up with lawyers experienced in negligence claims, whether they be defendants or plaintiffs. This article is by no means exhaustive in regards to considerations at hand in negligence scenarios, but is aimed to provide some idea of the complexities involved.

[1] (1997) 188 CLR 241

[2] [2001] VSC 279

[3] (Building and Property) [2019] VCAT 286

[4] (2002) 211 CLR 540

[5] [1985] HCA 41

[6] See eg. Bonnington Castings v Wardlaw [1956] AC 613 House of Lords

[7] See Vaughan v Menlove